The terminology
'undervaluation' is frequently used in matters of transfer of property, which
has a direct bearing on payment of stamp duty and registration charges payable
to Government. Before turning upon the subject 'under-valuation', it is necessary
to understand the constitutional provisions relating to stamp duty. Articles
246, 265, 268, 269(1) of the Constitution of India are relevant here. Article 246
refers to the powers of Parliament and State Legislature to make laws. The
Constitution of India has union list, state
list, and concurrent list. TheParliament has powers to make laws in respect of matters mentioned in the union
list and state legislatures have powers to make laws in respect of matters mentioned
in the state list and both have powers to make laws in respects of matters
mentioned in the concurrent list.
For day-to-day functioning and to meet administrative expenses
and also for undertaking developmental works, everyGovernment whether in the Central or States requires revenue which are earned
from different sources. Levy of tax is one such source of income to the Government. Article
265 makes it
very clear that no tax shall be levied
or collected except under an authority of law. Stamp
duty registration charges are the major sources of revenue to the State Governments. In
Karnataka, the department of registration and stamp duty is
ranked among the top five revenue earning departments
of the State.
The stamp duty and registration charges
are payable on ad-volerem basis, that
is based on the value of property. No maximum limit is
prescribed in respect of stamp duty and registration charges payable
on transfer of property. The stamp duty and registration charges go up with the increase
in the value of sale consideration paid for the property i.e. higher
the sale consideration, the greater the stamp duty and registration charges. These
charges are normally borne by the purchaser of
the property unless there is a contract between the parties to the contrary effect. Apart
from payment of sale consideration, stamp
duty and registration charges, the
purchaser has to incur expenditure to get revenue records mutated in his/her
name and for transfer of power and water connections to
his/her name. All these expenses put together would be around 12% of sale consideration.
To save some money from out of this expenditure, parties to a sale transaction by mutual consent mention the value of the property in the conveyance deed at a much lower figure than
its actual market value
and thereby pay less stamp duty and registration charges while at the same time, the purchaser makes payment of sale consideration as agreed upon to the vendor. This process
of declaring the value of a property in the conveyance
deed at a figure lesser than the actual sale consideration agreed upon for purposes of registration is generally known as undervaluation of the property. This modus operandi has two adverse
effect on the society. Firstly,
there is loss of revenue to the Government
and secondly, circulation of unaccounted money III the market
goes up. The Karnataka Stamp Act 1957 has certain sections dealing with undervaluation of property. Section 45-A
Inserted the Karnataka Stamp Act 1957, during 1975 and 45-B inserted during 1991
deal with the subject. Section 45-A deals with the procedure to be adopted where the properties are undervalued in a sale transaction.
The parties producing documents for registration have to file the market value of property calculated
in the prescribed form No.1. If registering
officer has reasons to believe that the market value of the property shown in the document produced for registration is not the actual value of the property in the locality, he
may arrive at the market value of such property and inform the parties to pay the stamp duty and registration charges according
to the market value arrived by him.
For arriving at the marketvalue, the registering officer will use the guidelines
value published by the committee constituted for estimation of market value under
Sec.45-B. The values published by the committee are the guidelines value for registering offices to
determine the market value. They are the average
value of the property in a particular locality. If the
sale consideration of a property shown in the sale deed is
lower than the guidelines value prescribed for that area, then the stamp duty & registration charges are payable on the basis of the guidelines value. If the market value of this property is more than the guidelines value, the stamp duty payable is as per the market value. The
registering authority informs the market value as arrived by
him in form I-A to the parties. This gives options to the parties to
contest the valuation done by the registering authority, or
to agree or to withdraw the document from
registration.
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