# Housing Development Finance Corp. Ltd v. State of U.P. & Ors. Opp. Parties

- **Citation:** (2024) 5 ILRA 1534
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2024-05-30
- **Case number:** Writ-C No. 41122 of 2019
- **Bench:** Mahesh Chandra Tripathi, Saumitra Dayal Singh, Siddharth
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/housing-development-finance-corp-ltd-v-state-of-u-p-ors-opp-parties-51975
- **Pages:** 15

## Headnote

Civil Law - Indian Stamp Act, 1899 -
Sections 2(14) & 3 - Full Bench Reference-
Admission stage of writ petition- - Articles
5 (c), 6 and 40 of Schedule 1-Bof the Stamp
Act- UP General Clauses Act, 1904 -
Sections 3(18) & 4(13) - Stamp Act- Fiscal
Statute- Charging section to be interpreted
strictly- Taxing event- no levy, if literal
reading
leads
to
non-taxability
of
transaction-
Burden
to
establish
occurrence
of
taxing
event-
to
be
discharged
by
Revenue-
Whether
instrument executed by the petitioner-
exigible to stamp duty under Article 6(1) of
Schedule 1-B- Agreement in writing-
condition for deposit of sale deed for
securing loan- Absent such agreement- no
levy of stamp duty on such instrument-
Upheld the Division Bench judgement in
HDFC Ltd. Vs Assistant Commissioner
Stamps, Ghaziabad- Writ petition to be
decided accordingly. (Paras 11, 12, 13, 14,
17, 18, 33 and 34)

HELD:
To define a 'taxing event' falls within the
competence of the legislature. It is an artificial
legislative construct. It arises upon a levy created
by the legislative law, on a person transaction,
event, or activity, performed by natural or other
persons. Therefore, it (taxing event) may arise
strictly in terms of the express words used by the
legislature. If literal reading leads to nontaxability of the transaction, no levy may arise. If
there exists a doubt/ambiguity about whether a
transaction, event or activity falls within the four
corners of the charging section, the taxing event
does not exist. Consequently, the levy of tax
cannot arise. (Para 11)

For a valid levy of a tax to arise, there must exist
four components of tax namely, the character of
the impost i.e. the description of the taxable
event; a clear indication of the person on whom
the levy is imposed; the rate of tax; and the
measure or value to which the rate of tax is to be
applied. The burden to establish the occurrence
or existence of a taxing event rests on the
revenue. Therefore, unless the revenue first
discharges that burden, the taxpayer may not be
burdened to prove the negative. (Para 12)

Read in the context of the duty Entry/Article 6(1)
of Schedule 1-B to the Stamp Act, that
'instrument' i.e. writing must further fulfill the
requirement of being an "agreement relating to
deposit of title deeds", etc. For an 'agreement' to
exist, it must involve a meeting of minds.
Therefore, the writing that must be proved (by
the revenue), must show that the parties (that
executed the same), had agreed to provide for
the deposit of the title deed in any immovable
property, etc., by way of security for the
repayment of money already advanced or to be
advanced by the person receiving such deposit.
(Para 18)

In the absence of that written agreement, no
'instrument' less so 'chargeable to duty' - in terms
of Section 3 read with Article 6(1) to Schedule 1B of the Stamp Act may ever exist. In that event,
an actual deposit of the title deed with a creditor,
to secure any loan availed by the debtor, would
not attract any stamp duty liability, since the
Stamp Act does not seek to levy stamp duty on
oral agreements/transactions. On the contrary,
the Stamp Act imposes duty liability only on an
'instrument'14. Those it construes as every
document/ written record etc. Unless written
words executed by the parties exist to establish
the nature of the transaction described under
Article 6(1) of Schedule 1-B of the Stamp Act, no
taxable event may ever arise or be witnessed
under the Stamp Act. (Para 21)

Thus, we conclude: (i) creation of a simple
mortgage (through deposit of title deeds),
though valid in law and fully enforceable as such,
would remain beyond the clutches of the Stamp
Act, so long as there is no written agreement
executed between the parties or any document
that is made part of thereof that evidences the
bargain reached between the parties - to deposit
the title deed (with the lender) to secure the loan
availed by the borrower. (ii) in the present case,
as noted above, there is no writte

## Text

_Characters 0–39,865 of 49,834. This is a partial read: ask again with offset=39865 for what follows._

1534 INDIAN LAW REPORTS ALLAHABAD SERIES
12. In the instant case, it is clear that
no such power was present with the
Collector (Stamp), and therefore, the
exercise of review carried out by the
Collector (Stamp) is bad in law. In light of
the same, the impugned order dated
February 3, 2023 is quashed and set-aside
and this writ petition is allowed.

EPILOGUE

13. During the course of the hearing, an
affidavit was filed by the State-respondents
indicating that a show cause notice was issued on
January 6, 2021 to the Sub Registrar with regards
to the alleged fabricated and forged report. In
reply to the said show cause notice, an
explanation dated January 14, 2021 was
provided by the Sub Registrar. However, the
affidavit is incomplete and does not contain any
mention as to what steps were taken subsequent
to the explanation provided by the Sub Registrar.
It appears that the matter was put to rest and the
inquiry was not taken forward. The allegations
made against the Sub Registrar were quite grave
in nature, and therefore, the State Government
should have ensured that a proper inquiry is
carried out.

14. In the realm of legal proceedings,
transparency, accountability, and the pursuit of
justice are paramount. The allegations made
against the Sub Registrar strike at the core of the
trust and integrity expected of public officials
entrusted with important responsibilities. It is
incumbent upon the State Government to
diligently investigate these allegations and take
appropriate actions to address any wrongdoing.
The affidavit submitted to this court raises
concerns
regarding
the
adequacy
and
thoroughness of the inquiry conducted so far. No
individual, regardless of their position or
authority, is above scrutiny or immune from
accountability. Public officials entrusted with the
responsibility of upholding the law and serving
the interests of the public must conduct
themselves with the utmost integrity and
diligence. The State Government, as the
custodian of public trust, must demonstrate
unwavering commitment to upholding the
principles of accountability and transparency.
Any laxity or indifference in addressing
allegations of misconduct undermines the
credibility of the entire administrative machinery
and erodes confidence in public institutions.

15. Accordingly, this Courts directs the
Principal Secretary, Stamp and Registration,
Government of Uttar Pradesh to initiate/continue
with the inquiry initiated against the Sub
Registrar and bring the same to a logical end.
The Principal Secretary is directed to conclude
his enquiry within a period of six months from
the date of receipt of this order and submit a
report to this Court. Registrar (Compliance) is
directed to communicate this order to the
Principal Secretary, Stamp and Registration,
Government of Uttar Pradesh forthwith.

16. There shall be no order as to the
costs.
----------
(2024) 5 ILRA 1534
ORIGINAL JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 30.05.2024

BEFORE

THE HON'BLE MAHESH CHANDRA
TRIPATHI, J.
THE HON'BLE SAUMITRA DAYAL SINGH, J.
THE HON'BLE SIDDHARTH, J.

Writ-C No. 41122 of 2019

Housing Development Finance Corp. Ltd.
 ...Petitioner
Versus
State of U.P. & Ors. ...Opp. Parties

Counsel for the Petitioner:
5 All. Housing Development Finance Corp. Ltd. Vs. State of U.P. & Ors.
1535
Gunjan Jadwani

Counsel for the Opp. Parties:
C.S.C.

Civil Law - Indian Stamp Act, 1899 -
Sections 2(14) & 3 - Full Bench Reference-
Admission stage of writ petition- - Articles
5 (c), 6 and 40 of Schedule 1-Bof the Stamp
Act- UP General Clauses Act, 1904 -
Sections 3(18) & 4(13) - Stamp Act- Fiscal
Statute- Charging section to be interpreted
strictly- Taxing event- no levy, if literal
reading
leads
to
non-taxability
of
transaction-
Burden
to
establish
occurrence
of
taxing
event-
to
be
discharged
by
Revenue-
Whether
instrument executed by the petitioner-
exigible to stamp duty under Article 6(1) of
Schedule 1-B- Agreement in writing-
condition for deposit of sale deed for
securing loan- Absent such agreement- no
levy of stamp duty on such instrument-
Upheld the Division Bench judgement in
HDFC Ltd. Vs Assistant Commissioner
Stamps, Ghaziabad- Writ petition to be
decided accordingly. (Paras 11, 12, 13, 14,
17, 18, 33 and 34)

HELD:
To define a 'taxing event' falls within the
competence of the legislature. It is an artificial
legislative construct. It arises upon a levy created
by the legislative law, on a person transaction,
event, or activity, performed by natural or other
persons. Therefore, it (taxing event) may arise
strictly in terms of the express words used by the
legislature. If literal reading leads to nontaxability of the transaction, no levy may arise. If
there exists a doubt/ambiguity about whether a
transaction, event or activity falls within the four
corners of the charging section, the taxing event
does not exist. Consequently, the levy of tax
cannot arise. (Para 11)

For a valid levy of a tax to arise, there must exist
four components of tax namely, the character of
the impost i.e. the description of the taxable
event; a clear indication of the person on whom
the levy is imposed; the rate of tax; and the
measure or value to which the rate of tax is to be
applied. The burden to establish the occurrence
or existence of a taxing event rests on the
revenue. Therefore, unless the revenue first
discharges that burden, the taxpayer may not be
burdened to prove the negative. (Para 12)

Read in the context of the duty Entry/Article 6(1)
of Schedule 1-B to the Stamp Act, that
'instrument' i.e. writing must further fulfill the
requirement of being an "agreement relating to
deposit of title deeds", etc. For an 'agreement' to
exist, it must involve a meeting of minds.
Therefore, the writing that must be proved (by
the revenue), must show that the parties (that
executed the same), had agreed to provide for
the deposit of the title deed in any immovable
property, etc., by way of security for the
repayment of money already advanced or to be
advanced by the person receiving such deposit.
(Para 18)

In the absence of that written agreement, no
'instrument' less so 'chargeable to duty' - in terms
of Section 3 read with Article 6(1) to Schedule 1B of the Stamp Act may ever exist. In that event,
an actual deposit of the title deed with a creditor,
to secure any loan availed by the debtor, would
not attract any stamp duty liability, since the
Stamp Act does not seek to levy stamp duty on
oral agreements/transactions. On the contrary,
the Stamp Act imposes duty liability only on an
'instrument'14. Those it construes as every
document/ written record etc. Unless written
words executed by the parties exist to establish
the nature of the transaction described under
Article 6(1) of Schedule 1-B of the Stamp Act, no
taxable event may ever arise or be witnessed
under the Stamp Act. (Para 21)

Thus, we conclude: (i) creation of a simple
mortgage (through deposit of title deeds),
though valid in law and fully enforceable as such,
would remain beyond the clutches of the Stamp
Act, so long as there is no written agreement
executed between the parties or any document
that is made part of thereof that evidences the
bargain reached between the parties - to deposit
the title deed (with the lender) to secure the loan
availed by the borrower. (ii) in the present case,
as noted above, there is no written evidence yet
brought on record, of any bargain reached by the
parties requiring the borrower to deposit the title
deeds with the lender/petitioner. (Para 33)

Reference answered. (E-14)
1536 INDIAN LAW REPORTS ALLAHABAD SERIES
List of Cases cited:

1. HDFC Ltd. Vs Assistant Commissioner Stamps,
Ghaziabad, 2015:AHC:125281-DB; (2015) 129
RD 208; (2015) 113 ALR 483; (2016) 2 ALJ 87;
2015 SCC Online All 8079

2. District Registrar & Collector Vs Canara Bank
(2005) 1 SCC 496

3. Board of Revenue Vs Rai Saheb Sidnath
Mehrotra, AIR 1965 SC 1092

4. Commissioner of Sales Tax, U.P. Vs Modi Sugar
Mills Ltd., (1960) SCC OnLine SC 118

5. Polester Electronic (P) Ltd. Vs Addl. Com. Sale
Tax (1978) 1 SCC 636

6. Rai Ram Krishna & ors. Etc. Vs St. of Bihar (In
Both the Appeals), (1963) SCC OnLine SC 31

7. CIT Vs Maharashtra Sugar Mills Ltd., (1971) 3
SCC 543

8. Central India Spg., Wvg. & Mfg. Co. Ltd. Vs
Municipal committee, AIR 1958 SC 341

9. Govind Saran Ganga Saran Vs CST, 1985 Supp
SCC 205

10. U.O.I. Vs Garware Nylons Ltd., (1996) 10 SCC
413

11. Shree Mohan Chowdhury Vs K.C. Dhulia AIR
1964 SC 173

12. S.N. Mathur Vs Board of Revenue, (2009) 13
SCC 301

13. Govind Rubber Ltd. Vs Louids Dreyfus
Commodities Asia (P) Ltd. (2013) 13 SCC 477

14. St. of T. N. Vs M/s Pyare Lal Malhotra & ors.,
(1976) 1 SCC 834

15. Brij Mohan Vs Sugra Begum (1990) 4 SCC 147

16. United Bank of India Ltd. Vs M/s Lekharam
Sonaram and Co. AIR 1965 SC 1591

17. United Bank of India Ltd. Vs Ram Chandra
Kapoor, 1967 SCC OnLine All 278
18. Padam Chand Jain Vs C.C.R.A., 1970 SCC
OnLine All 106

19. K. J. Nathan Vs S.V. Murthi Rao & ors., 1964
SCC OnLine SC 120

20. Umesh Kumar Gupta Vs St. of UP & ors., AIR
2006 Allahabad 30

21. The Chief Controlling Revenue Authority,
Madras Vs M/s Pioneer Spinners Pvt. Ltd., 1968
ILR Madras Series 284

(Delivered by Hon'ble Saumitra Dayal
Singh, J.)

1. Present reference (to a full bench)
has arisen on a doubt expressed by a learned
single judge, to the correctness of the ratio
contained in a division bench decision of the
Court in HDFC Ltd. Vs Assistant
Commissioner
Stamps,
Ghaziabad,
2015:AHC:125281-DB; (2015) 129 RD
208; (2015) 113 ALR 483; (2016) 2 ALJ
87; 2015 SCC Online All 8079. In that, the
division bench reasoned as below:

"In the case in hand also, the
instrument, namely, agreement executed
between the petitioner and its borrowers
does not, in itself, evidences or contain
terms regarding the deposit of title deed. The
loan agreement only provides for a future
eventuality requiring the giving of security,
which necessarily would not fall within the
ambit of Article 6 of Schedule 1-B of the Act.
The Stamp Act is a fiscal statute and its
provisions are to be strictly construed. No
stamp duty is liable to be charged on
assumptions and conjectures or surmises.
The stamp duty is to be paid on the tenor of
instrument and not at any future possibility.
The Article meant in the agreement for
security does not spell out even the nature of
the security that may be required to be
furnished sometimes in future. Stamp duty
also cannot be charged on an assumptions
5 All. Housing Development Finance Corp. Ltd. Vs. State of U.P. & Ors.
1537
that at any future time, the security by
creation of equitable mortgage by deposit of
title deeds would be executed. An equitable
mortgage created by simply depositing the
title
deed
without
there
being
any
instrument, letter, note, memorandum or
writing evidencing such an agreement
relating to deposit of title deeds, is also not
subject to payment of stamp duty.

In view of the aforesaid settled
legal positing, petitioner cannot be forced to
mention in the loan agreement the fact that
title document has been deposited with the
Bank as it is open in between the Bank and the
borrower to either create an oral equitable
mortgage by deposit of title deed as provided
under Section 58 (F) of the Transfer of
Property Act or execute a document in that
regard by way of an instrument, letter, note
and only in the eventuality of execution of an
instrument, memorandum, undertaking, letter,
the same would be chargeable with duty under
Article 6 of Schedule 1-B. In case, the loan
agreement executed between the parties, does
not contain stipulation in writing about
creation of a mortgage by the deposit of title
deed, the stamp duty would not be chargeable
under Article 5 of Schedule 1-B of the Act."

2. The reference was made at the
admission stage of the writ petition. At that
stage, the State had not filed its Counter
Affidavit. It had opposed the writ petition on
the strength of instructions. Even those are
not on record. In such circumstances,
relying on the document that may have been
produced by the State (at that stage) and
referring to Clauses 10.5(f), and 10.5(h) read
with Clause 13(d) of the Loan Agreement,
the learned single judge observed as below,
in the order dated 19.12.2019:

"9. Learned Standing Counsel,
who was earlier given time by this Court
to seek instructions, on the basis of
instructions, has informed this Court that
in the loan agreement signed between the
bank and the loanee, there is a Clause
10.5(f) and 10.5(h), which was not pointed
out at the time of decision of the Court
rendered on 31.8.2015. The emphasis is on
these two clauses and therefore, they are
being quoted hereinbelow:

"10.5(f). The Borrower alone
shall be responsible to bear and pay the
Stamp Duty, all charges levied by the
Central Registry of Securitization Asset
Reconstruction and Security Interest of
India,
as
well
as
all
other
statutory/regulatory charges/levies/taxes
as may be applicable to the Loan, the
Security, this Agreement as well as on all
other instruments in relation to the
Loan/Security (to the extent as may be
applicable during the pendency of the
Loan).

10.5(h) The Borrower further
agrees that the terms and conditions of the
Offer Letter, the loan application and the
related
documents
executed/
to
be
executed shall be read and form part and
parcel of this Agreement. In case of any
inconsistency, in any of the stated
documents, the terms and conditions of
this Loan Agreement shall prevail."

10. It has been submitted on the
basis of these two clauses that once the
loan agreement is signed by the loanee,
the title deed to the property mortgaged as
security of the loan are also deposited by
the loanee with the bank.
11. Learned Standing Counsel has pointed
out a clause in the loan agreement which
says that such title deed shall only be
released after repayment of the entire loan
amount i.e. Clause 13(d). It amounts to an
equitable mortgage created on the property
of which, the loan has been taken. It has
been submitted that these clauses of the
agreement were not brought to the notice of
1538 INDIAN LAW REPORTS ALLAHABAD SERIES
the Division Bench when it decided the case
on 31.8.2015."

3. Consequently, the following
reference was made by the learned single
judge:

"In the light of the submissions
regarding the loan agreement contained
Clause 10.5(f), 10.5(h) and 13(d), whether
the agreement signed between the bank and
the loanee would be chargeable as an
equitable mortgage created on the property
for which the loan is taken?"

4. The Chief Justice constituted this
full bench to answer that reference. After
that, a Counter Affidavit (sworn by Shri.
Yogendra Singh, Assistant Registrar, Sadar,
Gorakhpur dated 24.09.2020), was filed. It
did not bring the Loan Agreement (noticed
by the learned single judge), on record. On
that being pointed out by us on 05.04.2024,
the
State
craved
leave
to
file
a
Supplementary
Counter Affidavit.
We
granted that indulgence and adjourned the
hearing. Accordingly, a Supplementary
Counter Affidavit (sworn by Shri. Pradeep
Rana, Assistant Inspector General (Stamp),
Gorakhpur), dated 22.04.24 has been filed.
Learned counsel for the petitioner proposed,
not to file a Rejoinder Affidavit.

5. Since the reference has arisen at the
instance of the State, we heard Shri Manish
Goel learned Additional Advocate General
assisted by Shri A.K. Goyal learned
Additional Chief Standing Counsel for the
State first, and Shri Anurag Khanna learned
Senior Advocate, assisted by Ms. Gunjan
Jadwani for the petitioner, in reply.

6. The document described as a true
copy of the Loan Agreement (annexed to the
Supplementary Counter Affidavit), does not
contain
Clause
13(d).
The
learned
Additional Advocate General states, there is
a typographical error in the reference order.
The relevant Clause is Clause 13(iii)(b) of
the Most Important Terms & Conditions
(hereinafter referred to as MITC). In the
absence of any challenge to that statement,
we have no reason to doubt its correctness.
Accordingly, we read the reference made to
us as below:

In the light of the submissions
regarding the loan agreement contained in
Clause 13(iii)(b) whether the agreement
signed between the bank and the loanee
would be chargeable as an equitable
mortgage created on the property for which
the loan is taken?"

7. Article 10.5(f), 10.5(h) of the Loan
Agreement, Clauses 7, 10(a), 11, and 13 of
the MITC, appended to the Loan Agreement
read as below:

"10.5(f). The Borrower alone
shall be responsible to bear and pay the
Stamp Duty, all charges levied by the
Central Registry of Securitization Asset
Reconstruction and Security Interest of
India,
as
well
as
all
other
statutory/regulatory charges/levies/taxes as
may be applicable to the Loan, the Security,
this Agreement as well as on all other
instruments in relation to the Loan/Security
(to the extent as may be applicable during
the pendency of the Loan).

10.5(h). The Borrower further
agrees that the terms and conditions of the
Offer Letter, the loan application and the
related documents executed/ to be executed
shall be read and form part and parcel of
this Agreement. In case of any inconsistency,
in any of the stated documents, the terms and
conditions of this Loan Agreement shall
prevail."
5 All. Housing Development Finance Corp. Ltd. Vs. State of U.P. & Ors.
1539

7. Security/Collateral for the
loan [ * ]

Security
of
the
loan would
generally be security interest on the
property being financed and/or any other
collateral/interim security as may be
required by HDFC.

(a) Property description : House
on Plot on Arazi No. 7Mi, Mouza Dariya
Chak, Pargana Haveli, Tappa Kasba, Tehsil
Sadar, Bd By: N, W:Road, E: House, S:Plot,
situated
at
Gorakhpur,
273001
and
construction thereon present and future.

(b) Guarantee: Names of the
Guarantor/s (if any): Not Applicable

(c) Other Security Interest (If
any): Not Applicable

10. Conditions for disbursement of
the loan

The Borrower shall:

a. submit all relevant documents
as mentioned in the Sanction Letter/Loan
Agreement.

11. Brief Procedure to be
followed for Recovery of overdue:

Customers are explained the
repayment process of the loan in respect of,
tenure, periodicity, amount and mode of
repayment of the loan. No notice, reminder
or intimation is given to the customer
regarding his/her obligation to pay the EMI
or PEMI regularly on due date.

On non-payment of Pre-EMI/EMI
by the due dates, HDFC shall remind the
customers by making telephone calls,
sending written intimations by post and
electronic medium or by making personal
visils by HDFC's authorized personnel at
the addresses provided by the customer.
Costs of such calls/communication/visits
shall be recovered from the customer.

Notwithstanding what is stated
herein, it shall be the liability of the
customer to ensure that the Pre-EMI/EMIs
are regularly paid on the due dates.

Credit information relating to any
customer's account is provided to the Credit
Information Bureau (India) Limited (CIBIL)
or any other licenced bureau on a monthly
basis. To avoid any adverse impact ort the
credil history with CIBIL, it is advised that
the customer should ensure timely payment
of the amount due on the loan amount.

The
recovery
process
of
enforcement
of
mortgage/securities,
including but not limited to, taking
possession and sale of the mortgaged
property in accordance with the procedure
prescribed under the Securitisation and
Reconstruction of Financial Assels and.
Enforcement of Security Interest Act, 2002
(SARFAESI Act) or under any other law, is
followed purely as per the directions laid
down under the respective low.

Intimation/Reminders/Notice(s)
are given to customer prior to inillating
steps for res recovery of overdues, under the
Negotiable Instruments Act, Civil Suit as
well as under the SARFAESI Act.

13. Customer Services

(i) Customer Service Queries
including requirement of documents can be
addressed to HDFC through the following
channels

Write
to
us
through
our
website:www.hdfc.comor notify us at:

HOFC Lid, HDFC House, HT
Parekh
Marg,
165-166,
Backbay
Reclamation, Churchgate, Mumbai 400 020.

(ii) Visiting hours and the details
of person to be contacted for customer
service with respect to all branches of
HDFC are available atwww.hdfc.com.

(iii) Contact HDFC Customer
Service Officer at your nearest branch
within the working hours as mentioned in
the Loan Application form for:
1540 INDIAN LAW REPORTS ALLAHABAD SERIES

a. Photo Copies of documents,
which can be provided in 7 working days
from dale of placing request.

Necessary
administrative
fees
shall be applicable.

b. Original documents will be
returned within 10 working days from the
date
of
closure
of
loan.
Necessary
administrative fee shall be applicable if
documents collected beyond due date of
release of documents.

c. Loan Account statement (time
line) : Within 3 working days of the receipt
of request."

8. The reference has arisen in the
statutory context of the Indian Stamp Act,
1899 (hereinafter referred to as the 'Stamp
Act'), as applicable in the State of Uttar
Pradesh. The provisions of sections 2(14)
and 3 of the Stamp Act read as below:

"2(14)
"Instrument"
-
"Instrument" includes every document and
record created or maintained in or by an
electronic storage and retrieval device or
media by which any right or liability is, or
purports to be, created, transferred, limited,
extended, extinguished or recorded.

3. Instruments chargeable with
duty. Subject to the provisions of this Act
and the exemptions contained in Schedule I,
the
following
instruments
shall
be
chargeable with duty of the amount
indicated in that Schedule as the proper duty
therefor, respectively, that is to say,-

(a) every instrument mentioned in
that Schedule which, not having been
previously executed by any person, is
executed in India on or after the first day of
July, 1899;

(b) every bill of exchange payable
otherwise than on demand, or promissory
note drawn or made out of India on or after
that day and accepted or paid, or presented
for acceptance or payment, or endorsed,
transferred or otherwise negotiated in
India; and

(c) every instrument (other than a
bill of exchange, or promissory note)
mentioned in that Schedule, which not
having been previously executed by any
person, is executed out of India on or after
that day, relates to any property situate, or
to any matter or thing done or to be done, in
India and is received in India:

Provided that, except as otherwise
expressly provided in this Act, and
notwithstanding anything contained in
clauses (a), (b) and (c) of the section or in
Schedule I or I-A, the following instruments
shall, subject to the exemptions contained in
Schedule I-A or I-B be chargeable with duty
of the amount indicated in Schedule I-A or IB as the proper duty therefor, respectively,
that is to say,-

aa) every instrument mentioned in
Schedule J-A or B which not having been
previously executed by any person was
executed in Uttar Pradesh,-

(i) in the case of instruments
mentioned in Schedule I-A on or after the
date on which the U.P. Stamp (Amendment)
Act, 1948, came into force; and

(ii) in the case of instruments
mentioned in Schedule I-B on or after the
date on which the U.P. Stamp (Amendment)
Act, 1948, came into force;

(bb) every instrument mentioned
in Schedule I-A or I-B which not having been
previously executed by any person, was
executed out of Uttar Pradesh,-

(i) in the case of instruments
mentioned in Schedule I-A on or after the
date on which the U.P. Stamp (Amendment).

(ii) in the case of instruments
mentioned in Schedule I-B, on or after the
date on which the U.P. Stamp (Amendment)
Act, 1952, comes into force, and relates to
any property situated, or to any matter or
5 All. Housing Development Finance Corp. Ltd. Vs. State of U.P. & Ors.
1541
thing done or to be done in Uttar Pradesh,
and is received in Uttar Pradesh:

Provided also that no duty shall be
chargeable in respect of,-

(1) any instrument executed by or
on behalf of, or in favour of, the Government
in cases where, but for this exemption
Government would be liable to pay the duty
chargeable in respect of such instrument;

(2) any instrument for the sale,
transfer
of
other
disposition,
either
absolutely or by way of mortgage or
otherwise, of any ship or vessel, or any part,
interest, share or property of or in any ship
or vessel registered under the Merchant
Shipping Act, 1894, or under Act No. XIX of
1838, or the Indian Registration of Ships
Act, 1841 (X of 1841), as amended by
subsequent Acts;

[(3) Any instrument executed, by,
or, on behalf of, or, in favour of, the
'developer', or 'unit' or in connection with
the carrying out of purposes of the special
economic zone.

Explanation.- For the purposes of
this clause, the expressions "Developer",
"Special Economic Zone" and "Unit" shall
have meanings respectively assigned to
them in clauses (g), (za) and (zc) of Section
2 of the Special Economic Zones Act, 2005.]

Explanation.- Where the amount
of duty prescribed in Schedule I-B contains
any fraction of a rupee below twenty-five
paise, or above twenty-five paise, but below
fifty paise, or above fifty paise, but below
seventy-five paise, or above seventy-five
paise but below one rupee, the proper duty
shall be an amount rounded off to the next
higher quarter of a rupee as hereinafter
appearing in the said Schedule."

9. Then, Articles 5(c), 6, and 40 of
Schedule I-B to the Stamp Act read as
below:
Description of Instrument
Proper
Stampduty
5.Agreement
or
memorandum
of
an
agreement-
(c) if not otherwise provided
for
Exemption
Agreement or memorandum
of agreement-
(a) [Deleted by U.P. Act No.
14 of 1963]
(b) made in the form of
tenders
to
the
Central
Government for, or relating
to, any loan;
6. Agreement relating to
deposit of title, deeds, pawn
or pledge, that is to say, any
instrument evidencing an
agreement relating to -
(1) the deposit of title deeds
or instruments constituting
or being evidence of the title
to any property whatever
(other than a marketable
security);
or
(2) the pawn or pledge of
movable property, where
such deposit, pawn or pledge
has been made by way of
security for the repayment of
money advanced or to be
advanced by way of loan or
an existing or future debt -

[(a) if such loan or debt is
repayable on demand or
more than three months from
the date of the instrument
evidencing the agreement-

One
hundred
rupees.

Twenty
rupees
1542 INDIAN LAW REPORTS ALLAHABAD SERIES
For every Rs. 1,000 or part
thereof of the amount of loan
or debt.
Explanation

For the purposes of clause
(1) of this Article, any letter,
note or memorandum or
writing,
relating
to
the
deposit
of
title
deeds,whether written or
made before, or at the time
of, or after, the deposit of
title deeds is effected, and
whether it is in respect of the
first loan or any subsequent
loan,
such
letter,
note,
memorandum
or
writing
shall, in the absence of any
separate agreement relating
to deposit of title deeds, be
deemed to be an instrument
evidencing an agreement
relating to the deposit of title
deeds.]
(b) if such loan or debt is
repayable not more than
three months from the date of
such instrument.
Exemption
Instrument
of
pawn
or
pledge
of
agriculture
produce, if unattesed.
40.
Mortgage-deed
not
being an Agreement relating
to Deposit of Title-deeds,
Pawn or Pledge (No.6),
Bottomry
Bond
(No.16),
Mortgage of a Crop (No.41),
Respondentia Bond (No.56)
or Security Bond (No. 57)-
(a) when possession of the
property or any part of the
property comprised in such
deeds
is
given
by
the

Half the
duty
payable
on a loan
or
debt
under
Clause
(a) for the
amount
secured.

The same
duty as a
Conveyan
ce [No.23
clause
(a)] for a
considera
tion equal
to
the
amount
morgagor or agreed to be
given
(b) when possession is not
given or agreed to be given
as aforesaid
Explanation

A mortgagor who gives to
the mortgagee a power of
attorney to collect rents or a
lease of the property or part
thereof, is deemed to give
possession
within
the
meaning of this Article.

(c) when a collateral or
auxilliary or additional or
substituted security, or by
way of further assurance for
the abovementioned purpose
where
the
principal
or
primary security is duly
stamped-
for every sum secured not
exceeding Rs. 1,000
and for every Rs. 1,000 or
party thereof secured in
excess of Rs. 1,000
Exemptions

(1) Instruments executed by
persons
taking
advances
under the Land Improvement
Loans Act, 1883, or undre
the Agriculturists'
Loans
Act, 1884, or by their
sureties as securities for the
repayment of such advances.
(2) Letter of hypothecation
accompanying a bill of
exchange.
secured
by
such
deed.

The same
duty as a
Bond
(No.15)
for
the
amounts
secured
by
such
deed.

[Ten
rupees]

[Ten
rupees]

10. The Stamp Act is a fiscal statute1.
Therefore, the rule of strict interpretation
5 All. Housing Development Finance Corp. Ltd. Vs. State of U.P. & Ors.
1543
must be applied to its charging section -
Section 3 read with the Schedules to that
Act2. There is no room or permission to
interpret/read
the
charging
section,
liberally3. The Courts may only look at what
is clearly said; there is no room for
intendment; there is no equity about tax;
there is no presumption as to tax; nothing
may be read into, and nothing may be
implied to bring a subject to tax4.

11. To define a 'taxing event' falls
within the competence of the legislature5.. It
is an artificial legislative construct. It arises
upon a levy created by the legislative law, on
a person transaction, event, or activity,
performed by natural or other persons.
Therefore, it (taxing event) may arise strictly
in terms of the express words used by the
legislature. If literal reading leads to nontaxability of the transaction, no levy may
arise6. If there exists a doubt/ambiguity
about whether a transaction, event or
activity falls within the four corners of the
charging section, the taxing event does not
exist. Consequently, the levy of tax cannot
arise7.

12. For a valid levy of a tax to arise,
there must exist four components of tax
namely, the character of the impost i.e. the
description of the taxable event; a clear
indication of the person on whom the levy is
imposed; the rate of tax; and the measure or
value to which the rate of tax is to be
applied8. The burden to establish the
occurrence or existence of a taxing event
rests on the revenue9. Therefore, unless the
revenue first discharges that burden, the
taxpayer may not be burdened to prove the
negative.

13. Section 3 of the Stamp Act seeks to
charge stamp duty on an 'instrument'. Thus,
the taxing event is the execution of an
'instrument'. The person on whom such duty
liability arises is specified under Section 29 of
the Stamp Act. The rate and measure of duty
to be charged is to be found - as 'indicated'
under any of the Schedule to the Stamp Act.
Before us, there exists neither any doubt as to
the person on whom stamp duty is to be levied
nor to the existence of the rate or measure of
stamp duty specified by the Stamp Act.

14. The doubt is whether the 'instrument'
executed by the petitioner falls under Article
6(1) of Schedule 1-B to the Stamp Act. Unless
that 'instrument' exists, the rate and measure
of tax prescribed may not come to life. Thus,
for any charge of stamp duty to arise there
must exist an 'instrument' on which such duty
may be charged. Under separate entries
(described as Articles), enumerated under
each of the Schedules appended to the Stamp
Act, the exact rate of stamp duty must be
found prescribed on the subject 'instrument'.
Under the scheme of the Stamp Act, those
have been categorised by nature of the rights
and liabilities that an 'instrument' may seek to
create, alter or deal with 'indicating' the stamp
duty to be charged thereon. Unique rates of tax
have
been
specified
for
each
such
'instrument', together with the method/mode
of computation i.e. fixed rate or ad valorem
base.

15. Section 2(14) of the Stamp Act
includes and thus describes an 'instrument' as
'every document' etc. by which any 'right or
liability' is, or purports to be, amongst others
'created' or 'recorded'. The dictionary
meaning of the word 'instrument' would
commend its construction - a written
document of a formal legal kind10. In any
case, Section 3(18) of the General Clauses
Act, 1897 defines a 'document' thus:

"3(18). "document" shall include
any matter written, expressed or described
1544 INDIAN LAW REPORTS ALLAHABAD SERIES
upon any substance by means of letters,
figures or marks, or by more than one of
those means which is intended to be used, or
which may be used, for the purpose of
recording that matter.

16. Section 4(13) of the Uttar Pradesh
General Clauses Act, 1904 incorporates a
pari materia definition of the word
'document'. Similarly, Section 3 of the
Indian
Evidence
Act
1872
defines
'document' thus:

"3. Document. --Document means any
matter expressed or described upon any
substance by means of letters, figures or
marks, or by more than one of those means,
intended to be used, or which may be used,
for the purpose of recording that matter."

17. On a conjoint reading of Sections
3 and 2(14) of the Stamp Act read with
Section 3(18) of the General Clauses Act,
1897 and Section 4(13) of the U.P. General
Clauses Act, 1904, a charge of stamp duty
may arise - as to amount 'indicated' in any
of the Schedules to the Stamp Act on an
'instrument' i.e. a 'document' that must be
writing, expressed or described by letters,
figures or marks, etc., placed with an
intention to be used or for actual use to
record that matter. That may never be
anything but writing whether on paper or
electronic mode etc. In whatever form it
may exist, its visibility to the naked eye
(both as to the writing and the intent or use),
is a sine qua non, to be fulfilled, before such
'document' may ever be described as an
'instrument'. Therefore, for the charging
section to attract and a valid levy of stamp
duty to arise, there must not only exist an
'instrument' (as defined), but also a
specified rate of tax on such 'instrument',
under any one of the Schedules to the Stamp
Act11.

18. Read in the context of the duty
Entry/Article 6(1) of Schedule 1-B to the
Stamp Act, that 'instrument' i.e. writing
must further fulfill the requirement of being
an "agreement relating to deposit of title
deeds", etc. For an 'agreement' to exist, it
must involve a meeting of minds12.
Therefore, the writing that must be proved
(by the revenue), must show that the parties
(that executed the same), had agreed to
provide for the deposit of the title deed in
any immovable property, etc., by way of
security for the repayment of money already
advanced or to be advanced by the person
receiving such deposit.

19. Also, that 'agreement' must be
specific. It must satisfy the exact terms of
Article 6(1) to Schedule 1-B of the Stamp
Act. Thus, to be subjected to stamp duty
under that Entry/Article, the 'instrument'
must squarely/unequivocally describe the
terms of that Article/Entry, read strictly.
Such an 'instrument' must 'evidence' an
'agreement' to 'deposit of title deeds' etc.
The words 'that is to say' prefixed to that
taxing entry is an ancillary clause, enacted
to explain the meaning of the principal
clause. It makes clear and fixes the meaning
of the nature of 'instruments' subjected to
Stamp duty, by the legislature13. Therefore,
the 'instrument' to be subjected to stamp
duty payment under that Article/Entry must
specifically provide for "the deposit of title
deeds or......".

20. In other words, only when a writing
is found executed by the debtor, providing
for deposit of any title deed of an immovable
property with the creditor - to secure any
existing loan or future loan to be advanced
by the latter (which would be rights and
liabilities dealt with by that document), the
taxing event may exist. That alone may give
rise to a levy of stamp duty as the rate and
5 All. Housing Development Finance Corp. Ltd. Vs. State of U.P. & Ors.
1545
measure of the tax provided under Article
6(1) of Schedule 1-B to the Stamp Act.
There cannot be any presumption or
inference as to that.

21. In the absence of that written
agreement,
no
'instrument'
less
so
'chargeable to duty' - in terms of Section 3
read with Article 6(1) to Schedule 1-B of the
Stamp Act may ever exist. In that event, an
actual deposit of the title deed with a
creditor, to secure any loan availed by the
debtor, would not attract any stamp duty
liability, since the Stamp Act does not seek
to
levy
stamp
duty
on
oral
agreements/transactions. On the contrary,
the Stamp Act imposes duty liability only on
an 'instrument'14. Those it construes as
every document/ written record etc. Unless
written words executed by the parties exist
to establish the nature of the transaction
described under Article 6(1) of Schedule 1B of the Stamp Act, no taxable event may
ever arise or be witnessed under the Stamp
Act.

22. Seen in that light, Clause 10(a) of
the Loan Agreement only required the
borrower to submit documents mentioned in
the
Sanction
Letter/Loan
Agreement.
Remarkably, the Loan Agreement itself does
not require the borrower to deposit the title
deed in any immovable property with the
petitioner, to secure the loan availed by the
borrower. The Loan Agreement does not
speak of the deposit of any title deed.
Neither the Sanction Letter nor the Loan
Application nor any other document
(evidencing any bargain reached between
the parties requiring the borrower to deposit
any title deed, to secure the loan availed by
him), has been brought on record. Therefore,
the contents of such documents may remain
to be speculated, but never admitted, proved,
or established. There is no evidence or
credible material (shown to exist) with the
revenue
authorities,
to
establish
the
existence of any written bargain reached
between the parties that may have obliged
the borrower to deposit any title deed with
the petitioner - to secure the loan availed by
the former. That burden has remained
undischarged.

23. Similarly, in the absence of any
other
document
produced,
the
mere
existence of Clauses 10(f), 10(h) of the Loan
Agreement, Clauses 7, 10(a), 11, and 13 of
the MITC, the terms and conditions of the
Offer Letter, the Loan Application, and other
documents (that may form part and parcel of
the Loan Agreement), on their (own) force
did not create any written stipulation or
agreement or evidence of a bargain reached
by the borrower to deposit any title deed
etc., with the petitioner to secure the loan
availed by him. Creation of security interest
in
immovable
property,
without
documentary evidence of bargain, reached -
to deposit the title deed in the immovable
property (in which such security interest
may have been created in terms of Act
Number 54 of 2002), may also not be read
as evidence of an 'instrument' drawn to
deposit the title deed in that property, to
secure the loan availed by the borrower.

24. In view of the above, Clause
13(iii)(b) of MITC is extraneous to the issue.
Unless an 'instrument' evidencing an
'agreement' to deposit any title deed is
executed by the borrower, in favour of the
petitioner - to secure a loan availed by the
former, mere deposit of such title deed
(against an oral agreement) and its return
(against a written agreement) would not give
rise to any taxing event under Section 3 read
with Section 2(14) and Article 6(1) of
Schedule 1-B to the Stamp Act.