Duncan Industries Ltd v. State of U.P. (2000)
Quick Summary
The Supreme Court decided when heavy factory machinery becomes part of the land. If machines are permanently embedded to run the plant as a whole, they are immovable property. In this case, the fertilizer plant’s machinery was fixed for long-term production; so stamp duty applied on the land plus plant and machinery.
Issues
- Is heavy machinery embedded in the earth movable or immovable property?
Rules
- Each case turns on its facts and circumstances.
- The key test is the intention at the time of embedment: temporary (movable) or permanent (immovable).
The Court reads the agreement, the setup, and the industrial purpose to find that intention.
Facts (Timeline)
ICI India Ltd agreed to transfer its fertilizer business (manufacture, marketing, distribution, sale of urea) to Duncans Industries Ltd on an “as is where is” and “as a going concern” basis for a slump price of ₹70 crores.
A conveyance deed dated 09/06/1994 was executed in favour of Duncans.
The Sub-Registrar referred the deed to the Collector under Section 47-A(2), Stamp Act, 1899 for valuation, noting missing details under Section 27.
The Collector was asked to assess value and recover any deficit stamp duty and penalty.
Before the High Court, Duncans questioned the Sub-Registrar’s reason to believe; the High Court rejected the challenge.
The matter reached the Supreme Court of India.
Arguments
Appellant (Duncans)
- Plant and machinery are movable; stamp duty should not treat them as part of land.
- Reference by Sub-Registrar lacked proper basis.
Respondent (State)
- Machinery was permanently embedded to run the fertilizer plant.
- Hence, it formed part of the immovable property; full stamp duty applied.
Judgment
- The Court held that stamp duty is payable on the value of the land including the plant and machinery.
- Reason: machinery was embedded permanently to operate as a fertilizer plant—part of the immovable.
Outcome: Appeal failed; valuation must include embedded plant.
Ratio Decidendi
If machinery is fixed with the intention of long-term, integral use of the unit, it becomes part of the immovable property. Intention and permanence are decisive.
Why It Matters
- Guides industry transfers, mortgages, and taxes for plants and factories.
- Clarifies the line between fixtures (immovable) and chattels (movable).
- Helps draft precise sale and conveyance documents.
Key Takeaways
- Intention test: temporary vs permanent embedment.
- Integrated plant: permanent machinery = immovable.
- Stamp duty: includes land + embedded plant.
- Documents matter: agreements and conveyance reveal intention.
Mnemonic + 3-Step Hook
Mnemonic: “PIN Plant” — Permanent intent, INtegrated machinery, Plant is immovable.
- Spot the fixing: mere bolts or deep embedment?
- Read the papers: going concern, long use?
- Conclude: permanent + integrated → immovable.
IRAC Outline
Issue
Are the embedded machines movable or immovable?
Rule
Intention at embedment—temporary vs permanent—decides the category.
Application
The fertilizer plant used heavy machinery fixed for long-term production; agreements showed a going concern transfer.
Conclusion
Machinery is part of the immovable; stamp duty covers land plus plant.
Glossary
- Immovable Property
- Land and things permanently attached to the earth.
- Fixture
- A movable item that, when permanently fixed, becomes part of the land.
- Slump Sale
- Sale of a business as a going concern for a lump-sum price without item-wise values.
- Section 47-A
- Provision allowing reference to the Collector to check under-valuation for stamp duty.
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