SC ruling brings clarity on stamp duty in property agreements

The Supreme Court has ruled that an agreement to purchase property cannot be treated as a sale deed unless it results in the transfer of possession. The apex court also clarified that authorities cannot demand full stamp duty meant for a conveyance merely because an agreement to sell has been executed.

A Bench of Justice B V Nagarathna and Justice R Mahadevan delivered the ruling in Vayyeti Srinivasa Rao vs Gainidi Jagajyothi, relating to the interpretation of the Andhra Pradesh Stamp and Registration Act.

The court held that an agreement to sell is not automatically a “conveyance”. It becomes one only if it operates to transfer possession and property rights.

“This judgment reiterates a settled principle that an agreement to sell is only a promise to transfer property in the future, not the transfer itself,” said senior advocate S Prabhakar Rao, who specialises in stamp and property laws.

The case arose from East Godavari district, where petitioner Vayyeti Srinivasa Rao had been living as a tenant in the respondent’s house for nearly 50 years. In 2009, he agreed to purchase the property for Rs 9 lakh.

A dispute later emerged over registration. The trial court and later the Andhra Pradesh High Court treated the agreement as a sale deed and directed the petitioner to pay stamp duty and penalty.

Allowing the appeal, the Supreme Court set aside the earlier directions. The court observed that authorities cannot levy conveyance-level stamp duty and penalties unless the document effectively functions like a sale deed.

“The determining factor is whether possession was delivered under the agreement,” said property law expert K Ramesh.

Stamp duty consultant V Anuradha said the ruling will help settle disputes where agreements are signed, but the final transfer of property remains incomplete. The judgment underlines that stamp duty depends on the legal effect of the document, not its label.