Form 3 particulars under share allotment can attract conveyance stamp duty where they disclose transfer of immovable property.
A right to seek a reference under section 57(1) of the Indian Stamp Act carries a corresponding duty on the revenue authority to state the case when substantial questions of law are raised, and that duty is not lost merely because recovery proceedings have progressed or concluded. Separately, particulars filed in Form 3 under section 75(2) of the Companies Act, 1956 are deemed to be an instrument for stamp purposes, and duty is levied according to the legal character of the underlying oral contract. Where those particulars disclose a transfer of immovable property in consideration of share allotment, they attract stamp duty as a conveyance.
Issues: (i) Whether the revenue authority was bound to refer the substantial questions of law raised by the assessee under the Stamp Act. (ii) Whether the particulars filed in Form 3 under section 75(2) of the Companies Act, 1956 attracted stamp duty as a conveyance of immovable property.
Issue (i): Whether the revenue authority was bound to refer the substantial questions of law raised by the assessee under the Stamp Act.
Analysis: The right to seek a reference under section 57(1) of the Indian Stamp Act, 1899 is coupled with a corresponding duty on the revenue authority to state the case when the application raises a substantial question of law. That obligation is not defeated merely because the proceedings before the authority had reached the stage of recovery or were otherwise concluded. Where the authority fails to refer questions that should have been referred, the aggrieved party is not barred from seeking judicial relief on that ground.
Conclusion: The preliminary objection failed and the assessee was entitled to have the writ petition entertained.
Issue (ii): Whether the particulars filed in Form 3 under section 75(2) of the Companies Act, 1956 attracted stamp duty as a conveyance of immovable property.
Analysis: Under section 75(1) and section 75(2) of the Companies Act, 1956, where shares are allotted otherwise than for cash and no written contract exists, the company must file the prescribed particulars of the oral contract, and those particulars are deemed to be an instrument within the meaning of the Stamp Act. The stamp duty payable is the duty that would have been payable if the contract had been reduced to writing. On the contents of Form 3, the particulars did not merely disclose an agreement to sell but set out a transaction by which immovable and other assets were transferred in consideration of the allotment of shares. The authority was therefore justified in treating the form as attracting duty applicable to a conveyance.
Conclusion: The form was correctly charged to stamp duty as a conveyance and the demand of duty and penalty was sustained.
Final Conclusion: The assessee failed to establish any jurisdictional or substantive error in the impugned orders, and the challenge to the levy of stamp duty on the filed particulars was rejected.
Ratio Decidendi: Particulars filed under section 75(2) of the Companies Act, 1956 are chargeable to stamp duty according to the legal character of the underlying oral contract they evidence, and where those particulars disclose a transfer of immovable property in consideration of share allotment, they are liable as a conveyance.
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AI Drafter ✕
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