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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 ..... sha 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.21977 and 21979 of 2021: For the Petitioners : Ms.Inthu Karnakaran In W.P.No. 22562 of 2021: For the Petitioners : Mr.P.R.Murali In W.P.No. 30363 of 2023: For the Petitioner : Mr.G.Raghavan, Senior Counsel for Ms.Preeti Mohan In W.P.(MD) No. 1824 of 2019 and Writ Petition Nos.31650 & 31651 of 2016, 8511, 31191 of 2019, 18188 of 2020 21977, 21979 & 22562 of 2021 and 30363 of 2023: For the Respondents : Mr.S.Silambanan, AAG Assisted by Mr.Yogesh Kannadasan Special Government Pleader COMMON JUDGMENT HON'BLE MR.JUSTICE D. BHARATHA CHAKRAVARTHY A. The Petitions: These Writ Petitions are filed challenging the 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. When some of the Writ Petitions were originally pending before the learned Single Judge, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecretary 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 conferred by clause (a) of subsection (1 of section 9 of the Indian Stamp Act, 1899 (Central Act II of 1899), the Governor of Tamil Nadu thereby reduces the duty chargeable under the said Act in respect of instruments of transfer of property relating to amalgamation or reconstruction of companies to 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. NOTIFICATION - II In exercise of the powers conferred by section 78-A of the Registration Act, 1908 (Central Act XVI of 1908), the Governor of Tamil Nadu is of the opinion that it is necessary so to do in the public interest hereby reduces the fee payable under the said Act to Rs. 30,000/- (Rupees thirty thousand only) in respect of instruments of transfer of immovable property relating to amalgamation or reconstruction of companies." 2.4. Again, the State of Tamil Nadu, through the Principal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly 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 amalgamation or reconstruction shall be deemed to have been duly stamped: (f) If the principal instrument of amalgamation or reconstruction 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, any other subsequent instrument executed between the same companies under the said scheme for the sole purpose of reducing the terms of the scheme into writing, the subsequent instrument shall be deemed to have been duly stamped. 4. The Government accordingly direct that the notification appended to this order will be published in an extraordinary issue of the Tamil Nadu Government Gazette, dated 19.02.2020. The Works Manager, Government Central Press is requested to send 50 copies to the Government and 1000 copies to the Inspector General of Registration of the gazette in which the n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 Entry 44 of List III of the Constitution of India and as such requires an Act of competent legislature. 3.1 Similarly, the power to prescribe the rate of Stamp Duty is excluded from the Entry 33 of List III and would be either under Entry 91 of List I by the Parliament or under Entry 63 of List II by the State Legislature. Therefore, without enacting legislation and prescribing the rate of Stamp Duty, by way of an executive circular, under the garb of clarification, the impugned orders are passed. The impugned orders are an attempt by creating a source to levy, prescribe and collect Stamp Duty. More particularly, it is retrospective in nature. The Indian Stamp Act seeks to levy Stamp Duty only on instruments not on the underlying assets that is dealt with. It is also further contended that in many of the cases Stamp Duty is also paid in other states like, 0.7 % in Mumbai (in W.P.No. 31191 of 2019) a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 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 allowed. D. The Arguments : 4. We have heard Mr.G.Raghavan, learned Senior Counsel appearing on behalf of the petitioner in W.P.No. 30363 of 2023; Mr.S.R.Raghunathan, learned counsel appearing on behalf of the petitioner in W.P.No. 31191 of 2019; Mr.Naveen Kumar Murthi, learned Senior Counsel appearing on behalf of the petitioner in W.P. (MD) No. 1824 of 2019 and W.P.No. 18188 of 2020; Mr.V.Venkadasalam, learned counsel appearing on behalf of the petitioner in W.P.Nos.31650 and 31651 of 2016; Ms.S.Kamala Rani, learned counsel appearing on behalf of the petitioner in W.P.No. 8511 of 2019; Ms.Inthu Karnakaran, learned counsel appearing on behalf of the petitioners in W.P.Nos.21977 and 21979 of 2021 and Mr.P.R.Murali, learned counsel appearing on behalf of the petitioner in W.P.No. 22562 of 2021 and Mr.S.Silambanan, learned Additional Advocate General appearing on behalf of the State of T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Judgment in Ruby Sales and Services (P) Ltd., case, the same is in respect of the consent decree and not regarding sanctioning the scheme of amalgamation. Relying upon the Judgment of the Supreme court in Goan Real Estate and Construction Limited and another Vs. Union of India and Ors., [(2010) 5 SCC 388] more specifically paragraph No. 31, the learned Senior Counsel would submit that the Judgments should not be read as statutes and should be read in the context. For the same proposition, the learned Senior Counsel would rely upon the Judgment of the Supreme Court in P.S.Sathappan (died) by LR's Vs. Andra Bank Ltd., and Ors., [(2004) 11 SCC 672] more specifically relying upon the paragraph Nos.144 to 147 of the said Judgment. Therefore, in the context of the position prevailing in the State of Tamil Nadu, the Circular by which the Stamp Duty is sought to be levied is without jurisdiction, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the Judgment of Mathuram Agarwal's case (cited supra) more specifically paragraph No. 12 to contend that if there is any ambiguity regarding any of the ingredients in a taxing statute, then there is no tax in law. Concluding his submissions, the learned Senior Counsel would submit that the existing definition of conveyance and the levying Article 23 of the Act does not fulfil these requirements in relation to an Order approving the scheme. That's why Article 25 (B) (a) was introduced in the Maharashtra Stamp Act. A similar provision is absent in the State of Tamil Nadu. Only by virtue of the specific amendment, the State of Maharashtra charges the aggregate market value of the shares issued or allotted in exchange or otherwise the amount of consideration paid for such amalgamation. In the absence of the same, the impugned circular and the Government Orders are categorically a colourab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 expression 'Instrument' or 'Conveyance' for the purpose of levy of Stamp Duty. He would also rely upon the Judgment of the learned Single Judge of this Court in T.T.Krishnamachari and Co. Vs. Joint Sub-Registrar - I and another [2008 SCC Online Mad 460], to contend that in the matter of transfer effected by virtue of an amalgamation order made under Section 394 (2) of the Companies Act, there is no instrument executed which is chargeable with Stamp Duty. The said legal position is followed by another learned Single Judge of this Court in W.P.(MD).No.4128 of 2010 dated 18.11.2014 and W.P.No. 13001 of 2016 dated 20.10.2021. 4.10 It is further contended that even if the order of amalgamation is to be considered as an instrument, even then the said original instrument is with the appropriate High Court or the Tribunal as the case may be. What is supplied to the parties is on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 under Section 35 of the Indian Stamp Act also applies to the Registering Officer who is a public officer and as such even when a certified copy is produced it has to be duly stamped. Relying upon the Judgment in W.A.Nos.570 and 571 of 2014 dated 16.09.2021 the learned Additional Advocate General would contend that this Court already approved such an act of the Registering Officer. Further, relying upon the Full Bench Judgment of this Court in R.Thiyagarajan Vs. Inspector General of Registration [(2019) 4 CTC 839], it is contended that unless Stamp Duty is paid the instrument would be a still born child and no right would vest upon the person concerned. The learned Additional Advocate General would further rely upon paragraph No. 5 of the Judgment of the Division Bench in W.A.No.1792 of 2022 dated 05.08.2022, to contend that even if the registration of the document is not compulso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y [(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., [AIR 2009 All 93] more particularly paragraph Nos.19,20 & 27 of the Judgment to contend that the scheme of arrangement involves business of a going concern and it involves transfer of assets and liabilities as one transaction. Therefore, he would submit that the action of the State in bringing the aggregate market value of the shares as a criteria would be appropriate and cannot be termed as irrelevant or colourable exercise power. 4.19. He would further rely upon the Judgment of the Vimpson Precision Pvt. Ltd., and Ors. Vs. State of Gujarat and Ors., [(1993) 2 GLR 1015] more specifically paragraph Nos.8 to 14 to contend that the State Government has power to reduce or remit the Stamp Duty prospectively or retrospectively. The learned Senior Counsel also placed reliance on the Judgment of the High Court of Rajasthan at Jodhpur in the case of the State of Rajasthan and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 equitably transferred and the taxation is confined only to the instrument whereby the property is transferred. If a contract of purchase or sale or a conveyance by way of purchase and sale, can be, or is, carried out without an instrument, the case would not fall within the section and no tax can be imposed. Taxation is confined to the instrument by which the property is transferred legally and equitably transferred." 6.2 Thus, it can be seen that it is the instrument which is liable to duty. Section 2 (14) defines the term 'instrument' which is extracted as hereunder :- "2(14) "instrument" includes, (a) every document, by which any right or liability is, or purports to be, created, transferred, limited, extended, extinguished or recorded; (b) a document, electronic or otherwise, created for a transaction in a stock exch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 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 recorded, but does not include bill of exchange, cheque, promissory note, bill of lading, letter of credit, policy of insurance, transfer of shares, debenture proxy and receipt. The recital in the scheme of amalgamation as well as the order of the High Court under Section 394 of the Companies Act, declares, that, upon such order of the High Court the undertaking of the transferor company shall stand transferred to the transferee company with all its movable, immovable and tangible assets to the transferee company without any further act or deed. Sub-section (3) of Section 394 provides that the certified copy of the order of the court has to be presented before the Registrar of Companies within thirty days for registration. And in default any officer of the company, who is in default, becomes liable to be pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... malgamation/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 immovable, is transferred inter vivos and which is not otherwise specifically provided for by Schedule 1;" 7.1 We have already held that the Order of Court/Tribunal sanctioning an arrangement/scheme of amalgamation appended thereto is an instrument. It can be seen that such amalgamation results in transfer of both movable and immovable assets. 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. In this context, the matter is no longer res integra as the Hon'ble Supreme Court in the case of Hindustan Lever case (cited supra) more particularly in paragraph Nos.28 and 31 has held as follows:- "28. The transfer of assets and liabilities ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance"." 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 parties; and 2. that the jurisdiction of the Company Court while sanctioning the scheme is supervisory only i.e. to observe that the procedure set out in the Act is met and complied with and that the proposed scheme of compromise or arrangement is not violative of any provision of law, unconscionable or contrary to public policy. The court is not to exercise the appellate jurisdiction and examine the commercial wisdom of the compromise or arrangement arrived at between the parties. The role of the court is that of an umpire in a game, to see that the teams play their role as per rules and do not overstep the limits. Subject to that how best the game is to be played is left to the players and not to the umpire. Both these principles indicate that there is no adjudication ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hile 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 Iron Works Pvt. Ltd., [AIR (2009) SC 1905] has held that the inclusive definition in any legislation should be considered as under:- "........(one) to enlarge the meaning of words or phrases so as to take in the ordinary popular and natural sense of the words and also the sense which the statute wishes to attribute to it; (two) to include meaning about which there might be some dispute; (three) to bring under one nomenclature all transactions possessing certain similar features but going under different names." 7.4 Thus 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 Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sferee, 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 reduction or remitting, it can be by an Order passed in exercise of power under Section 9(1)(a) of the Act and accordingly we answer the question. I. Question No. 4 : 9. The impugned notification is extracted in para 2.3 above. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 be as per the value mentioned in the amalgamation scheme or as per the guideline value prevailing as on the date of the scheme. 10.2. Therefore, we uphold the G.O.(Ms.) No. 47 dated 19.02.2020. We hasten to add that it is yet another question that at what point of time, the State can insist for duty and whether it can be insisted at the time of presentation of any subsequent document in respect of any property which is conveyed to third parties and whether such documents can be withheld as a Charge for payment of duty on amalgamation are all altogether different questions which do not fall for consideration in the present petitions and as such are not considered or answered. We accordingly answe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entical 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 itself made the instrument liable to stamp duty under Section 3(a) as it stood before the amendment. Under Section 3(c) execution out of India, where the instrument relates to property situated or any matter or thing done or to be done in India together with the further fact that the instrument is received in India, made the instrument chargeable with duty. In amending the Stamp Act what the State legislatures substantially did was to treat the particular State as equivalent to India. Thus, after the amendment by the U.P. legislature the position in law is that execution of an instrument in Uttar Pradesh is made the primary dutiable event and liability to stamp duty arises on such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 19.02.2020 is held valid; (iv) Accordingly, the authorities will be entitled to collect the stamp duty by calculating 2% of the market value of the immoveable property and excess duty if any collected shall stand refunded to the writ petitioners; (v) The Stamp Duty if any paid, while presenting the order / scheme relating to amalgamation in other States shall be taken into account, while calculating the Stamp Duty payable in the State of Tamil Nadu and after setting off the amount already paid, only the balance amount if any alone can be demanded; (vi) in Writ Petition No. 31191 of 2019, pursuant to the interim orders of this Court, the petitioner ha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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