ORDER
N.K. Jain, C.J.
1. This is a case referred by Chief Controlling Revenue Authority under Section 54 of the Karnataka Stamp Act, 1957 (hereinafter called the 'Stamp Act').
2. The essential facts of the case leading upto this case are as follows.-
The petitioner herein which is a company registered under the Companies Act, 1956, agreed to take over a Tea Estate known as 'Glenlorna Tea Estate' comprised in different survey numbers situate in Poradu Village, T. Shettigeri Village and Nemmale Village of Virajpet Taluk, Kodagu District and measuring in all 942.56 acres. The said Tea Estate is leasehold granted by Government of Coorg under two lease deeds dated 1913-1914 and 1915-1916, for a period of 999 years. The property passed different hands and Coorg Tea Company Limited acquired leasehold right in the said Tea Estate and agreed to convey leasehold rights to the petitioner in the said Tea Estate for a consideration of Rs. 1,36,25,000/-. Being doubtful about the stamp duty to be paid on the said conveyance, the petitioner addressed a letter to the District Registrar of Kodagu, Mercara on 21-5-1985 under Section 31 of the Stamp Act and the District Registrar conveyed by his communication dated 27-5-1985 that for consideration for transfer of assignment of Rs. 1,36,25,000/- the stamp duty inclusive of surcharge will be Rs. 13,63,500/- and in addition, the registration fee will be Rs. 1,36,250/-. The deed dated 5-6-1985 was presented for registration on 6-6-1985 before the Sub-Registrar, Ponnampet, Kodagu and registered on payment of the above said stamp duty and registration fee. However, the petitioner filed a petition under Section 53 of the Stamp Act before the Chief Controlling Revenue Authority seeking for refund of surcharge of Rs. 4,11,500/- contending that the deed was only assignment of lease and not sale and Section 164(7) of the Karnataka Village Panchayats and Local Boards Act, 1959 (in short, the 'Panchayat Act'), was not attracted. Appeal was rejected holding that the deed was in substance a sale and not mere assignment and dismissed on 21-7-1986. The petitioner filed W.P. No. 8193 of 1988 seeking for a direction to refer the case under Section 54 of the Stamp Act. Writ petition was allowed directing to make a reference on 9-3-1995. This reference is made under Section 54 of the Stamp Act for the opinion on the following questions:
(1) Whether the instrument in question is a conveyance on sale falling within the ambit of Section 21(d) of the Karnataka Stamp Act, 1957 and chargeable to duty under Article 20 of the Schedule to the Karnataka Stamp Act, 1957 read with Section 164(7) of the Karnataka Village Panchayat and Local Boards Act, 1957?
(2) If not, whether it is a transfer of lease falling within the purview of Article 53 of the Schedule to the Karnataka Stamp Act, 1957?
(3) If the instrument does not fall under any of the items aforesaid, what is the correct nature of the deed and the stamp duty chargeable thereon?
3. We have heard Sri R.V.S. Naik, the learned Counsel for the petitioner and Sri Parthasarathy, the learned High Court Government Advocate for respondents. Perused the relevant material and provisions.
4. Sri Naik, the learned Counsel for the petitioner has submitted that the deed only assigns leasehold right for unexpired period and hence is chargeable to duty under Article 53 of the Stamp Act and not a sale or conveyance and does not attract surcharge under Section 164(7) of the Panchayat Act, and entitled to refund of surcharge. Learned Counsel further submitted that the definition of 'conveyance' under Section 2(1)(d) of the Stamp Act is not applicable to the deeds for which a specific provision is made in the Schedule to the Stamp Act.
5. Sri Parthasarathy, the learned High Court Government Advocate, submitted that the substance of the transaction under the deed, having regard to the contents of the deed, is a sale and not mere assignment and the leasehold property is absolutely conveyed to the petitioner and therefore, surcharge under Section 164(7) of the Panchayat Act, is attracted and the petitioner had sought for decision of the District Registrar regarding duty payable and has accordingly, paid the stamp duty and got the document registered on 6-6-1985 and is not entitled to refund.
6. The point that arises for determination is:
Whether the instrument dated 5-6-1985 executed in favour of the petitioner is a mere assignment of lease chargeable to stamp duty under Article 53 of the Stamp Act as contended by the learned Counsel for the petitioner or a sale chargeable under Article 20 and attracts surcharge under Section 164(7) of the Panchayat Act, as contended by the respondent?
It is clear from the provisions of Section 2(1)(d) of the Stamp Act and Articles 20 and 53 of the Schedule to the Stamp Act that stamp duty payable is the same. However, if the instrument is construed as a sale it would attract surcharge of 3 per cent under Section 164(7) of the Panchayat Act.
'Section 164 deals with the levy of taxes.--(1) Subject to any general or special orders which may be made by the Government in this behalf, every Taluk Board may, after observing the procedure prescribed in this section and with the sanction of the Commissioner levy-
(a) a duty on transfers of immoveable property, in the shape of an additional stamp duty;
(7) The duty on transfers of immoveable property (hereinafter in this section referred to as 'transfer duty') shall be levied in the form of a surcharge on the duty imposed by the Karnataka Stamp Act, 1957, on instruments of sale, gift, mortgage, exchange and lease in perpetuity, of immoveable property situate within the limits of the Taluk Board at a rate not exceeding three per centum on, as the case may be, the amount of the consideration for the sale, the value of the property in the case of a gift, or the amount secured by the mortgage, the value of the property of the greater value in the case of exchange, or the value of the rent for the first ten years in the case of a lease, as set forth in the instrument:
Provided that no such duty is leviable in respect of mortgage where the amount secured by a mortgage does not exceed rupees two thousand'.
7. The instrument in the present case though titled as the deed of assignment of lease, the contents of the document would irresistibly lead to the inevitable conclusion that it is not an assignment but sale of leasehold right absolutely in favour of the petitioner. While construing the document in question what is to be seen is the substance of the transaction, and the mere nomenclature used cannot be conclusive or decisive. The Apex Court also in Commissioner of Income-tax, Assam, Tripura, and Manipar v. The Panbari Tea. Company Limited, : [1965]57ITR422(SC) , : [1965]57ITR422(SC) has held, that 'It is well-settled that it is not the form but the substance of the transaction that matters. The nomenclature used may not be conclusive or decisive as there may be circumstances where the parties may camouflage the real nature of transfer by using clever phraseology'. It will be appropriate to go through the deed. Excerpts from the deed would clearly indicate:
'I. By an indenture dated 18th December, 1943 registered as No. 7 of 1944, Book I, pages 52 to 54 in the office of the Sub-Registrar, Ponnampet and made between the Arnakal Tea Estates Limited, referred to above of the one part and Coorg Tea Company Limited, the assignor herein of the other part the Arnakal Tea Estate Limited assigned to the assignor its leasehold rights and all other right, title and interest in the said Glenlorna Tea Estate free of all encumbrances together with all buildings, fixtures, erections, furniture, machinery, plants, tools, implements, tea plants nursery and all other appurtenances and ever since the said assignment in its favour the assignor has been in continuous and undisturbed possession and enjoyment of the Glenlorna Tea Estate except for an extent of 279 acres 76 cents of land comprised in Sy. No. 1/18 of West Nemmale Village covered by Coffee Registration No. VTS. 71/58/8, dated 24-9-1958 which the assignor assigned, conveyed and transferred for valuable consideration to and in favour of Neroth Plantations Private Limited vide a deed of assignment dated the 3rd August, 1976, registered as No. 3232/1976-77 at pages 37 to 46, Volume 228 of Book I in the office of the Sub-Registrar, Ponnampet and thus at present Glenlorna Tea Estate consists of 942 acres 56 cents of land comprises in S. Nos. 98/4, 98/38, 160/2, 160/19, 160/20 and 198/1 of Hysodlur Village, Survey No. 79/1 of Poradu Village, Survey Nos. 1/1, 1/2 and 2/4 of T. Shettigeri Village and S. Nos. 4/4 and 4/8 of West Nemmale Village together with factory buildings, bungalow, labour quarters and other constructions, plant and machinery and other movables.
J. At the extraordinary general meeting of the shareholders of the assignor-company held on 23rd March, 1985 it was resolved and the consent of the company was accorded in terms of Section 293(1)(a) and other applicable provisions of the Companies Act, 1956, for the sale of the Glenlorna Tea Estate and other properties hereinbefore recited for a net price not below Rs. 1.25 lakhs and also for the sale of current assets at the book value thereof to any suitable purchaser and the said resolution authorised the Directors to negotiate and settle other terms and conditions in any manner they deem fit in the interest of the assignor-company.
K. By an agreement for sale dated the 29th March, 1985, the assignor offered to assign, transfer and convey to the assignee free of all encumbrances the said Glenlorna Tea Estate including the factory buildings, bungalows, labour quarters and other constructions for a net consideration of Rs. 1,36,25,000/-.
Receipt of which entire sum of rupees one hundred thirty-six lakhs and twenty-five thousand only, the assignor doth hereby acknowledge and release the assignee from the obligation to pay the same the assignor doth hereby assign, transfer and convey to and unto the use of the assignee absolutely and free of all encumbrances all those pieces and parcels of land with tea plantation known as 'Glenlorna Tea Estate' admeasuring in area extent of nine hundred and forty-two acres and 75 cents comprised in Sy. Nos. 98/4, 98/38, 160/2, 160/19, 160/20 and 198/1 of Hysodlur Village, S. Nos. 1/1, 1/2 and 2/4 of T. Shettigeri Village and S. Nos. 4/4 and 4/8 of West Nemmale Village of Virajpet Taluk, Kodagu District together with factory, buildings, bungalows, labour quarters and other constructions all of which pieces and parcels of land and constructions are more fully described in the Schedule hereunder written and hereinafter called 'Glenlorna Tea Estate' to have and hold the same for the unexpired term of the lease together with plants, trees, hedges, ditches, fences ways, water courses, rights, easements, privileges and appurtenances whatsoever to the said hereditaments appertaining of with the same held or enjoyed or reputed as part thereof or as appurtenant thereto and also together with all deeds and documents, writings, vouchers and other evidence of the title relating to the Glenlorna Tea Estate or any part thereof and all estate title, interest, claim and demand of the assignor upon the Glenlorna Tea Estate to have and to hold the Glenlorna Tea Estate and singular the premises expressed to be hereby assigned, conveyed and transferred unto the assignee absolutely.
The assignor now has in itself good right, full power and absolute authority to grant, assign, convey, confirm and assure the said Glenlorna Tea Estate hereby assigned, granted, transferred and conveyed and assured or intended or expressed so to be unto and for the use of assignee in the manner aforesaid and that it shall be lawful for the assignee from time to time and at all times hereafter peacefully and quietly to hold, enter upon, have, occupy, possess and enjoy the said Glenlorna Tea Estate hereby assigned and conveyed with its appurtenances and receive the rents, issued, income and profits thereof and of every part thereof and for its own use and benefit without any suit unlawful eviction, interruption, claim and/or demand whatever from or by the assignor or its successors or any of them.
The assignor hereby confirms having this day delivered and the assignee acknowledges having thus taken vacant possession of the said Glenlorna Tea Estate'.
It is also seen that Annexure-A to the instrument gives description of estate conveyed and Annexure-B gives particulars of building in the estate comprising of office and staff quarters comprising of 66 structures.
8. Under the circumstances, it is clear that the instrument dated 5-6-1985 is not assignment as suggested, but, conveyance on sale, selling leasehold right in respect of tea estate and structures thereon, absolutely in favour of the petitioner and therefore, would attract surcharge under Section 164(7) of the Panchayat Act.
9. We record our opinion on questions referred as follows.-
(i) The instrument in question is a conveyance on sale falling within the ambit of Section 2(1)(d) of the Karnataka Stamp Act, 1957 and chargeable to duty under Article 20 of the Schedule to the said Act and with Section 164(7) of the Karnataka Village Panchayats and Local Boards Act, 1959.
(ii) The instrument in question is not a transfer of lease falling within the purview of Article 53 of the Schedule to the Karnataka Stamp Act, 1957.
(iii) Does not survive for consideration in view of answers to questions (i) and (ii).
The reference is answered accordingly.
A copy of the order shall be sent to the Chief Controlling Revenue Authority and Commissioner of Stamps in Karnataka, Bangalore, under the seal of this Court and signature of the Registrar as required under Section 56(2) of the Karnataka Stamp Act, 1957.