Stamp Duty is a state subject in India. While some of the States in India have enacted their own Stamp Acts others have adopted the Indian Stamp Act, 1899 [ISA] with their state amendments. Stamp Duty is levied on Instrument(s). The term instrument is covered under the definition of Conveyance in ISA and it has also been given a separate definition under ISA. "Conveyance" includes a conveyance on sale and every instrument by which property, whether moveable or immoveable is transferred inter vivos and which is not otherwise specifically provided for by Schedule I1. "Instrument" includes every document by which any right or liability is, or purports to be, created, transferred, limited, extended, extinguished or recorded2. As per Section 394(2) of the Companies Act, 1956 when an order passed by a High Court under Section 394(1) of the Companies Act 1956, provides for the transfer of any property or liabilities, then, by virtue of the order, that property shall be transferred to and vest in, and those liabilities shall be transferred to and become the liabilities of, the transferee company; and in the case of any property, if the order so directs, freed from any charge which is, by virtue of the compromise or arrangement, to cease to have effect. Since there is no specific mention of the order of High Court passed under section 394(1) in the ISA as an instrument to be stamped and the fact that the High Court confirms the scheme of merger and a major role is played by the stakeholders of the transferor and transferee companies to approve the scheme of merger, led to the question that whether such an order is required to be stamped. Although High Courts in India have led to contrary views with regards to payment of Stamp Duty on such an order but the Supreme Court of India has held that an order under Section 394(1) is liable for payment of Stamp Duty.SOME OF THE IMPORTANT JUDICIAL PRONOUNCEMENTS FOR PAYMENT OF STAMP DUTY ON HIGH COURT ORDER IN CASE OF MERGERS ARE AS FOLLOWS In the case of Li Taka Pharmaceuticals Ltd. vs State of Maharashtra And Other3 the following observations were made by Hon'ble Bombay High Court: An order under section 394 is founded or based upon compromise or arrangement between the two companies of transferring assets and liabilities of one company to another company known as "transferor-company" and that order is an "instrument" as defined under section 2(1) of the Bombay Stamp Act which includes every document by which any right...
Stamp Duty On High Court Orders In Case Of Mergers In India
|Author:||Mr Pradhumna Didwania|
|Profession:||Singh & Associates|
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