Supreme Court's important decision regarding Circle Rate, said - rates should be fixed scientifically

The Supreme Court has also held in one of its decisions that the circle rates of land have to be fixed scientifically. It would be appropriate that the circle rates of land have to be fixed by expert committees which should not be comprising only of government officials but also other experts who know the market situation.

The apex court held that the circle rates which have been fixed in a scientific and systematic manner can assist in booming the economy and improving tax collection. The bench of Chief Justice of India Sanjeev Khanna and Justice Sanjay Kumar delivered the judgment on March 27, dismissing the appeal of Madhya Pradesh Road Development Corporation. The court has approved the commissioner's order to compensate the purchased land on the basis of the circle rate.

In the judgment, the bench has discussed in detail the provisions of the Land Acquisition Act 2013 and fixing the circle rate of land. The court has said that the collector should not rely only on the average selling price but should also consider broader market-based factors. For example, the nature of the land, its importance and development cost, etc.

The judgment states that when the circle rate is determined keeping in mind the factors of variation in the market value of the land, it makes it easier to predict the transaction and reduces litigation. The court said that standardized circle rates should be fixed at the minimum or base price because asking the public to pay stamp duty at higher value circle rates would be very unfair.

The Supreme Court said that correct circle rates will take care of the interests of honest taxpayers as well as prevent non-compliant taxpayers. Rational and fair circle rates reflect good governance.

The court has said in the order that fixing fair and accurate circle rates has a direct impact on every citizen. Increased rates impose an undue financial burden on buyers. Conversely, low assessed rates lead to inadequate stamp duty, thereby adversely affecting the revenue of the State.

The Court observed that circle rates which reflect the market value ensure proper revenue collection for the State by preventing the undervaluation of properties. On the basis of the circle rates of properties being discussed in litigations in various jurisdictions, the Court observed that circle rates often become a matter of controversy both politically and economically. This is reflected in the frequent litigations in various jurisdictions discussing the circle rates applicable to properties.