The Bombay High Court recently held that once the necessary stamp duty has been paid on a development agreement signed by a developer and cooperative housing society, the ancillary Permanent Alternate Accommodation Agreements (PAAAs) executed between the developer and the individual members of the cooperative housing society are not subject to being seized. The validity of two circulars issued by the relevant stamp authority was contested in a batch of 9 Writ Petitions brought before the High Court. The development agreement would be the only instrument subject to the full stamp duty in the first scenario. The 2017 Circular clarified the situation under the 2015 Circular, allowing PAAAs to be treated as separate documents and subject to construction-related stamp duty. This applies to PAAAs executed in accordance with a properly stamped development agreement between a developer and a cooperative housing society using a value calculated at the cost of construction.
In its recent decision in Adityaraj Builders v. State of Maharashtra & Ors, a division bench of the Bombay High Court held, among other things, that once the necessary stamp duty has been paid on a development agreement signed by a developer and co-operative housing society, the ancillary Permanent Alternate Accommodation Agreements (“PAAAs”), executed between the developer and the individual members of the co-operative housing society, are not subject to being assessed separately.
Adityaraj Builders v. State of Maharashtra & ORS was decided on February 17, 2023 by a division bench of Justices G.S. Patel and Neela Gokhale of the Hon’ble Bombay High Court. The petitions addressed a common legal issue related to the imposition of stamp duty on the Permanent Alternate Accommodation Agreement (“PAAA”) under the Maharashtra Stamp Act. The Chief Controlling Revenue & Authority issued circulars stating that the transfer of the property to the member society will be treated as an independent agreement and subject to stamp duty on the construction costs if the DA is only executed between the CHS and Developer. The bench noted that the current members and residents cannot be regarded as “purchasers” of the regions to which they are lawfully entitled following renovation. The court overturned and revoked circulars that suggested that a Permanent Alternate Accommodation Agreement (PAAA) signed by the developer and society members needs to be stamped once more.
The ruling declared that a cooperative housing society’s development agreement with a developer for the development of the society’s real estate needs to be stamped, that each member of the society does not have to sign the Development Agreement, and that the PAAA cannot be separately assessed to stamp duty beyond the Rs. 100 requirement of Section 4(1) of the Maharashtra Stamp Act, 1958. The ruling ordered the quashing of the Inspector General of Registration and Controller of Stamps, Maharashtra, issued circulars dated 23 June 2015 and 30 March 2017 as they were in violation of the Stamp Act. The judgment in the aforementioned case declared that stamp duty was inadmissible to impose on the PAAA based on the cost of building new premises in place of the existing premises. This decision has given society’s participants some relief, as they are no longer required to sign the PAAA without paying any stamp duty. It has also given residents moving into new homes much-needed relief as they are no longer responsible for paying stamp duty on extra space provided by the developers free of charge.
Name: SARAH GARIMA TIGGA , SEMESTER: VI, COLLEGE: SYMBIOSIS LAW SCHOOL (PUNE)
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