Stamp Act | Stamp Duty Determined By Instruments' Legal Character, Not Its Nomenclature: Supreme Court

The Supreme Court held that for the purpose of stamp duty assessment, the decisive test is the instrument’s true legal character and not the label or nomenclature chosen by the parties. The Court was dealing with a composite instrument executed as a “Security Bond cum Mortgage Deed” in favour of the Meerut Development Authority to secure colony-development obligations; although the instrument was styled to suggest a security bond (attracting a lower rate under Article 57 of Schedule 1-B), its operative provisions, substance and effect – namely transfer of rights over specified properties to the authority upon default and the company itself providing the surety – demonstrated that it operated as a mortgage falling under Article 40 and therefore attracted higher stamp duty. The Court emphasised substance over form, explained the limited ambit of Article 57 (applicable only where surety is furnished by a third party) and affirmed the concurrent findings of the revenue and the High Court, dismissing the appeal and upholding the enhanced demand.