Actual Use Determines Stamp Duty Classification of Industrial Property

The Supreme Court has clarified an important question concerning the valuation of property for stamp duty purposes under the Rajasthan Stamp Act, 1998.

In Harinder Singh Sodhi v. State of Rajasthan & Ors., 2026 INSC 922, the Court held that the actual use of the property, rather than merely its classification under a Master Plan, determines whether it should be valued as industrial, commercial or residential property.

What's The Matter?

The dispute concerned a gift deed relating to property that had been registered as residential land. The Sub-Registrar sought to enhance the stamp duty by treating the property as commercial because a showroom was being operated there.

However, the Collector, after physically inspecting the premises, found that manufacturing activity was being carried out and treated the property as industrial. The Rajasthan Tax Board agreed with the Collector.

The High Court subsequently reversed these findings. It adopted a narrower test, holding that industrial use would depend upon whether the property was situated in an industrial area and whether the activity was exclusively manufacturing.

Since the manufactured goods were also being sold from the premises, the High Court classified the property as commercial.

What Court Said?

The Supreme Court rejected this approach. Referring to the Government of Rajasthan's Circular No. 2/2004, the Court observed that the valuation framework focuses on the user of the land, rather than merely its area classification.

The circular specifically provides that where, at the time of execution of the document, the land is being used for industrial purposes, is situated in a RIICO Industrial Area, or has been converted for industrial use, industrial rates are applicable.

The Court also rejected the proposition that selling manufactured goods automatically converts an industrial premises into a commercial property. Manufacturing naturally involves the subsequent sale of manufactured products. Even retail sale from the premises, by itself, does not change the character of the property from industrial to commercial for the purpose of valuation.

Significantly, the Court gave weight to the property's registration as a factory under the Factories Act, 1948 and its registration as an industry with the District Industries Centre, Jaipur.

These official registrations supported the conclusion that the premises were being used for industrial purposes.

The judgment is particularly important because the Supreme Court made clear that the High Court had introduced a test that was not contained in the State Government's valuation circular. The Court restored the concurrent findings of the statutory authorities and held that the property was correctly valued according to the industrial rate.

At the same time, the Court declined to order any refund merely because the gift deed had voluntarily been stamped on the higher residential valuation.

Since the executant had chosen that valuation with full knowledge, the excess amount could not be claimed back as a consequence of the judgment.

The ruling therefore establishes a practical principle for stamp-duty valuation: classification cannot override actual user where the governing valuation framework makes user the determining factor. For industrial premises, the mere presence of sales activity does not necessarily transform an industrial property into commercial property.

The Supreme Court's decision reinforces a functional approach to property valuation while also respecting the State's objective of encouraging industrial activity through a lower industrial valuation rate.