Stamp duty on amalgamation schemes applies to the instrument, with valuation confined to scheme consideration.

A High Court-sanctioned amalgamation scheme can fall within the Bombay Stamp Act definitions of "conveyance" and "instrument" because it effects transfer of property through a compromise or arrangement, so stamp duty may be levied on the instrument and not on the judicial act itself. The challenge to section 2(g)(iv) and the levy therefore failed. For valuation, an amalgamation transfers the undertaking as a going concern, so stamp duty must be computed on the consideration reflected in the share exchange ratio or other scheme consideration, not by separately valuing the transferor's assets and liabilities. The separate asset-and-liability method was disapproved.

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Issues: (i) Whether an order of the High Court sanctioning an amalgamation under section 394 of the Companies Act, 1956 falls within the definition of "conveyance" and "instrument" so as to attract stamp duty under the Bombay Stamp Act, 1958. (ii) Whether, for computing stamp duty on such amalgamation order, the stamp authority can separately value the transferor company's assets and liabilities or must proceed on the basis of the consideration reflected in the share exchange ratio.

Issue (i): Whether an order of the High Court sanctioning an amalgamation under section 394 of the Companies Act, 1956 falls within the definition of "conveyance" and "instrument" so as to attract stamp duty under the Bombay Stamp Act, 1958.

Analysis: The definition of "conveyance" in section 2(g) of the Bombay Stamp Act was held to be wide enough to include an order made by the High Court in respect of amalgamation of companies, because the amalgamation order is founded on a compromise or arrangement between the companies and effects transfer of property. The definition of "instrument" in section 2(l) was also applied, since the sanctioned scheme or order is the document by which rights and liabilities are transferred. The court rejected the argument that stamping such an order amounts to an impermissible levy on the judicial act itself or on the transfer of property as such; the levy is on the instrument.

Conclusion: The challenge to the validity of section 2(g)(iv) and the levy of stamp duty on amalgamation orders failed; the provision was upheld as within legislative competence.

Issue (ii): Whether, for computing stamp duty on such amalgamation order, the stamp authority can separately value the transferor company's assets and liabilities or must proceed on the basis of the consideration reflected in the share exchange ratio.

Analysis: The court held that an amalgamation transfers the undertaking as a going concern and not its assets and liabilities as separate items. The proper basis for valuation is the value of the consideration or other benefit represented by the shares allotted under the scheme, and not a separate aggregation of the assets and liabilities transferred. The attempt to levy duty by separately valuing assets and liabilities was disapproved.

Conclusion: The valuation must be made on the basis of the share consideration or other consideration under the amalgamation scheme, not by separately valuing assets and liabilities.

Final Conclusion: The statutory provision imposing stamp duty on High Court-sanctioned amalgamation orders was sustained, but the method of valuation was confined to the consideration reflected in the scheme, leaving the petitioners successful only on the valuation question.

Ratio Decidendi: A High Court-sanctioned amalgamation scheme is an instrument and conveyance liable to stamp duty, but the duty on such a going-concern transfer must be computed on the consideration reflected in the scheme and not by separately valuing transferred assets and liabilities.

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