Industrial Usage Prevails Over Master Plan Classification for Stamp Duty: Supreme Court in Harinder Singh Sodhi Vs State of Rajasthan and Ors.
1. Background and Context
The Supreme Court in Harinder Singh Sodhi Vs State of Rajasthan and Ors. (Civil Appeal No.__ of 2026, arising out of SLP (C) No. 36745 of 2025, decided on 24/08/2026) has clarified an important issue under the Rajasthan Stamp Act, 1998:
When determining stamp duty, the actual use of a property for industrial purposes overrides its zoning or classification in the Master Plan.
The dispute arose in relation to a gift deed where the property had been treated for stamp duty purposes as residential. Subsequently, the classification of the property for valuation—whether industrial, commercial, or residential—became the central controversy.
The Court interpreted Circular No. 2/2004 issued by the Government of Rajasthan and held that:
- Actual industrial use of the property governs its valuation category; and
- Master Plan classification or the presence of retail sale activities at the premises does not by itself convert an industrial property into a commercial one.
At the same time, the Court clarified that since the gift deed itself had voluntarily adopted a higher residential valuation, no refund of stamp duty would follow from the reclassification as industrial.
2. Core Legal Question
2.1 Nature of the Dispute
The principal question before the Supreme Court was:
Whether the property transferred by way of gift should, for purposes of computing stamp duty under the Rajasthan Stamp Act, 1998, be treated as an “industrial” property or a “commercial” property, given that the deed was in fact registered on the footing that the land was “residential”.
2.2 Relative Valuation Categories
The Court noted the following hierarchy of valuation for stamp duty purposes:
- Residential land – higher valuation than industrial land;
- Industrial land – lower than residential but distinct category;
- Commercial land – higher than residential land.
Thus, the classification of a property as industrial, residential, or commercial directly affected the stamp duty liability.
3. Proceedings Before the Authorities and High Court
3.1 Action by the Sub-Registrar
Following registration of the gift deed as relating to residential land, the Sub-Registrar conducted an inspection. His findings included:
- The premises were being used as a showroom in the name of “Sodhi Carpets”;
- The location, Golimar Garden, housed several commercial establishments;
On this basis, the Sub-Registrar treated the property as commercial and sought enhancement of stamp duty.
3.2 Collector’s Inspection and Conclusion
The Collector, as the competent authority under the Rajasthan Stamp Act, 1998, also personally inspected the property. His observations differed substantially from the Sub-Registrar’s:
- The building at the site was functioning as a factory;
- The activity carried on was industrial in nature;
Based on these findings, and applying Circular No. 2/2004 of the Government of Rajasthan, the Collector concluded that the property was industrial, not commercial.
3.3 Rajasthan Tax Board’s View
The Rajasthan Tax Board examined:
- The inspection report of the Sub-Registrar;
- The inspection report of the Collector; and
- The applicable Government circular.
After evaluating both reports, the Tax Board concurred with the Collector’s assessment and held that the property fell in the industrial category for valuation and stamp duty purposes.
3.4 Challenge by the State Before the High Court
Despite concurrent findings of the statutory authorities (Collector and Rajasthan Tax Board), the State carried the matter to the High Court.
The High Court reversed those findings, laying down the following test to determine whether property should be regarded as industrial:
- Whether the property is situated in an industrial area; and
- Whether the activity carried out at the premises is solely manufacturing, with nothing more being done.
Since both manufacturing and sale of the manufactured goods were being carried on at the same premises, the High Court concluded that the property was a commercial building.