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TMI Blog2024 (3) TMI 904X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hares 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- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 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. - Hon'ble Mr. Sanjay V.Gangapurwala, Chief Justice And Hon'ble Mr.Justice D.Bharatha Chakravarthy In W.A.Nos.758, 687, 751, 755 and 851 of 2022: For the Appellants : Mr.S.Silambanan, AAG Assisted by Mr.Yogesh Kannadasan Special Government Pleader In W.A.Nos.758, 751, 755 and 851 of 2022: For the Respondents : Mrs.Inthu Karunakaran In W.A.No.687 of 2022: For the Respondents : No appearance for RR1 2 In W.P.Nos.31650 and 31651 of 2016: For the Petitioners : Mr.V.Venkadasalam In W.P. (MD) No. 1824 of 2019 and 18188 of 2020: For the Petitioners : Mr.Naveen Kumar Murthi, Senior Counsel for Ms.S.Varsha In W.P.No. 8511 of 2019: For the Petitioner : Ms.S.Kamala Rani In W.P.No. 31191 of 2019: For the Petitioner : Mr.S.R.Raghunathan, Senior Counsel for Ms.Preeti Mohan Mr.K.V.Karthi Subramanian In W.P.Nos. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Circular, the Inspector General of Registration, State of Tamil Nadu issued the following directions:- 3. Thus the aforesaid judicial pronouncements lead to the following conclusions:- (i) Scheme of arrangements submitted by companies and sanctioned by High Court / registered by competent authorities evidencing transfer of property are classifiable under Article 23 of the Indian Stamp Act, 1899. (ii) Consequently such instruments / copy of instrument when presented for registration shall not be registered unless it is unequivocally evident that original instrument is duly stamped. (iii) If such instrument is found to be not duly stamped, the instrument presented shall be returned to the Presentant, by clearly explaining the aforesaid legal position through a check slip, and also requiring the presentant to produce evidence as to the duly stamping of the original instrument. 2.3. Thereafter, the State of Tamil Nadu through the Principal Secretary to Government, Commercial Taxes and Registration Department issued G.O.(Ms.) No. 29 dated 01.03.2019, ordering publication of the following notifications which were appended there of: APPENDIX NOTIFICATION I In exercise of the powers confe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of order sanctioning the scheme: (c) In respect of such instruments which consist of immovable property situated outside the State of Tamil Nadu, then Stamp Duty shall not be levied on the property which is situated outside the State of Tamil Nadu: (d) For the purpose of calculation of Stamp Duty, the market value of the shares of an unlisted company shall be reckoned as the market value set-forth in the scheme of amalgamation or reconstruction of companies or if not set-forth therein, the market value of the shares shall be the value of shares found in the audited balance sheets of the companies filed with the Registrar of Companies immediately before the date of order sanctioning the scheme: (e) If any other instrument is subsequently executed between the same companies under the said scheme for the sole purpose of reducing the terms of the scheme into writing and the subsequent instrument is found to be duly stamped with the duty of two percent of the market value of the immovable property or 0.6 percent of the aggregate of the market value of the shares, whichever is higher, subject to a maximum of Rs. 25 crores (Rupees twenty five crores only), the principal instrument of am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fer of properties to augment the State exchequer. 2.6 However, the said bill got lapsed and subsequent attempts by way of similar bills also lapsed and the State of Tamil Nadu has not carried out any such amendment to the Indian Stamp Act till today. It is under these circumstances, the present Writ Petitions were filed, either apprehending that the order of the Tribunal will be treated as an instrument and Stamp Duty will be demanded or aggrieved by the actual orders passed, demanding Stamp Duty and Registration charges. C. The Case of the Parties : 3. The petitioners challenge the circular and the exercise of reduction of Stamp Duty on the grounds, firstly as a colourable exercise of power. The State of Tamil Nadu itself felt that there is no provision in the Act to charge Stamp Duty and registration charges, in respect of such schemes of amalgamation and attempted to amend the Act. The amendment not having fructified into law, by means of all these executive orders, the State had tried to legislate by bringing in the scheme of amalgamation, within the purview of levy of Stamp Duty, as such it is a colourable exercise. Power to levy Stamp Duty on all documents is traceable to Ent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Stamp Act and the Orders of the Courts/Tribunals shall be instruments liable for levy. 3.3 Further, Section 9 (1) (a) of the Act empowers the State Government to reduce or remit the Stamp Duty, either prospectively or retrospectively. Therefore, while in the ordinary course, a transfer or conveyance of immovable property would attract 5% Stamp Duty, G.O.(Ms.) No. 47 dated 19.02.2020 provides for levy of reduced Stamp Duty, i.e., 2 % of the market value of the immovable property or 0.6 % of the aggregate of the market value of the shares, whichever is higher on the instruments of transfer of property relating to the scheme of amalgamation or reconstruction of companies. The Government Orders are relatable only to the instrument of transfer / conveyance and not relating to transfer of shares and therefore, are well within the ambit of the powers of the State of Tamil Nadu. A reading of Section 9(2)(b) makes it abundantly clear that only in respect of transfer of shares and debentures, the power is vested with the Central Government. Therefore, the challenge to the circular and the Government Orders have to be repelled and the appeals filed by the State of Tamil Nadu ought to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arned Senior Counsel submits that the charging provision in a taxing statute should be clear and unambiguous. Learned Senior Counsel taking this Court through the LA Bill No. 20 of 2012, more specifically the language used therein, which clearly stated that it seeks to provide for levy of Stamp Duty and also expressly acknowledges that there is no provision in the Act for levy of Stamp Duty and the Bill being sought to be passed in the year 2012, much after the Judgment of the Hon ble Supreme Court in the Hindustan Lever case would submit that the same would bind the State in as much as it's intent is concerned the Bill was again sought to be introduced in the year 2013 and 2019. But however, what they could not achieve by way of bringing amendment, is now sought to be introduced through circular dated 20.11.2018. 4.2 The learned Senior Counsel would submit that the Circular dated 20.11.2018 is on an incorrect premise, basing on its reasoning on the strength of the Judgment of the Hon ble Supreme Court in Hindustan Lever case ( cited supra) which dealt with the Maharashtra Act . The said Act contains specific provision for levying duty for amalgamation scheme. As far as the Jud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pugned Government Order states that the duty payable will be the amount whichever is higher . Therefore, it is a colourable exercise of power as it always will not lead to reduction of duty as 0.6% net value of shares can be more than 5% of the duty payable on the immovable property. As a matter of fact, levy of duty in respect of transfer of shares would fall under List I. Therefore, it would be in the realm of Central Government and as such the impugned Government Orders attempting to impose Stamp Duty at the rate of 0.6 % of the aggregate value of the shares is beyond the legislative competence of the State of Tamil Nadu. 4.5 Mr.G.Raghavan , learned Senior Counsel would rely upon the Judgment of the Hon ble Supreme Court in the case of Commissioner of Income Tax, Udaipur, Rajasthan Vs. McDowell and Company Limited, [(2009) 10 SCC 755] more specifically paragraph No. 21 to contend that to levy tax, duty, cess or fee, legislative action is essential and it cannot be levied or collected in the absence of any legislative sanction by the exercise of power of the State under Article 73 by the Union or under Article 162 by the State. The learned Senior Counsel would further rely upon t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... categories mentioned in Entry 91 of List -I, then the power shall only be in the Parliament. The Learned Counsel would rely upon the Judgment in V.V.S. Rama Sharma Vs. State of UP, [(2009) 7 SCC 234]. 4.8. Mr. S.R. Raghunathan , would submit that in his case, the parties had already paid duty under the Bombay Stamp Act, 1958 at the rate of 0.7% of the value of the shares transferred and as such there is no question of levy of duty once again. Again, stressing upon the Judgment of Bombay High Court in Li Taka s case, the Learned Counsel would submit that selectively targeting the immovable assets of the transferor company and making the assets subject to stamp duty is illegal. 4.9. Mr.V.Venkadasalam , learned counsel appearing on behalf of the petitioners in W.P.Nos.31650 and 31651 of 2016 would rely upon the Judgment of Hon ble Kolkata High Court in the case of Madhu Intra Limited Anr Vs. Registrar of Companies, W.B. Ors [(2004) SCC Online Calcutta 36] , more specifically on paragraph No. 52 would contend that even in respect of an order under Section 394 (1) of the Companies Act, the Hon ble Calcutta High Court has held that the same will not come within the purview of the express ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion what happens is an agreement between the prescribed majority of the shareholders and creditors of the transfer of company, and the transferee company, which is a voluntary act of the contracting parties and has all the trappings of a sale. 4.12. The learned Additional Advocate General further relies upon the Judgment of the Hon'ble Delhi High Court in Delhi Towers Limited case ( cited supra) more specifically paragraph Nos.8.21, 8.22 and 92 to contend that the consistent view of the Hon'ble Supreme Court is that the scheme of amalgamation is already covered in the definition of 'conveyance' under the unamended Act. 4.13. The learned Additional Advocate General would submit that the repeated attempts made by the State of Tamil Nadu was only by way of abundant caution and there need not be any separate or explicit provision. When the scheme of amalgamation is covered by the definition under Section 2(10) read with Article 23 of the Act, the charge at the rate of 0.6 % on the net value of shares is not a levy on transfer of shares within the meaning of Section 9 (1) (b) of the Act, but will be within the remit of Section 9 (1) (a) of the Act. 4.14. The embargo und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s.8.19, 8.20 and 8.21 of the Judgment of the Delhi High Court in Delhi Towers Limited case (cited supra) and contend that the Hon'ble Supreme Court and the High Court of Delhi have categorically held that the inclusive definition of conveyance would already take amalgamation within its fold and the amendment made in the Bombay Act is only clarificatory and declaratory in nature. Once the order of the Court, sanctioning the scheme of amalgamation/ restructuring is to be treated as an instrument of conveyance then the question on what basis the Stamp Duty is leviable, is answered by the Bombay High Court in Li Taka Pharmaceuticals Ltd., case (cited supra) more specifically in paragraph Nos.31 to 33 in the said Judgment. 4.18 The learned Senior Counsel would also further point out the Judgment in Himalaya House Co. Ltd., Bombay Vs. The Chief Controlling Revenue Authority [(1972) 1 SCC 726] to contend that the State Government has power to bring in amendments not only in respect of the Stamp Duty but also the mode of computation of the Stamp Duty. He would also place reliance on the Judgment of the High Court of Allahabad in the case of Hero Motors Ltd., Vs. State of U.P. And Ors., ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ?. F. Question No. 1: 6. Section 3 of the Tamil Nadu Stamp Manual is the charging Section, which makes the instruments liable to duty. Section 3 reads as under:- 3. Instruments chargeable with duty : - Subject to the provisions of this Act and the exemptions contained in Schedule I, the following instruments shall be chargeable with duty of the amount indicated in that Schedule as the proper duty therefor, respectively, that is to say, ...... ...................... (emphasis supplied) 6.1 This has been explained by the Hon'ble Supreme Court in the Hindustan Lever case (cited supra) more particularly in paragraph No. 22, which reads as under:- 22. The Court held that the thing which is made liable to stamp duty is the instrument . It is not a transaction of purchase and sale, which is struck at, it is the instrument whereby the purchase and sale are effected which is struck at. It is the instrument whereby any property upon the sale thereof is legally or e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. It is essential to extract paragraph Nos.14 and 15, which read as follows:- 14. The term instrument has been defined in Section 2( 1 ) of the Bombay Stamp Act, 1958 which is as under: 2. ( 1 ) instrument includes every document by which any right or liability is, or purports to be, created, transferred, limited, extended, extinguished or recorded, but does not include a bill of exchange, cheque, promissory note, bill of lading, letter of credit, policy of insurance, transfer of share, debenture, proxy and receipt; 15. This definition of instrument is not amended by Maharashtra Act 17 of 1993. The word instrument is defined to mean, every document by which any right or liability is, or purports to be created, transferred, limited, extended, extinguished or recor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent admissible, the Hon'ble Supreme Court while approving the finding of the Appellate Court that the defendants who are responsible for the suppression of the original agreement of lease and that the reception of secondary evidence by way of an oral evidence can be resorted to and it further held that the objection under Section 35 of the Stamp Act cannot be made in respect of the secondary evidence. 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, we reject the submissions made on behalf of the petitioners in this regard and answer the question 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. G. Question No. 2: 7. The term 'conveyance' is defined in Section 2(10) of the Act, which reads as follows:- (10) Conveyance.- Conveyance includes a conveyance on sale and every instrument by which property, whether movable or imm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt or no consent when the decree or order of the court purports to transfer title in the property, it becomes an instrument. The Court negatived the submission made that prior to introduction of Section 2( g )( iii ) the consent decree was not included in the definition of conveyance and instrument by observing (SCC p. 535, para 15) it appears to us that the amendment was made out of abundant caution and it does not mean that the consent decree was not otherwise covered . It clearly shows that the Court was of the opinion that consent decree which purports to convey the title in the property was in an instrument liable for stamp duty at all times and it was only by way of abundant caution that the legislature had included the consent decree in the definition of the word conveyance . 7.2 It is also essential to quote paragraph Nos.12, 44 and 45 of the Judgment of the Hon'ble Supreme Court in the Hindustan Lever case (cited supra) as under:- 12. Two broad principles underlying a scheme of amalgamation which have been brought out in this judgment are: 1 . that the order passed by the court amalgamating the company is based on a compromise or arrangement arrived at between the part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unsound mind with the other person would not be recognised in law, though the same is between two living beings, as they are not juristic persons in the eye of the law who can by mutual consent enter in a contract or transfer the property. The company would be a juristic person created artificially in the eye of the law capable of owning and transferring the property. Method of transfer is provided in law. One of the methods prescribed is dissolution of the transferor company by merger in the transferee company along with all its assets and liabilities. Where any property passes by conveyance, the transaction would be said to be inter vivos as distinguished from a case of succession or devise. 7.3 Thus, the Hon'ble Supreme Court, while considering the very question has authoritatively decided the issue that it would be a transfer inter vivos of movable and immovable properties and therefore even in the absence of a specific amendment it would be covered within the definition of conveyance . As a matter of fact, it can be seen that the definition of conveyance is an inclusive definition. The Hon'ble Supreme Court in Karnataka Power Transmission Corporation and Anr. Vs. Ashok ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... zette, [(1)] [The Government] may, by rule, or order published in the Official Gazette, (a) reduce or remit, whether prospectively or retrospectively, in the whole or any part of [the territories under its administration], the duties with which any instruments or any particular class of instruments, or any of the instruments belonging to such class, or any instruments when executed by or in favour of any particular class of persons, by or in favour of any members of such class, are chargeable, and (b) provide for the composition or consolidation of duties [of policies of insurance and] in the case of issues by any incorporated company or other body corporate [or of transfers (where there is a single transferee, whether incorporated or not)] of debentures, bonds or other marketable securities. 8.1 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 red ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the impugned circular is only clarificatory in nature. Therefore any clarification would automatically be retrospective. As far as the impugned Government Order in G.O.(Ms.) No. 47 dated 19.02.2020 is concerned, inter alia , it specifies that the applicability of G.O.(Ms.) No. 29 dated 01.03.2019 shall be retrospective. 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. 10.1. The further apprehension of the petitioners that the present market value would be imposed is totally unfounded as clause 3 (b) of the Government Order itself categorically makes it clear that it would b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ame time and by the same persons as though such instrument was an instrument received in India for the first time at the time when it became chargeable with the higher duty; and (iii) the provisions contained in clause (b) or clause (c) as the case may be, of the proviso to sub-section (3) of section 32, shall, with the necessary modifications, apply to such instrument, but the provisions contained in clause (a) of the said proviso shall not apply thereto. 11.2. 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., [AIR 1963 SC 1307] 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. It is essential to extract paragraph 14 of the Judgment, which reads as follows:- 14. Primarily, the liability of an instrument to stamp duty arises on execution. Execution in India its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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. Accordingly, we answer this question. L. The Result: 12. In the result, the Writ Appeal Nos.758, 687, 751, 755 851 of 2022, Writ Petition (MD) No. 1824 of 2019 and Writ Petition Nos.31650 31651 of 2016, 8511 and 31191 of 2019, 18188 of 2020, 21977, 21979 22562 of 2021 and 30363 of 2023 are disposed of, on the following terms; (i) the Circular No. 49282/P1/2018 dated 20.11.2018 is upheld; (ii) the G.O.(Ms.) No. 29 dated 01.03.2019 is quashed in as much as portion of the notification or 0.6 percent of the aggregate of the market value of the shares, whichever is higher and in all other aspects the said G.O. (Ms.) No. 29, dated 01/03/2019 shall be valid; (iii) the G.O.(Ms.) No. 47 dated 19. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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