2000 (7) TMI 921 - SC - Companies Law

Whether transfer of shares in a Co-operative Society is subject to levy of stamp duty under the Bombay Stamp Act 1958? Whether the State Legislature has legislative competence to levy stamp duty on transfer of shares? Held that - The question whether or not a transfer of shares in a Co-operative Society is subject to levy of stamp duty on the basis that it is a conveyance has already been answered by this Court in the case of Veena Hasmukh Jain and Another v. State of Maharashtr a and Ors. 1999 (1) TMI 521 - SUPREME COURT whereinheld that such agreements would be covered by Article 25 of the Bombay Stamp Act 1958. It is held that stamp duty would be leviable as if it is a conveyance. This Court has held that these are in effect agreements to sell immovable property as the possession of such property is transferred to the purchaser before or at the time of or subsequent to the execution of the agreement. It is held such an agreement to sell must be d emed to be a Conveyance. It is fairly conceded that this Judgment fully covers question (a) set out hereinabove. As seen above stamp duty is sought to be levied under Article 25 Schedule I of the Bombay Stamp Act. The stamp duty is being levied not on transfer of shares but on the basis that the agreement is a conveyance. There is no dispute that there is legislative competence in the State Government to levy stamp duty on a conveyance of property. Question No. (b) has been raised On the footing that the instrument of transfer is a form of transfer of shares. Now that it is held that such an instrument is not an instrument of transfer of shares but it is in fact a conveyance question (b) no longer survives. Appeal dismissed.

Summary

Issues:
1. Whether transfer of shares in a Co-operative Society is subject to levy of stamp duty under the Bombay Stamp Act, 1958.
2. Whether the State Legislature has legislative competence to levy stamp duty on transfer of shares.

Analysis:
1. The case involved a transfer of shares in a Co-operative Society under the Bombay Stamp Act, 1958. The Appellants transferred 5 shares to other parties for a consideration. The Superintendent of Stamps deemed the transfer as a conveyance chargeable with stamp duty under Article 25(b)(i) of the Act. The Appellants contended that the transfer of shares did not fall under the Act's purview and challenged the levy of stamp duty.

2. The Appellants argued that the levy of stamp duty on transfer of shares in a co-operative society fell exclusively within Entry 91 of List I of the Seventh Schedule to the Constitution of India, beyond the State's legislative competence under Entry No. 63 of List II. The High Court dismissed the petition, upholding the stamp duty levy as a conveyance of property and rejecting the lack of legislative competence argument.

3. The Supreme Court referred to a previous judgment where it was held that agreements involving transfer of shares in a Co-operative Society are covered by Article 25 of the Bombay Stamp Act, 1958, and stamp duty is leviable as if it is a conveyance. The Court determined that the instrument of transfer in this case was akin to a conveyance of property rather than a transfer of shares, rendering the legislative competence issue irrelevant.

4. Consequently, as the transfer was considered a conveyance subject to stamp duty under Article 25 of the Act, the Court found that the question of legislative competence did not survive. The Court dismissed the appeal, stating that the stamp duty was levied on the basis of the agreement being a conveyance, not a transfer of shares, and upheld the decision of the High Court.

5. In conclusion, the Supreme Court dismissed the appeal, emphasizing that the instrument of transfer was deemed a conveyance, not a transfer of shares, and therefore, the question of legislative competence regarding stamp duty levy did not apply. The Court found no grounds to interfere with the High Court's decision and ordered no costs to be awarded.