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2024 (3) TMI 904 - HC - Indian LawsLevy of stamp duty on schemes of amalgamation or restructuring - Validity of the Circular dated 20.11.2018, issued by the Inspector General of Registration in No. 49282/P1/2018 and / or G.O.(Ms.) No. 29, Commercial Taxes and Registration (J1) dated 01.03.2019 and G.O.(Ms.) No. 47, Commercial Taxes and Registration (J1) dated 19.02.2020. Whether or not the order of the Court sanctioning the scheme of amalgamation / restructuring or merger can be deemed to be an instrument? - HELD THAT - The Hon'ble Supreme Court in the HINDUSTAN LEVER VERSUS STATE OF MAHARASHTRA 2003 (11) TMI 335 - SUPREME COURT dealt with the similar definition of the term 'instrument' under the Bombay Stamp Act and held that on a consideration of Section 394 of the Companies Act, it is clear that upon such Orders of the Court, the undertaking of the transferor company stood transferred to the transferee company with all its movable, immovable and tangible assets and on presentation of certified copy of the said Order of the Court to the Registrar of Companies, the transferor of company stands amalgamated in the transferee company along with all its assets and liabilities and as such the Court Order along with the amalgamation scheme appended to it, is an instrument - In the present context, whereunder the Registrar being a public officer, under Section 35 is mandated not to act upon in the scheme of amalgamation, unless it is duly stamped, the said argument of certified copy will not hold good. Therefore, the submissions made on behalf of the petitioners in this regard is rejected and the question is answered that the Orders of Court/Tribunal sanctioning schemes of amalgamation/restructuring/de-merger etc., along with such schemes appended thereto, shall be instruments within the meaning for the purposes of the Act. Whether or not amalgamation / restructuring can be termed as a transfer inter vivos amounting to conveyance? - HELD THAT - The scheme of amalgamation results in transfer of the rights, assets and liabilities of the transferor company vesting in the transferee company in praesenti and therefore there is a transfer inter vivos - it can be seen that amalgamation, merger or other such arrangements shall be within the meaning of conveyance in more than one sense. As a matter of fact, such schemes, originally being dealt with under Sections 391-394 of the Companies Act, 1953 and now under Chapter XV (Sections 230-240) of the Companies Act, 2013. Except doing away with the definition of transferor company and transferee company in respect of amalgamation and imposing certain additional requirements of disclosure etc., the essential features of the transactions remains the same - the order sanctioning amalgamation / restructuring appended by the scheme as such is an instrument of conveyance liable to duty under Article -23 of the Act and no further legislative action is necessary to bring the same within the ambit of duty. As far as the impugned circular dated 20.11.2018 is concerned, it only attempts to clarify the existing position by quoting the relevant Judgments and addressing the registering officers that they should be aware that the scheme of amalgamation submitted by the Companies and sanctioned by the High Court are classifiable as Conveyance and will be subject to duty under Article -23 of Schedule -I of the Act - there are no illegality in the said Circular dated 20.11.2018. If the Orders are instruments amounting to conveyance, then whether the levy in the present manner, that is, prescription through an executive order is valid? - HELD THAT - As far as the notification in G.O.Ms.No.29 dated 01.03.2019, it states that it is to reduce the duty chargeable under the Act. Therefore, the State of Tamil Nadu is well within its powers to reduce or remit the duty chargeable under the Act. So long as the power is exercised to reduce the duty chargeable under the Act, the same would be perfectly in order. When it is only a question of reduction or remitting, it can be by an Order passed in exercise of power under Section 9(1)(a) of the Act. If so, the mode of computation, that is, 2 % of the value of the immovable property or 0.6 % of the net value of the shares transferred whichever is higher is in order? - HELD THAT - While exercising the powers under Section 9(1)(a), reducing the duty from 5 % to 2 % of the market value of the property is a clear and fair exercise of power and it merely reduces the duty chargeable as per Article- 23. As far as the second limb of the notification, to compute the Stamp Duty on 0.6 % of the aggregate of the market value of the shares and then adopt the value whichever is higher is concerned, firstly it introduces a new mode of computation, which is not found in Article -23. Therefore, the same tantamounts to amending Article -23, which would require legislative action. Secondly, it was pointed out across the bar that there are several instances where the aggregate market value of the shares in respect of the transferee company which is amalgamated may run to several crores, whereas it may have an immovable property of a meagre value within the State of Tamil Nadu in which case, as per the notification if 0.6% of the aggregate market value of the shares which is higher would only be taken, then the same would result in increase in duty which would be more than 5 % of the duty chargeable under Article- 23 - to the last sentence of the notification contained in the impugned Government Order, in G.O.(Ms.) No. 29 dated 01.03.2019, i.e., or 0.6 percent of the aggregate of the market value of the shares, whichever is higher alone is struck down and rest of the notification shall stand. Whether the retrospective application of the impugned Government Order with effect from 01.04.1956, by way of G.O.Ms.No.47 dated 19.02.2020 is valid? - HELD THAT - Conveyance it was chargeable at various rates periodically prescribed and is presently at the rate of 5 % . It can be seen that from 01.04.1956 at no point of time, it was less than 2% and the G.O.(Ms.) No. 29 dated 01.03.2019 only reduces the duty to 2 %. Therefore the petitioners have no ground to complain of G.O.(Ms.) No. 47 dated 19.02.2020, which only makes the application of the beneficial provision of G.O.(Ms.) No. 29 dated 01.03.2019 as retrospective. As a matter of fact, Section 9(1) (a) of the Act itself expressly authorises the State to exercise such a power retrospectively. Thus, the retrospective applicability per se cannot be termed as illegal - the G.O.(Ms.) No. 47 dated 19.02.2020 is upheld. Whether the stamp duty paid in other States, while registering the amalgamation orders are liable to be taken into account and set off as against the duty payable, while presenting the document for registration in the State of Tamil Nadu? - HELD THAT - Once the instrument is already presented for registration in other States and again presented for registration within the State of Tamil Nadu, then, Section 19 -A of the Act, which is a Tamil Nadu amendment of the Indian Stamp Act, 1899, which will come into play - The very question was dealt with in detail by the Constitution Bench of the Hon'ble Supreme Court in New Central Jute Mills Co. Ltd. And Ors Vs. State of West Bengal and Ors., 1963 (1) TMI 65 - SUPREME COURT while considering the identical provision 19 -A of the Uttar Pradesh amendment. The Hon'ble Supreme Court has held that though the execution of instrument may be in other States, when the instrument relates to any property situate within the State, then the liability also arises with reference to the State, where the property is situate also. Thus, it is clear that upon presentation in the State of Tamil Nadu, the duty has to be calculated as per the rate payable in Tamil Nadu and thereafter, upon comparison, if the duty paid in any other State is higher than the State of Tamil Nadu, then the same has to be taken into consideration and no duty shall be payable. If the duty paid is lesser than what is payable in the State of Tamil Nadu, then whatever amount paid is to be set off and the balance duty is to be paid on the instrument of amalgamation. Appeal disposed off.
Issues Involved:
1. Classification of Court Orders as Instruments 2. Amalgamation as Conveyance 3. Validity of Executive Orders for Levy 4. Mode of Computation of Stamp Duty 5. Retrospective Application of Government Orders 6. Consideration of Stamp Duty Paid in Other States Summary: 1. Classification of Court Orders as Instruments: The court held that the orders of Court/Tribunal sanctioning schemes of amalgamation/restructuring/de-merger, along with such schemes appended thereto, are 'instruments' within the meaning of the Indian Stamp Act. This conclusion was based on the Supreme Court's interpretation in the Hindustan Lever case, which clarified that such orders effectuate the transfer of property and thus qualify as instruments. 2. Amalgamation as Conveyance: The court affirmed that amalgamation results in the transfer of both movable and immovable assets, constituting a transfer inter vivos. This aligns with the Supreme Court's ruling in the Hindustan Lever case, which defined such transactions as conveyances under Section 2(10) of the Act, thus making them liable for stamp duty. 3. Validity of Executive Orders for Levy: The court determined that the state is empowered under Section 9(1) of the Act to reduce or remit stamp duty via executive orders. The G.O.Ms.No.29 dated 01.03.2019, which sought to reduce the duty chargeable, was deemed valid in its intent to reduce the duty from 5% to 2% of the market value of the property. 4. Mode of Computation of Stamp Duty: The court found that the notification's provision to compute stamp duty based on 0.6% of the aggregate market value of the shares, whichever is higher, was invalid. This was because it introduced a new mode of computation not found in Article 23 of the Act, requiring legislative action. Thus, the phrase "or 0.6 percent of the aggregate of the market value of the shares, whichever is higher" was struck down. 5. Retrospective Application of Government Orders: The court upheld the retrospective application of the G.O.(Ms.) No. 47 dated 19.02.2020, which made the beneficial provisions of G.O.(Ms.) No. 29 dated 01.03.2019 retrospective. This was deemed valid under Section 9(1)(a) of the Act, which allows for retrospective reduction or remission of duty. 6. Consideration of Stamp Duty Paid in Other States: The court ruled that stamp duty paid in other states must be taken into account when calculating the duty payable in Tamil Nadu. Section 19-A of the Act mandates that any duty already paid in another state should be set off against the duty payable in Tamil Nadu, and only the balance, if any, should be demanded. Conclusion: The court disposed of the writ appeals and petitions by upholding the circular dated 20.11.2018, partially quashing G.O.(Ms.) No. 29 dated 01.03.2019, validating G.O.(Ms.) No. 47 dated 19.02.2020, and directing the authorities to collect stamp duty accordingly. Excess duty collected was ordered to be refunded, and the balance duty was to be recalculated considering the duty paid in other states.
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