Karnataka HC finds loophole in the Stamp Act

Karnataka high court has found discrimination in the powers given to the civil courts and deputy commissioners to levy penalty in cases of insufficient payment of stamp duty.

Justice K Sreedhara Rao had recently observed in his judgment that the Stamp Act allows a civil court to levy a penalty of `5 or 10 times the stamp duty.

The deputy commissioner, however, can levy any amount of penalty that is not more than 10 times the stamp duty.
“Those approaching the deputy commissioners have the benefit of less penalty whereas the civil court has no such discretion to levy less penalty. This shows the discrimination,” he had observed.

He has found discrimination in the powers given to the civil courts and deputy commissioners under Sections 34 and 35 of the Act respectively. Justice Rao observed that the penalty should not be unduly harsh. He has observed that before imposing fine, the civil court or the deputy commissioner should consider the nature of the transaction and the party’s capacity to pay the fine.

He further observed that the fine that is double the amount of the stamp duty should be levied only in exceptional circumstances.