BOARD OF REVENUE ETC. versus A. M. ANSARI ETC.

Citation: [1976] 3 S.C.R. 661 · Decided: 17-03-1976 · Supreme Court of India · Bench: A.N. RAY · Disposal: Dismissed
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Judgment (excerpt)

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661 
BOARD OF REVENUE ETC. 
v. 
A. M. ANSARI ETC. 
March 17, 1976 
(A. N. RAY, C.J., M.. H. BEG AND JASWANT SINGH, JJ.] 
Indian Stamp (Andhra Pradesh Extension and Amendment) Act XIX of 
1959-Arts. 31(c) and 35(c)--Scope of-Lease and licence-Distinction. 
Sales Tax-JVhether payabh on annual auction Sales. 
A 
B 
Under the terms and conditions of sale th'e respondents, who were the high-
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est bidders at an auction of forest produce, were called upon to pay stamp 
duty on the agreements to be executed by them as if they were leases of immo-
vable property falling under Art. 31(c) and on the deposits of security as mort-
gages under art. 35(c) of the ll!ldian Stamp Act, 1899 as also sales tax on the 
bid amounts. In a petition under art. 226, the respondents contended that the 
right to pluck, collect and take away the forest produce v.-as not a right or 
interest in immovable property ·within the meaning of art. 31(c) of the Stamp 
Act, the security deposits were not mortgages nor did the Government carry 
on any business of sale and, as such. they were not liable to pay the amounts 
D 
demanded. The High Court allowed the petitions. 
Dismissing the State's appeal, 
HELD : 
The acquisition by the respondents not being an interest in the 
soil but merely a right to cut 1he fructus narurales, the agreements possessed 
the characteristics of licences and did not amount to leases so as to attract 
the applicability of art. 31 ( c) of the Stamp Act. [667D] 
Firm Chhotabhai Jethabai Patel & Co. & Or9. v. The State of Madhya 
Pradesh. [1953] S.C.R. 476 and Mahadeo v. State of Bombay 1959 S.C.J. 1021 : 
A.I.R. 1959 S.C. 735 referred 10. 
(1) A study of the definitions of immovable property occurring in 
the 
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· Transfer of Property Act, the Jtegistration Act and the General Clauses Act 
shows that it is the creation of an interest in immovable property or a right 
to possess it that distinguishes a f.~ase from a licence. A licence does not create 
an interest in the property to which it relates while a lease does. In the case 
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of a lease there is transfer of a right to enjoy the property. For the purpose 
of deciding whether a particular grant amounts to a lease or a licence, it is 
essential to look to the substance and essence of the agreement and not to its 
form. 
[665F-G] 
Associated Hotels of lndia Lid. v. R. N. Kapoor A.l.R. 1959 S.C. 1262; 
Kauri Timber Company Litnited v. The Commissioner of Taxes, [1913] A.C. 
771 (776) Marsliall v. Green (1875) 
L.R.l.C.P.l.D. 35 and Firm Chhotabhili 
G 
Jethabai Patel & Co. & Ors. v. The State of Madhya Pradesh [1953] S.C.R. 
576 referred to. 
Mahadeo v. State of Bombay :t959 S.C.J. 1021 : AIR 1959 S.C. 735 disting-
uished. 
In the instant case the salient. features emerging from the agreements are 
(i) that they were made for a short duration of 9 to 10 months; (ii) they did 
not create any estate or interest in the land and (iii) the respondents were not 
granted exclusive possession and control of the land but were merely granted 
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the right to pluck, cut, carry awa:1 and appropriate the forest produce, present 
or future. The right to go on tbt: land was only ancillary to the real purpose 
of the contract. 
[667C-DJ 
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B 
c 
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662 
SUPREME COURT REPORTS 
[1976] 3 S.C.R. 
(2) The respondent could not be called upon to pay stamp duty under Art. 
35(c) of the_ Stamp Act. 
For an instrument to fall within the definition of 
mortgage deed contained in s. 2 ( 17) of the Stamp Act it is necessary that it 
should satisfy the essential conditions by creating a right over or in r~spect of 
a specified property in favour of another person. [6710; 670G] 
In the instant case there is nothing in the relevant clause of the sale notice 
to indicate that any right over or in the security deposits was created in favour 
of the State Government. 
[67JA] 
Reference under Stan1p Act, Section 46 15 l.L.R. Mad. 134 nnd Rishidev 
Sondhi v. Dhampur Sugar Mills A.I.R. 1947 All. 190 F.B. approved. 
(3) (a) The respondents were not liable to pay sales lax. It cannot be said 
that the Government, by holding auction of forest produce, carried on business 
in the sale of that class of goods, which is an essential condition to make the 
respondents liable to pay sales tax. 
[670D] 
State of Gujarat v. Raipur Manufacturing Co. Ltd. (1967) 19 S.T.C. l(S.C.) 
followed. 
(b) The consideration of profit motive cannot ·be regarded as an essential 
ingredient of the term 'business· in view
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