2026 INSC 922
Harinder Singh Sodhi v. State of Rajasthan & Ors.
Supreme Court of India — Civil Appellate Jurisdiction
Civil Appeal arising out of SLP (C) No. 36745 of 2025
Order dated: 24 August 2026
Bench: J.B. Pardiwala and K. Vinod Chandran, JJ.
I. HEAD NOTES
1. Stamp duty — Classification of property — Industrial, commercial or residential use — Para 2
The principal question was whether the property covered by the gift deed was to be treated as “industrial” or “commercial” property for determining stamp duty under the Rajasthan Stamp Act, 1998.
The gift deed had admittedly been registered as residential land. The dispute concerned whether the actual use of the property attracted valuation at the industrial or commercial rate. Para 2.
2. Actual use of property — Valuation for stamp duty — Paras 3–4
The Sub-Registrar inspected the property and considered it commercial because a showroom in the name of Sodhi Carpets was functioning there and the surrounding Golimar Garden area contained commercial establishments.
The Collector also inspected the premises but found manufacturing activity and treated the building as being used for an industrial purpose.
The Rajasthan Tax Board, upon considering both inspection reports and the Government circular governing valuation, agreed with the Collector. Paras 3–4.
3. Manufacturing activity accompanied by sale of manufactured goods — Para 7
The Supreme Court held that the fact that manufactured goods are sold from premises where manufacturing activity is carried on does not, by itself, convert industrial use into commercial use.
Even retail sale of the manufactured goods from the premises does not necessarily alter its character from industrial to commercial. Para 7.
4. Registration as factory and industry — Para 7
The Court attached significance to the fact that the premises were:
registered as a factory under the Factories Act, 1948; and
registered as an industry under the District Industries Centre, Jaipur.
These registrations supported the conclusion that the property was being used for industrial purposes. Para 7.
5. Government circular — User determines valuation, not merely area classification — Paras 7–8
Circular No.2/2004 issued by the Government of Rajasthan prescribed valuation for different categories of land.
In respect of industrial land, the circular focused upon the user of the land, rather than merely its classification under the Master Plan.
The land was to be valued at the industrial rate where, at the time of execution of the document:
it was being put to industrial use;
it was situated in a RIICO Industrial Area; or
it had been converted for industrial purposes.
The Supreme Court therefore held that user determines valuation, as distinguished from classification. Para 8.
6. High Court's test held contrary to Government circular — Para 9
The High Court had adopted two tests:
whether the property was situated in an industrial area; and
whether the activity conducted there was exclusively manufacturing and nothing further.
The Supreme Court held that this test did not emerge from the Government circular and was therefore erroneous. Para 9.
7. Voluntary payment of higher residential stamp duty — No refund — Para 10
Although the gift deed had been valued on the basis of residential land, the Supreme Court noted that the residential valuation was higher than the industrial valuation.
The Court nevertheless directed that there would be no refund of the excess duty, because the executant had voluntarily adopted the residential valuation “with open eyes.” Para 10.
II. FACTS AND EVIDENCE OF THE CASE
1. Gift deed and initial valuation — Paras 2, 6
The property was owned by a family carrying on business in a multi-storey building consisting of ground floor and three floors.
Ownership was separately assigned to the siblings.
One brother gifted his share in the property to another brother.
The gift deed was registered as residential land and stamp duty was paid on that basis. Paras 2 and 6.
2. Sub-Registrar's inspection — Para 3
The Sub-Registrar inspected the property and concluded that it was being used commercially.
The basis recorded was that a showroom in the name of Sodhi Carpets was functioning on the premises and that the surrounding area, known as Golimar Garden, contained several commercial establishments.
On that basis, the Sub-Registrar sought enhancement of stamp duty by treating the property as commercial. Para 3.
3. Collector's inspection — Para 4
The Collector, who was the competent authority under the Stamp Act, independently inspected the property.
His inspection revealed that manufacturing activity was being carried on in the building.
The Collector therefore treated the property as industrial rather than commercial.
The Rajasthan Tax Board considered both inspection reports and agreed with the Collector. Para 4.
4. Registration and recognition of industrial activity — Para 6
The appellant's case before the statutory authorities was supported by the fact that the premises were:
registered as a factory under the Factories Act, 1948; and
registered as an industry under the District Industries Centre, Jaipur.
The appellant also contended that the stamp duty actually paid on the gift deed, calculated at the residential rate, was already higher than the duty applicable to industrial land. Para 6.
5. Government Circular No.2/2004 — Paras 7–8
The Supreme Court examined Circular No.2/2004 issued by the Government of Rajasthan, which prescribed the method of valuation of different categories of land for stamp-duty purposes.
The Court particularly relied upon the portion concerning valuation of industrial land.
The circular referred to the use of the land at the time of execution of the document, including industrial use, location in a RIICO Industrial Area, or conversion for industrial purposes. Paras 7–8.
III. LAW APPLIED AND DISCUSSED
1. Rajasthan Stamp Act, 1998 — Para 2
The question arose under the statutory scheme governing determination of stamp duty under the Rajasthan Stamp Act, 1998.
The issue was not simply the description appearing in the gift deed. The Court examined the basis upon which the property was required to be valued under the applicable Government circular.
2. Government Circular No.2/2004 — Paras 7–8
The decisive interpretative question concerned the distinction between:
classification of the area, and
actual user of the property.
The Supreme Court held that the circular, insofar as industrial land was concerned, specified the user of the property.
Thus, the fact that a Master Plan might classify an area in a particular manner did not, by itself, determine the stamp-duty valuation where the circular prescribed valuation by reference to actual industrial use.
3. Industrial use notwithstanding sale of manufactured goods — Para 7
The Supreme Court rejected the proposition that the presence of sale activity necessarily makes premises commercial.
Where manufacturing is carried on in the premises, the manufactured products necessarily have to be sold.
The Court therefore held that:
manufacturing activity accompanied by sale of the manufactured goods does not, by itself, change industrial use into commercial use.
This remains so even where the sale is retail, as stated expressly in para 7.
4. Registration under the Factories Act and District Industries Centre — Para 7
The statutory and administrative recognition of the premises as:
a factory; and
an industry
was considered significant.
The Court treated these registrations as supporting evidence of the industrial character of the actual use of the property.
5. Effect of voluntary adoption of residential valuation — Para 10
The Court recognised that the residential valuation adopted in the gift deed was actually higher than the industrial valuation.
Nevertheless, because the executant had voluntarily adopted that higher valuation, the Court refused to direct refund of the excess stamp duty.
The principle applied was that a person who voluntarily adopted the higher valuation while executing the document could not subsequently claim refund merely because the Court ultimately determined that the property ought to have been valued at the industrial rate.
IV. FINDINGS OF THE SUPREME COURT
1. The actual use of the property was industrial — Paras 4, 7.
The Collector's physical inspection disclosed manufacturing activity.
2. Sale of manufactured goods did not make the premises commercial — Para 7.
The existence of sale activity, including retail sale, did not alter the industrial character of the premises where manufacturing was carried on.
3. Registration as a factory and industry supported industrial classification — Para 7.
The registrations under the Factories Act and with the District Industries Centre were significant circumstances.
4. The Government circular made user, rather than merely area classification, determinative — Para 8.
The industrial rate was applicable where the land was being put to industrial use at the time of execution of the document.
5. The High Court applied a test not found in the circular — Para 9.
The requirement that the property must be situated in an industrial area and that the activity must be exclusively manufacturing was not supported by Circular No.2/2004.
6. The statutory authorities' concurrent conclusion was restored — Para 10.
The Supreme Court found no reason to sustain the High Court's order and restored the orders of the statutory authorities.
7. No refund of excess residential stamp duty — Para 10.
The excess payment was not refundable because the gift deed had voluntarily been valued at the residential rate.
V. CONCLUSION
The Supreme Court allowed the appeal and reversed the judgment of the High Court.
The orders of the statutory authorities, including the Collector and Rajasthan Tax Board, were restored.
The Court held that, for purposes of valuation under the applicable Rajasthan Government circular, actual industrial use of the property is determinative and the mere fact that manufactured goods are also sold from the premises does not convert industrial use into commercial use.
The registration of the premises as a factory under the Factories Act, 1948 and as an industry with the District Industries Centre, Jaipur, together with the Collector's physical inspection establishing manufacturing activity, supported the industrial valuation.
The High Court's test—that the property must be situated in an industrial area and that the activity must consist exclusively of manufacturing—was held to be unsupported by the Government circular.
Although the gift deed had been valued at the residential rate, which was higher than the industrial rate, the Supreme Court expressly directed that no refund of the excess stamp duty would be made, since the executant had voluntarily adopted the residential valuation.
Appeal allowed. High Court order reversed. Orders of the statutory authorities restored. Pending applications, if any, disposed of.
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