Stamp duty: Execution of document outside state

In this Article, I have tried to clarify the confusion prevailing on applicable stamp duty, if the documents have been executed outside the state but brought back in the state for different purposes including for the purpose of storage. Since Stap Duty is a state subject and most of the states have either passed their own stamp Act or have introduced a seperate schedule on stamp duty applicable in thier state. For the purpose of this Article I have taken the state of Maharashtra and Bombay Stamp Act, 1958 (applicable stamp act in the state of Maharashtra) for the purpose of illustration. we understand that the fundamental principle behind payment of stamp duty on documents executed in the state other than maharshtra (as explained in this Article below) shall remain the same for other states also, however, it is advised to the reader to check the provisions of stamp act applicable in their state.

Section 3 of the Bombay Stamp Act, 1958 (“Said Act”) being the charging section provides that where an instrument chargeable under schedule I to the Act which has been executed outside state of Maharashtra, is brought into the state of Maharashtra and relates to any property situated or to any matter or thing done or to be done in this State.

If an instrument chargeable under the said Act is executed outside the State of Maharashtra to which Section 3(b) applies, section 19 of the said Act will apply. Such an instrument will have to be stamped with the differential amount i.e. the amount to which such an instrument would be chargeable under Schedule I of the Said Act less the amount of stamp duty, if any, already paid under any law in force in India, excluding the state of Jammu and Kashmir, when such instrument was executed.

If an instrument is executed outside the state of Maharashtra and does not relate either to any property situated or to any matter or things done or to be done in this State, such instrument will not be liable to stamp duty under the said Act. If it is merely received in the State for the purpose of storage only, it would not attract stamp duty because it does not fulfill the ingredients of Section 3(b).

Unless both the ingredients of satisfied i.e. (i) the instrument relating to any property situate or to any matter or thing doe or to be done in this State; and (ii) the instrument being received in this State, section 3 (b) of the said Act will not be attracted. Mere receipt of the instrument in the State for storage without the other requisite conditions being satisfied will not result in the instrument being liable to stamp duty under the said Act in the State of Maharashtra.

In the matter of Antifriction Bearing Corporation v. State 1999 (1) Bom C.R. 13, it was observed by Bombay High Court that if an instrument is executed outside State of Maharashtra but whose filing is required with the Registration of Companies situated at Maharashtra under Companies Act, 1956 the such instrument would fall within Sec. 3(b) and would liable for stamp duty. If some stamp duty has already been paid in the state in which the instrument has been executed, the differential stamp duty as specified in Sec.19 of the said Act would have to be paid.

Another important aspect which is relevant to discuss here is that what will be the stamp duty, if an instrument has been executed by parties in different states. An instrument is said to be executed if it is signed by all persons who are required by the character of the instrument to sign it, in order to give that instrument effect according to the law. If the instrument is of such a character that only one party is required to sign it to give effect to it according to law, the instrument is executed when that paty signs the same. If, however, the instrument is of such a character that more than one party to the document is required to sign it to make it a binding instrument, it would be signed by all of them for the instrument to fall within the definition of execution under Section 2(i) of the said Act. The instrument will be deemed to be executed for the purpose of attracting stamp duty only when it is signed by the last last of the persons who are required to sign the same. Therefore, if an instrument required to be signed by two parties is signed first by one party in Maharashtra and thereafter by the second party who is required to sign it, outside the State of Maharashtra and would not attract stamp duty in Maharashtra unless it is received in the State of Maharashtra and conditions of Section 3(b) of the said Act are satisfied.