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Issues: Liability of a company to pay stamp duty in respect of transfer of shares not duly stamped. Effect of merger on stamp duty liability.
In this case, the High Court of Bombay considered the liability of a company to pay stamp duty in relation to transfer of shares not duly stamped. The company in question, a public limited company incorporated in Baroda, had transfer deeds not properly stamped due to misappropriation by employees. The company voluntarily disclosed this to revenue authorities, who demanded payment of both Baroda stamp duty and Indian stamp duty with penalties. The main issue was whether the company was liable to pay Indian stamp duty on these transfer deeds. The court analyzed relevant provisions, including section 34(3) of the Indian Companies Act, which mandates proper stamping for share transfers. The court pointed out that the liability to pay stamp duty for transfer instruments lies with the executant under section 29 of the Indian Stamp Act. The court emphasized that the revenue authorities can impound unstamped documents and recover duty only from the person liable to pay it, not the company. The court highlighted the absence of provisions making a company liable for stamp duty on transfer deeds, unlike the specific provision for share warrants. Ultimately, the court held that the company was not liable to pay Indian stamp duty on the transfer deeds in question, as the duty payment responsibility rested with the executant. Therefore, the court ruled against the revenue authorities, stating that they were not justified in demanding stamp duty payment from the company. Consequently, the court found it unnecessary to address the effect of the merger on the stamp duty liability of the company and ruled in favor of the company, directing the revenue authorities to bear the costs.
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