Harinder Singh Sodhi v. State of Rajasthan & Ors., 2026

Although the gift deed described/valued the property as residential, the Sub-Registrar inspected the premises and considered it to be commercial, principally because a showroom known as “Sodhi Carpets” was operating there and the surrounding area also had commercial establishments. 

The Collector, however, physically inspected the premises and found that manufacturing activity was actually being carried out there. He therefore treated the property as industrial for stamp-duty valuation. The Rajasthan Tax Board agreed with the Collector.

The property had also been registered as a factory under the Factories Act, 1948 and as an industry with the District Industries Centre, Jaipur. 

The High Court subsequently reversed the statutory authorities' findings. It reasoned that the property could not be regarded as industrial because: it was not situated in an industrial area; and activities at the premises were not restricted exclusively to manufacturing, since manufactured goods were also being sold there. 

The matter therefore reached the Supreme Court.

The Court held that, under the applicable Rajasthan Government Circular, the decisive consideration is the actual user of the land, rather than merely the classification of the surrounding area or its classification under the Master Plan.

The Court examined the Collector's physical inspection and found that manufacturing activity was actually taking place on the premises. The fact that manufactured products were subsequently sold there — even through retail sale — did not convert the industrial property into a commercial property. 

The Supreme Court further observed that the property's registration as a factory and as an industry was significant evidence supporting its industrial character.

The Court restored the orders of the statutory authorities, particularly the Collector and Rajasthan Tax Board3. 

Important qualification: Although the gift deed had been valued using the residential rate, which was higher than the applicable industrial rate, the Court held that the appellant could not claim a refund of the excess stamp duty, because the valuation had been voluntarily made by the executant with full knowledge.

The Supreme Court specifically distinguished “user” from “classification.” The relevant Rajasthan circular focused on how the property was actually being used at the time of execution of the document.

The High Court had treated the existence of a showroom and sale of manufactured goods as evidence of commercial use.

The Supreme Court rejected this approach. Its reasoning was practical: manufacturing necessarily results in manufactured goods that have to be sold somewhere. Selling the goods from the same premises does not, without more, destroy the industrial character of the premises.

The Supreme Court emphasized that the High Court had introduced a test that did not appear in the Government's circular.

The Collector had actually inspected the property and found manufacturing activity. This factual finding was supported by the property's registration as a factory and industry.

The Supreme Court therefore gave considerable weight to the actual physical character and use of the premises, rather than relying merely upon the existence of a showroom or the nature of the surrounding locality.

The decision provides useful guidance for authorities dealing with property valuation:

The applicable valuation category should be determined from the property's actual use and the governing valuation rules/circulars, rather than assumptions based solely on locality or Master Plan classification.

This can be particularly important where an industrial unit also contains showrooms, sales areas or retail operations.

The judgment also contains an important limitation. Even though the Court accepted the industrial classification, it did not order refund of the excess duty already paid under the residential valuation, because the executant had voluntarily adopted that valuation.

The ruling strengthens a substance-over-label approach to property classification for stamp-duty purposes. The character of the property must be assessed through its actual use, relevant statutory registrations and the precise language of the applicable valuation rules/circulars.