Stamp duty evasion charge: BJP MLA’s realty firm told to pay Rs 473 crore penalty, dues

On April 30, the state’s Collector of Stamps, who has quasi-judicial powers in such matters, passed an order holding the firm responsible for alleged evasion. The Lodha group was also directed to pay Rs 474 crore in penalty and dues within 30 days to avoid further action. The Indian Express has reviewed the order issued by the Collector of Stamps.
Abhishek Lodha has questioned the department’s action. The controversy relates to an agreement signed between Mumbai Metropolitan Region Development Authority (MMRDA), under the state government, and the realty group’s Lodha Crown Buildmart Private Limited on August 1, 2011 for the Wadala land.

MMRDA is the planning authority for the plot. On March 3, 2010, the Authority had invited bids for the disposal of the land either on payment of a one-time premium or on deferred payment in installments over five years. The firm, which offered Rs 5,721 crore in installments for the plot, bagged the rights to develop it.

On August 1, 2011, MMRDA and Lodha Crown Buildmart entered into an “agreement to lease” for the plot, where the latter was “permitted to enter upon the plot as a bare licensee for erecting buildings and no other purpose until the formal grant of lease”. Both sides had agreed that a lease deed will be executed after completion of the entire work.

On the face of it, the document was an agreement for creation of lease in future. While stamp duty is not chargeable on an agreement to lease, unless there is an immediate demise of the land and creation of interests in favour of the lessee, the Collector of Stamps argued in its order that in substance the 2011 document was a development agreement, where interests had already been created in favour of the firm.

It pointed out that the firm had already sold 1,000 apartments in the project, and has raised loans on it. “The developer has already created third-party right and interests on the property,” a senior official said. “He (Lodha) has not acted as a bare licensee. We are treating the document as a development agreement, on which 5 per cent duty on consideration value is chargeable.”

The Lodha group contests this argument, and maintains that the document had to be treated as an agreement to lease.

In a statement, the company said, “Lodha Group operates with the highest standards of corporate governance and ethics. Authorities issue many such demands to boost their collections but everyone has to follow the law of the land.

In a similar matter, as per Supreme Court judgment in ICICI v/s. State of Maharashtra, which is an identical agreement, the stamp duty is payable at time of execution of lease deed, not agreement to lease, and we are following the same Supreme Court judgment.”

The statement said, “We will contest the Collector of Stamps order through the highest administrative and judicial process.”

Stating that Lodha had so far paid about Rs 2,500 crore in premium installments, Deputy Metropolitan Commissioner Anil Wankhede said, “We had opted not to create a lease at the outset since the land disposal model was on a deferred payment basis. It would not have been wise to grant lease when only one installment had been paid. We had repeatedly sought directions from stamps authorities regarding the time when the stamp duty would become payable…. There was no direct reply.”

He said, “We have even written to the developer, stating clearly that full stamp duty would have to be paid. There is no question of supporting any bid to evade payment of duty.”