Exchange of Property

Exchange of Property
By Vinod Sampat, Advocate

Posted on 10 July 2002
Article 32 of the Bombay Stamp Act is applicable in case of Exchange of Properties. The term Exchange of Property has not been defined under the Bombay Stamp Act. Sec.118 of the Transfer of Property Act defines Exchange to the effect that when two persons mutually transfer ownership of one thing with the ownership of other thing being money or both things being money only. The transaction is called an Exchanged. An important criteria for Exchange is that the properties to be exchanged cannot be money. Immovable property can be exchange for immovable property and /or immovable property . The basic difference between Sale and Exchange is that in Exchange the consideration for transferring one property will be other property but not money. Money can be paid for the difference for equalising the price of the two properties while in Sale the consideration is the form of money. The Stamp Duty is the same as on a conveyance under Article 25 of the Bombay Stamp Act. In order to derive the value of the property, one will have to first determine the Market Value of the property. The Stamp Duty will be recovered on the Market Value of the property which is higher. The same is explained hereunder with a example:- Mr. X exchanges his flat at Peddar Road with Mr. Y’s flat at Peddar Road . The Market Value of Mr. X ‘s flat is Rs. 50,00,000/- and the Market Value of Mr. Y’s flat is Rs.55,00,000/- Mr. X also pays the difference of Rs.50,00,000 /- to Mr. Y. The Stamp Authorities will recover Stamp Duty on the Value of Rs. 55,00,000/-.
Stamp papers to be in the name of the parties. The Bombay Stamp Act 1958 has been amended vide Mah. Act No. 29 of 1994. The abovesaid amendment states that Stamp Papers must be in the name of the one of the parties who must be a signatory to the document .Therefore, the parties must be for executing the document purchase the Stamp Papers in their names otherwise as per Section 34 the instrument which is not duly stamped will not be admissible in evidence in Court of Laws. The said Section 34 is reproduced herewith.
No Instrument chargeable with duty shall be admitted in evidence for any purpose by any person having by law or consent of parties authority to receive evidence, or shall be acted upon, registered or authenticated by any such person or by any public officer unless such instrument is duly stamped (or if the instrument is written on sheet of paper with pressed stamp and the executor or one of the executors is the person in whose name such stamp paper is purchased).
Provided that,- (a) Any such instrument shall , subject to all just exceptions, be admitted in evidence on payment of -(I) The duty with which the same is chargeable , or in the case of an instrument insufficiently stamped, the amount required to make up such duty , and (ii) A penalty of five rupees , or ten times the amount of deficient portion thereof , whichever is higher;(b) Where a contract or agreement of any kind is effected by correspondence consisting of two or more letters and any one of the letters bears the proper the proper stamp, the contract or agreement shall be deemed to be duly stamped ; ( c ) Noting herein contained shall prevent the admission of any instrument in evidence in any proceeding in a Criminal Court other than a proceeding under Chapter IX or Part D of Chapter X of the Code of Criminal Procedure ,1973. (d) Nothing herein contained shall prevent the admission of any instrument in any Court when such instrument has been executed by or on behalf of the Government or where it bears the certificate of the Collector as provided by Section 32 or any other provisions of the Act. (e) Nothing herein contained shall prevent the admission of a copy of any instrument or of an oral admission of the contents of any instrument , if the stamp duty or a deficient portion of the stamp duty and penalty a specified in clause (a) is paid.
It is observed that is very time consuming to purchase stamp papers from General Stamp Office, At a time one has to spend more than two or three hours just to purchase the Stamp Papers.
Prior to the above said amendment it had been a practice that Advocates, Chartered Accountants used to purchase the Stamp Paper in bulk in their name and the parties used to execute the document on Stamp Paper which were purchased in the name of their Legal Advisors. The abovesaid amendment has increased clerical work of Clients as well as their Legal Advisors . It is the contention of the Stamp Authorities that many persons were misusing the Stamp Papers and at times the documents were even back dated. With a view to curb this illegal practical the said Section 34 has been amended . The hardship faced by the members of the public has increased considerably.
One of my client had jokingly told me that he had to spent Rs. 50/- on conveyance and out of pocket expenses of his staff member for the purpose of purchasing this is how bureaucracy works, one has to live with it. The Rules are important but the Times, Money and Energy of the Tax Payers is not that such important.
A general view is that Stamp Papers are available in the Court of Laws as well as in the Court and Sales Tax Offices. I may add that the Suptd. of Stamps has recently appointed additional Stamp Vendors , who are authorised to issue Stamp Paper in the name of the Purchasers. I would like to inform the Members of Public that they can purchase Stamp papers from Stamp Vendors and it is quite likely that some stamp vendors might be near the Stamp Purchasers residence or office. This will save considerable Time, Money and Energy of the Stamp Vendor.