Allowances for Stamps

In one line

Where a stamp has been spoilt, used for a document that never took effect, or simply not needed, the Collector may allow its value back, and above a threshold the decision is taken higher up.

In exam wording: section 47 provides that, subject to rules as to evidence and enquiry, the Collector may, on application made within the period prescribed by section 48, and if satisfied as to the facts, make allowance for impressed stamps spoiled in the cases the section sets out.

Why the Act allows anything back

Stamp duty is a tax on an instrument. Where the instrument never came into effective existence, or where the stamp was spoilt before it could be used, no taxable event has really occurred, and to keep the money would be to tax nothing.

The Act is nevertheless careful. Allowances are a route by which the revenue can be drained, so every head is defined, there are short time limits under section 48, and above a threshold the decision is taken away from the Collector under section 52A.

Section 47: the heads of allowance

The Collector may make allowance for impressed stamps spoiled in these cases:

(a) the stamp on paper inadvertently and undesignedly spoiled, obliterated, or by error in writing or otherwise rendered unfit for the purpose intended, before any instrument written on it is executed by any person;

(b) the stamp on a document written out wholly or in part but not signed or executed by any party;

(c) the stamp used for an instrument executed by a party which:

• has afterwards been found by the party to be absolutely void in law from the beginning;
• is found unfit, by reason of an error or mistake in it, for the purpose originally intended;
• by reason of the death of a person by whom it must be executed, or the refusal of any person to act under it, or the refusal of any person to advance money intended to be secured by it, or the refusal or failure of any person to perform some act intended to be performed by it, cannot be completed;
• for want of the execution of some material part by a person whose execution was necessary, is inoperative;
• is wholly useless because the purpose intended cannot be carried out;
• becomes useless in consequence of the transaction being effected by some other instrument between the same parties and bearing the proper duty.

The proviso to that last group requires, in the case of an executed instrument, that no legal proceeding has been commenced in which the instrument could or would have been given in evidence, and that the instrument is given up to be cancelled, or has already been given up to the Court to be cancelled.