Relinquishment of property rights in family settlements cannot be treated as gift deeds for stamp duty

Delhi High Court Overturns Stamp Duty Impounding of Relinquishment Deeds. Court rules that relinquishment of property rights in family settlements cannot be treated as gift deeds for stamp duty purposes.

In a significant ruling, the Delhi High Court has set aside the impounding of relinquishment deeds executed by the sisters of Ramesh Sharma in favor of their brother, affirming that such deeds do not qualify as gift deeds under the Indian Stamp Act, 1899. The judgment delivered by Justices Anil Kshetarpal and Harish Vaidyanathan Shankar concluded that these deeds, which are part of a family settlement, should not be subjected to gift deed stamp duty.

The case arose from a property dispute concerning the ownership of a property located at Greater Kailash, New Delhi. Following the demise of their parents, the property was jointly owned by Ramesh Sharma, his mother, and five sisters. The sisters executed relinquishment deeds to transfer their share in the property to Ramesh Sharma, which were later impounded by the authorities, treating them as gift deeds due to deficient stamp duty.

The High Court's judgment emphasized that the relinquishment deeds executed among co-owners within a family do not amount to an alienation of rights but merely feed into the title already held by the beneficiary. The court clarified that the nomenclature of a document is not decisive for adjudicating stamp duty liability, and economic consideration and evidence regarding the nature of the transaction are critical factors.

The judgment also reviewed various precedents from other High Courts and the Supreme Court, reinforcing that relinquishment deeds should be treated as release deeds rather than conveyance deeds or gift deeds when executed among co-owners without any economic consideration. The court noted that the procedure under the Stamp Act is primarily to collect revenue, and the nature of the transaction must reflect the reality of the situation, especially in cases of family settlements.

Ultimately, the High Court directed the Collector of Stamps, Hauz Khas, Mehrauli, to release the impounded documents and affirmed that the relinquishment deeds executed by Ramesh Sharma's sisters are valid release deeds, not gift deeds.

Bottom Line:

For the purposes of the Indian Stamp Act, 1899, the relinquishment of rights in a property by co-owners in favor of another co-owner cannot be deemed as a gift deed if the transaction is in the nature of a family settlement or does not involve any economic consideration.

Statutory provision(s): Indian Stamp Act, 1899, Article 23 of Schedule I, Article 55 of Schedule 1-A (for Delhi), Section 46 of the Stamp Act

Ramesh Sharma v. Government of N.C.T. of Delhi, (Delhi)(DB) : Law Finder Doc Id # 2791045