The Supreme Court, bench comprising Justice J. B. Pardiwala and Justice K. Vinod Chandran, has held that the actual user of land determines its valuation for computing duty under the Rajasthan Stamp Act, 1998, rather than the zonal classification of the area. Ruling on whether a gifted property share should be assessed as an industrial or commercial property, the apex court set aside the High Court ruling and restored the findings of the statutory authorities, affirming that conducting retail sales of self-manufactured goods on site does not reclassify an industrial building into a commercial one.
Background of the Case
The case pertained to a multi-storey building comprising a ground floor and three upper floors where a family carried on business, with separate ownership assigned to siblings. One brother executed a gift deed transferring his share to another brother, remitting stamp duty based on residential valuation. Under applicable rules, residential land valuation is higher than industrial land valuation, but lower than commercial land valuation.
Following registration, the Sub-Registrar inspected the property and sought enhancement of stamp duty, deeming it commercial because a showroom named “Sodhi Carpets” operated on the premises and the surrounding Golimar Garden area contained several commercial enterprises.
However, the Collector inspected the property and recorded that the building was being used as a factory. The Rajasthan Tax Board evaluated both inspection reports alongside Circular No. 2/2004 issued by the Government of Rajasthan and agreed with the Collector that the property was industrial.
The State challenged the tax board’s decision before the High Court. The High Court reversed the findings of the statutory authorities, ruling that to qualify for industrial rate valuation, a property must be located in an industrial area and used exclusively for manufacturing. Because retail sales of manufactured goods were conducted on site, the High Court classified the property as commercial. The appellant then appealed to the Supreme Court.
Arguments of the Parties
The appellant submitted that the property was utilized for industrial purposes, highlighting that the premises were registered as a factory under the Factories Act, 1948, and as an industry with the District Industries Centre, Jaipur. The appellant further argued that the gift deed had already been stamped at residential rates, which was higher than the rate applicable to industrial land.
The State, relying on the Master Plan, argued that commercial sales on the property disentitled it from being assessed at industrial rates.
Court’s Analysis
Examining Circular No. 2/2004 issued by the Government of Rajasthan regarding property valuation for stamp duty, the Supreme Court held that the circular focuses on actual usage rather than zonal classification.
The bench observed: “The circular, insofar as valuation of industrial land, specifies the user and not the classification of the area. The circular requires that at the time of execution of the document, if the land is being put to industrial use or is situated in a RIICO Industrial Area or has been converted to industrial purpose, then it shall be valued at the industrial rate. Hence, our finding, that the user determines the valuation of the land, as distinguished from the classification, even as per the Master Plan as submitted by the learned Government Advocate.”
Rejecting the High Court’s test regarding on-site sales, the Supreme Court emphasized that manufacturing inherently includes selling the produced goods: “The Collector had in fact conducted a physical inspection of the premises and found a manufacturing activity going on. The manufactured items definitely had to be sold and if the premises is used for such sale too, even retail sale, it cannot lead to a conclusion that the property is one used for commercial purposes, as distinguished from an industrial purpose.”
The apex court noted that lower valuation rates apply to industrial land to promote industrial activity, and emphasized that registration as a factory and as an industry carries significant weight under the State circular.
Critiquing the High Court’s reasoning, the bench noted: “The High Court clearly erred in stipulating a test which does not come out from the circular of the State Government providing for valuation of different properties, specifically of industrial, residential and commercial properties.”
Court’s Decision
Finding no reason to sustain the decision of the High Court, the Supreme Court allowed the appeal and restored the orders of the statutory authorities.
The court clarified that while duty was voluntarily paid at residential valuation rates (which exceed industrial rates), no refund would be granted: “We make it clear that even if the gift deed has reckoned the valuation for residential lands, which is in excess of industrial lands, there shall be no claim for refund by virtue of this order, since the valuation was carried out voluntarily by the executant of the gift deed, with open eyes.”
Case Details:
Case Title: Harinder Singh Sodhi v. State of Rajasthan and Ors.
Case No.: Civil Appeal No. of 2026 (Arising out of SLP (C) No.36745 of 2025)
Bench: Justice J. B. Pardiwala and Justice K. Vinod Chandran
Date: August 24, 2026
