By : Sreenitya Tirumalasetty
In most States, stamp duty on a conveyance is charged on the market value of the property or the consideration stated in the deed, whichever is higher.[1] Land use is one of the biggest drivers of that value: agricultural or non-agricultural, residential, commercial or industrial. A line of decisions, most of them recent, suggests that courts are converging on a working rule. Authorities may value land by how it is actually used on the date of the instrument, or by a use to which it is demonstrably being put, but they need evidence for it. Assumption, zoning labels and speculation about future plans are generally not enough. The position is not uniform, however. Each State has its own provisions and valuation guidelines, and a key question on the threshold for reopening valuations is now before a larger Bench of the Supreme Court.
1. The statutory frame
Section 27 of the Indian Stamp Act, 1899 requires the consideration and all other facts and circumstances affecting the chargeability of an instrument, or the amount of duty, to be fully and truly set forth in it. As amended in some States, it also requires instruments relating to immovable property chargeable on market value to state particulars such as annual rental or revenue and local taxes.[2] Section 47A, inserted by State amendments (with analogous provisions in State stamp statutes, such as Section 45A of the Karnataka Stamp Act, 1957), enables the authorities to test whether market value has been truly set forth. Its text varies by State. The Tamil Nadu version, reproduced by the Supreme Court, permits a reference to the Collector after registration and suo motu action by the Collector within five years of registration.[3] The Uttar Pradesh version, as reproduced in a reported Allahabad High Court decision, instead requires deficit duty to be paid before registration where the value stated falls below the prescribed minimum. It also provides a four year suo motu window, extendable to eight years with the prior permission of the State Government.[4] These differences matter in practice: limitation periods, pre-registration requirements and appeal routes all turn on the text in force in the relevant State on the relevant date.
Land use enters valuation principally through the State’s guideline values (variously called guideline, circle or ready reckoner rates). Telangana’s official Market Value Assistance tool, for example, asks for the property type, whether it is located in a residential or commercial area, and its classification (dry, wet or garden).[5] Guideline values are, however, only a prima facie indicator of market value and are not conclusive.[6] Disputes arise where the authorities contend that the use recorded in the instrument understates the real one.
2. Market value means what a willing buyer would pay
In Shanti Bhushan (D) through LRs v. State of U.P. (2023), the Supreme Court held, in the context of Article 23 as applicable in Uttar Pradesh, that duty on a conveyance is payable on the market value prevailing on the date of execution of the conveyance, or on the stated consideration if that is higher. Market value on the date of an earlier agreement to sell is irrelevant. The Court described market value as what a bona fide, willing buyer would offer, and rejected a valuation derived from the municipal propertytax method. It accepted that property in a tenant’s possession ordinarily fetches less than vacant property, and remanded the matter for valuation on oral and documentary evidence, including comparable sales of tenanted property.[7] The case was about tenancy, not land use. Its lesson carries over, though: valuation is a factual inquiry into the property as it actually stands on the date of execution, and both sides may lead evidence. Note, however, that the correctness of Shanti Bhushan is among the questions referred to a larger Bench in Bharat Petroleum (see Section 6). It remains binding until that reference is answered.
3. Potential use: relevant, but anchored to the date of the instrument
The Allahabad High Court has held that market value under Section 47A is to be assessed by reference to the use to which the land is reasonably capable of being put immediately or in the proximate future, drawing on the Full Bench decision in Smt. Pushpa Sareen v. State of U.P. The petitioner society had paid duty at the agricultural rate. The authorities found that it had bought the land for housing and began construction within months, and the High Court upheld the Collector’s determination of market value and dismissed the writ petition.[8] The reclassification rested on facts on the ground, namely the purpose of the purchase and the construction that promptly followed.
This formulation must, however, be read with the Supreme Court’s decision in State of U.P. v. Ambrish Tandon, which held that the nature of user is relatable to the date of purchase, so that later commercial use of a property sold as residential does not by itself justify a higher valuation.[9] The two are reconcilable if potential use is treated as relevant only where it is evidenced as at the date of the instrument, through the purpose of the purchase, permissions already obtained or development already under way, rather than inferred from what the buyer later does.
4. Actual use prevails over zoning classification
The Supreme Court’s decision in Harinder Singh Sodhi v. State of Rajasthan (24 August 2026) is the most recent statement on use versus classification, although it is a non reportable two Judge Bench decision that turns on the wording of a Rajasthan circular. A gift deed of a share in a multi-storey building was stamped at residential rates. The Sub-Registrar treated the property as commercial because a carpet showroom operated there. On inspection, the Collector found a manufacturing unit, and the Rajasthan Tax Board agreed. The High Court reversed, reasoning that a property is industrial only if it lies in an industrial area and the activity is exclusively manufacturing. Sale of the manufactured goods on site, it held, made it commercial.
A Bench of Justices J.B. Pardiwala and K. Vinod Chandran set aside the High Court’s order and restored the authorities’ findings. The Court read the State’s valuation circular as turning on the user of the land at the time of execution, not on the classification of the area in the Master Plan. It held that retail sale of self manufactured goods does not convert an industrial use into a commercial one, gave weight to the property’s registration as a factory under the Factories Act, 1948 and with the District Industries Centre, and held that the High Court had imposed a test the circular does not contain. It also made clear that its order would not found a claim for refund of duty already paid.[10] Two points follow. First, the use based test operated here against the State’s contention for the commercial rate: actual use is a neutral standard, not merely a revenue tool. Second, the circular’s own words drove the outcome. Given its non-reportable status and circular specific reasoning, Sodhi is best treated as an illustration rather than a general rule, so advisers should read the specific circular or rule and not assume a general principle.
5. The limit: intended use must be proved
The Karnataka High Court drew the boundary in Disthi Vishal Pvt. Ltd. v. Regional Commissioner (W.P. No. 4469 of 2023, order dated 20 August 2026). The petitioners acquired 37 acres 23 guntas in Hassan district for ₹88.98 lakh; permission for non-agricultural use had been granted before the purchase. Acting under Section 45A(1) of the Karnataka Stamp Act, 1957, the District Registrar demanded about ₹82.7 lakh in additional duty, on the view that a spot inspection showed the land was meant for resort use, and the Regional Commissioner upheld the demand. Justice M.G.S. Kamal quashed both orders. Intended use cannot ground a valuation unless documents establish it, and the inspecting officer’s view was no more than a personal opinion. No residential layout or units had been built, and a small stud farm structure did not show commercial development of the whole holding. The Court directed revaluation under the Central Valuation Committee guidelines for converted land in force on the date the document is presented for registration.[11] Those guidelines are themselves use based: converted land is valued at the agricultural value plus a percentage that varies with the use (the order records 55% for industrial, 65% for residential and 80% for commercial). The dispute was therefore not whether use matters, but which use the evidence proved.
This is consistent with the Allahabad decision and with Ambrish Tandon. Each accepts that use drives value, and each requires a factual anchor as at the date of the instrument: construction under way in the one, documents and physical development in the other. What they reject is valuation on conjecture about what a buyer might later do.
6. Process discipline and an open question
Use based reclassification is only as sound as the process behind it. In Chief Revenue Controlling Officer v. P. Babu (3 January 2025), the Supreme Court upheld a Madras High Court decision quashing enhanced valuations. It held that a reference to the Collector is not a mechanical act: the registering officer must have reason to believe, on material, that market value has not been truly set forth, and must record a prima facie basis for that belief. An unreasoned reference vitiates the enquiry. The registering officer cannot conduct a roving inquiry. The guidelines register is an aid to a prima facie check, not a substitute for market price. The Collector had also bypassed the provisional order and notice steps required by the Tamil Nadu Stamp (Prevention of Undervaluation of Instruments) Rules, 1968.[12]
There is also a doctrinal question pending. In V.N. Devadoss (2009), a three Judge Bench treated wilful undervaluation with intent to evade duty as the basis for invoking Section 47A,[13] and another three Judge Bench followed that view in ASL Vyapar. In Bharat Petroleum Corporation Ltd. v. District Revenue Officer (Stamps), 2026 INSC 963, a two Judge Bench doubted that reading. It observed that the section requires only reason to believe that market value was not truly set forth, and referred the point to a larger Bench, together with the question whether Ramesh Chand Bansal and Shanti Bhushan lay down the correct law.[14] The reference is not a ruling on the merits. Devadoss and ASL Vyapar remain binding until the larger Bench decides, and P. Babu itself speaks of reason to believe that there was deliberate undervaluation. How this resolves will significantly affect how readily authorities can open use based inquiries, particularly where parties have disclosed the use in good faith but the authorities take a different view of its value.
Conclusion
The judicial position is settling around a balanced approach, though not yet a uniform rule. The State may look through a label to the reality of how land is used, or is demonstrably about to be used, on the date of the instrument, but it must show that reality with evidence and follow the prescribed procedure. Guideline values and Master Plan zones are starting points, not conclusions. Whether the authorities must also show an intent to evade duty before reopening a valuation is a question the larger Bench will now resolve. For buyers and their advisers, accurate disclosure and contemporaneous records are likely to matter more than any argument about classification.
[1]As enacted, Article 23 of Schedule I to the Indian Stamp Act, 1899 charges duty on the amount or value of the consideration. Most States have amended Article 23, or enacted their own stamp statutes (for example, the Karnataka Stamp Act, 1957 and the Maharashtra Stamp Act), to charge duty on market value where it exceeds the consideration.
[2]Indian Stamp Act, 1899, s. 27. The additional particulars appear in s. 27 as amended in Uttar Pradesh; for the text, see LawStreet Journal, “To Determine Its Market Value, The Property’s Potential Use In The Near Future Must Be Considered – Indian Stamp Act, Section 47A: Allahabad High Court” (29 March 2022): https://lawstreet.co/judiciary/indian-stamp-act-allahabad-high-court
[3]Chief Revenue Controlling Officer cum Inspector General of Registration v. P. Babu, 2025 INSC 44, Civil Appeal Nos. 75–76 of 2025 (SC, 3 January 2025), paras 17–18 (text of s. 47A as applicable in Tamil Nadu): https://api.sci.gov.in/supremecourt/2016/3168/3168_2016_14_42_58223_Judgement_03-Jan-2025.pdf
[4]LawStreet report (note 2) (reproducing the Uttar Pradesh text of s. 47A as it then stood).
[5]Registration & Stamps Department, Government of Telangana, Market Value Assistance (Non-Agriculture): https://registration.telangana.gov.in/TGMV_Client/NonAgri.htm
[6]Ramesh Chand Bansal v. District Magistrate/Collector, (1999) 5 SCC 62; P. Babu (note 3), para 22.
[7]Shanti Bhushan (D) through LRs v. State of U.P., 2023 SCC OnLine SC 489 (SC, 25 April 2023): https://api.sci.gov.in/supremecourt/2013/10354/10354_2013_16_1501_43893_Judgement_25-Apr-2023.pdf. See also SCC Online Blog: https://www.scconline.com/blog/post/2023/05/02/supreme-court-stamp-duty-on-sale-deed-can-be-calculated-on-market-value-of-property/
[8]LawStreet report (note 2), citing Smt. Pushpa Sareen v. State of U.P., 2015 (2) ESC 819 (All) (FB). The report identifies the petitioner as the Assembly of God North India Balrampur.
[9]State of U.P. v. Ambrish Tandon, (2012) 5 SCC 32 (SC, 20 January 2012).
[10]Harinder Singh Sodhi v. State of Rajasthan, 2026 INSC 922; 2026 LiveLaw (SC) 869 (SC, 24 August 2026) (non-reportable), paras 6–10, construing Rajasthan Circular No. 2/2004: https://www.livelaw.in/supreme-court/stamp-duty-valuation-based-on-nature-of-lands-use-not-its-classification-in-master-plan-supreme-court-547789. Judgment PDF (linked from that report): https://www.livelaw.in/pdf_upload/2026/08/29/72233202561973718judgement24-aug-2026-696869.pdf. See also Law Trend: https://lawtrend.in/user-of-property-not-its-classification-determines-stamp-duty-valuation-supreme-court/
[11]Disthi Vishal Pvt. Ltd. v. Regional Commissioner, W.P. No. 4469 of 2023 (Karnataka HC, 20 August 2026), 2026:KHC:44977; 2026 LLBiz HC (KAR) 152, paras 7–8 and 11–14: https://www.livelawbiz.com/others-taxes/karnataka-hc-quashes-enhanced-stamp-duty-demand-based-on-alleged-resort-use-548451. Order PDF: https://www.livelawbiz.com/pdf_upload/2026/09/03/disthi-vishal-697810.pdf
[12]P. Babu (note 3), paras 21–27 and 29–31.
[13]V.N. Devadoss v. Chief Revenue Control Officer-cum-Inspector of Stamps, (2009) 7 SCC 438 (SC, 8 May 2009): https://indiankanoon.org/doc/328167/
[14]Bharat Petroleum Corporation Ltd. v. District Revenue Officer (Stamps), 2026 INSC 963 (SC, 7 September 2026), referring the correctness of Devadoss (note 13), Registrar of Assurances v. ASL Vyapar (P) Ltd., (2024) 17 SCC 572, Ramesh Chand Bansal (note 6) and Shanti Bhushan (note 7): https://www.verdictum.in/supreme-court/cause-title-bharat-petroleum-corporation-limited-v-district-revenue-officer-stamps-and-another-2026-insc-963-1621549. See also LiveLaw: https://www.livelaw.in/supreme-court/indian-stamp-act-is-fraudulent-intent-necessary-to-invoke-s47a-over-undervalued-deed-supreme-court-refers-to-larger-bench-549030
