2024 (4) TMI 308 - SC - Companies Law

Liability of stamp duty on increase in share capital - How stamp duty is to be applied to Articles of Association in cases of increased share capital? - HELD THAT - Filing of Form No. 5 is only a method prescribed whereby notice of increase in share capital or of members of a company has to be sent to the Registrar within 30 days of passing of such resolution. The Registrar then has to record such increase in share capital or members and carry out the necessary alterations in the articles. Stamp Duty is affixed on Form No. 5 as a matter of practical convenience because a company itself cannot carry out the alterations and record the increase in share capital in its Articles of Association. It is only the articles which are an instrument within the meaning of Section 2(l) of the Stamp Act and accordingly have been mentioned in Article 10 of Schedule-I of the Stamp Act. It is a settled position of law that in case of conflict between two laws the general law must give way to the special law. A conjoined reading of the Stamp Act and the Companies Act would show that while the former governs the payment of stamp duty for all manner of instruments the latter deals with all aspects relating to companies and other similar associations - In the case at hand we are concerned with an instrument which is chargeable to Stamp Duty and finds its origin in the Companies Act. The various provisions of the Companies Act provide the purpose and scope of the instrument. Thus it has to be said that the Companies Act is the special law and the Stamp Act is the general law with regards to Articles of Association and the special will override the general. Whether the maximum cap on stamp duty is applicable every time there is an increase in the share capital or it is a one-time measure? - HELD THAT - It is an admitted fact that when the respondent increased its share capital from Rs. 36 crores to Rs. 600 crores it paid a stamp duty of Rs. 1, 12, 80, 000/- and at that time there was no provision for a maximum cap or upper ceiling on the amount payable - The fact that the maximum cap of Rs. 25 lakhs would be applicable as a one-time measure and not on each subsequent increase in the share capital of a company is fortified directly by the Maharashtra Stamp (Amendment) Act 2015 which amended the charging section for Articles of Association i.e. Article 10 of the Stamp Act. It is true that the amendment does not have retrospective effect however since the instrument Articles of Association remains the same and the increase was initiated by the respondent after the cap was introduced the duty already paid on the same very instrument will have to be considered. It is not a fresh instrument which has been brought to be stamped but only the increase in share capital in the original document which has been specifically made chargeable by the Legislation. The appellants are directed to refund Rs. 25 lakhs paid by the respondent along with interest @ 6% per annum. Let the needful be done within 6 weeks from today - order of the High Court of Bombay upheld - civil appeal dismissed.

Summary

Issues Involved:
1. Whether Form No. 5 is an "instrument" as defined u/s 2(l) of the Bombay Stamp Act, 1958.
2. Applicability of maximum cap on stamp duty for each increase in share capital.
3. Interpretation of fiscal statutes and charging provisions.

Summary:

Issue 1: Whether Form No. 5 is an "instrument" as defined u/s 2(l) of the Bombay Stamp Act, 1958

The Supreme Court examined whether Form No. 5, used to notify the Registrar of an increase in share capital, qualifies as an "instrument" u/s 2(l) of the Stamp Act. The Court noted that Form No. 5 merely serves as a notice and does not create, transfer, limit, extend, extinguish, or record any right or liability. The Court referenced the judgment in *New Egerton Woollen Mills, In re* and concluded that Form No. 5 is not an instrument liable for stamp duty. The Court agreed with the Bombay High Court's view that only the Articles of Association are chargeable to stamp duty, and since the maximum duty had already been paid, no further duty was required.

Issue 2: Applicability of maximum cap on stamp duty for each increase in share capital

The Court addressed whether the Rs. 25 lakhs cap on stamp duty applies to each increase in share capital or is a one-time measure. The Court analyzed the charging provision in Article 10 of Schedule-I of the Stamp Act and determined that the cap is applicable on the Articles of Association as a whole, not on each individual increase. The Court reasoned that once the maximum duty is paid, no further duty can be levied on subsequent increases in share capital. The Court cited hypothetical examples and legislative amendments to support this interpretation.

Issue 3: Interpretation of fiscal statutes and charging provisions

The Court emphasized that fiscal statutes must be interpreted strictly. It referred to the principle that no one can be taxed by implication and that charging provisions must be construed strictly. The Court held that the inclusion of "increased share capital" in the charging provision does not imply multiple charges for each increase if the maximum duty has already been paid. The Court also noted that the amendment to the Stamp Act in 2015, which explicitly included increased share capital in the charging provision, supports the interpretation that the cap applies to the total share capital, not each increase.

Conclusion:

The Supreme Court dismissed the appeal, upholding the Bombay High Court's order. The appellants were directed to refund Rs. 25 lakhs paid by the respondent along with interest @ 6% per annum within six weeks. The Court clarified that the cap on stamp duty is a one-time measure and not applicable to each subsequent increase in share capital.