TaxTMI 
TaxTMI 
2016 (4) TMI 482
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.... companies are registered, sanctioning the Amalgamation Scheme filed by both, the transferor, as also the transferee company. The purpose and the object as to why both, the transferor and the transferee company had to obtain order from the court sanctioning the Scheme of Amalgamation is that, such a scheme of amalgamation must bind the dissenting members, as also, all the creditors of both the companies. As per the Scheme, from the appointed date, the assets/undertakings of the transferor company, viz., respondent no.2 was to, without any further Act, instrument or deed, stand transferred to and vested in or deemed to have been transferred to and vested in the transferee (respondent no.1) company, pursuant to the provisions of Sections 391 to 394 of the Companies Act so as to become the properties and assets of the transferee company. Accordingly, on 10th April 2002, the respondent no.1- transferee company filed a Company Petition No.391 of 2002 and Company Application No.133 of 2002 in this court for sanctioning the arrangement in the Scheme of Amalgamation. Similarly, respondent no.2, the transferor company on 16th April 2002, filed the Company Petition No.75 of 2002 and Company ....
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....urt remitted the matter back to the applicant no.1 to decide the reference application afresh after hearing the parties. The applicant no.1 once again rejected the reference application against which the respondent no.1 filed a fresh writ petition bearing No.1293 of 2007. 5 By an order dated 1.3.2007, this court directed the respondent no.1 to deposit the balance amount of deficit stamp duty of Rs. 10 crores in the office of the applicant no.2 within two weeks thereof and directed the applicant no.1 to make reference to this court under Section 54(2) of the Bombay Stamp Act 1958 within 4 weeks from the date of deposit of the balance amount of deficit stamp duty by respondent no.1. 6 The following questions therefore, have been referred to this court under Section 54 of the Bombay Stamp Act 1958 :- 1. Whether a scheme sanctioned between the two companies under Section 391 and 394 of the Companies Act is one and same document chargeable to stamp duty regardless of the fact that order sanctioning the scheme may have been passed by two different High Courts by virtue of the fact that the Registered Offices of the two Companies are situated in two different states ? 2. Wheth....
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....s Constitution, organisation, jurisdiction and powers of the Supreme Court (including contempt of such Court), and the fees taken therein; person entitled to practice before the Supreme Court. 78 Constitution and organisation (including vacations) of the High Courts except provisions as to officers and servants of High Courts; persons entitled to practice before High Courts". Entry 91 relates to rates of stamp duty in respect of certain instruments which do not cover an instrument or a document with which we are concerned, namely, certificate of enrollment is-sued under s. 22 of the Act. Entry 96 in the same list relates to fees in respect of any of the matters in the List but not including the fee 'taken in any court. Entry 63 in List II relates to rates of stamp duty in respect of documents other than those specified in List I i.e. Entry 91. In the same List Entry 66 relates to fees in respect of any of he matters in that List but not including fee taken in any court. The following Entries in List III may be reproduced : "26. Legal, medical and other professions". "44. Stamp duties other than duties or fees collected by means of judicial stamp, but not including rate....
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....nt to enact legislation for the levy of the duty although it is only under Entry 63 of List II that rates can be prescribed by the State Legislature. In other words, the charging provisions can be enacted by both the Parliament and the State Legislatures subject to the provisions of Art. 254 of the Constitution. It is well settled that the scheme of the Entries in the various Lists is that taxation is not intended to be comprised in the main subject in which "it might on an extended construction be regarded as included but is treated as a distinct matter for the purpose of legislative competence". Even under the residually power a. legislation conferred by Art. 248 the Parliament can only impose that tax which is not mentioned in either List III or List II. Thus, it is the State Legislature, which has legislative power to impose stamp duty, as also, prescribe the rates of stamp duty inasmuch as the instrument that deals with `Amalgamation of Companies'. 9 The questions referred to this court as mentioned above are required to be adjudicated in the context of the provisions of the Bombay Stamp Act 1958. The provisions of Bombay Stamp Act, 1958 which we need to consider for....
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.... whether by way of declaration of trust or otherwise, the terms of any such disposition. Section 3 : Instrument 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 Schedule I as the proper duty therefore respectively, that is to say - (a) every instrument mentioned in Schedule I, which not having been previously executed by any person, is executed in the State on or after the date of commencement of this Act ; (b) every instrument mentioned in Schedule I, which not having been previously executed by any person, is executed out of the State on or after the said date, relates to any property situate, or to any matter or thing done or to be done in this State and is received in this State : [Provided that a copy or extract, whether certified to be a true copy or not and whether a facsimile image or otherwise of the original instrument on which stamp duty is chargeable under the provisions of this section, shall be chargeable with full stamp duty indicated in the Schedule I if the proper duty payable on such original instrument is not pai....
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.... rules and bye-laws with the requisite amount of stamp duty, within two months from the date of its execution.] Section 19 : Payment of duty on certain instruments [or copies thereof] liable to increased duty in [Maharashtra State] Where any instrument of the nature described in any article in Schedule-I and relating to any property situate or to any matter or thing done or to be done in this State is executed out of the State and subsequently [such instrument or a copy of the instrument is ] received in the State - (a) the amount of duty chargeable on such instrument [or a copy of the instrument] shall be the amount of duty chargeable under Schedule-I on a document of the like description executed in this State less the amount of duty, if any, already paid under any law in force in India excluding the State of Jammu and Kashmir on such instrument when it was executed ; (b) and in addition to the stamps, if any, already affixed thereto such instrument [or a copy of the instrument] shall be stamped with the stamps necessary for the payment of the duty chargeable on it under clause (a) of this section, in the same manner and at the same time and by the same persons as tho....
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....erson or where proxies are allowed [under the rules made under section 643], by proxy, at the meeting, agree to any compromise or arrangement, the compromise or arrangement shall, if sanctioned by the court, be binding on all the creditors, all the creditors of the class, all the members, or all the members of the class, as the case may be, and also on the company, or in the case of a company which is being wound up, on the liquidator and contributories of the company ; [Provided that no order sanctioning any compromise or arrangement shall be made by the court unless the court is satisfied that the company or any other person by whom an application has been made under sub-section (1) has disclosed to the court, by affidavit or otherwise, all material facts relating to the company such as the latest financial position of the company, the latest auditor's report on the accounts of the company, the pendency of any investigation proceedings in relation to the company under sections 235 to 251, and the like] (3) An order made by the court under sub-section (2) shall have no effect until a certified copy of the order has been filed with the Registrar. (4) A copy of every su....
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....such manner as the court directs, dissent from the compromise or arrangement; and (vi) such incidental, consequential and supplemental matters as are necessary to secure that the reconstruction or amalgamation shall be fully and effectively carried out : [Provided that no compromise or arrangement proposed for the purposes of or in connection with, a scheme for the amalgamation of a company, which is being wound up, with any other company or companies, shall be sanctioned by the court unless the court has received a report from the Registrar that the affairs of the company have not been conducted in a manner prejudicial to the interests of its members or to public interest. Provided further that no order for dissolution of any transferor company under clause (iv) shall be made by the court unless the Official Liquidator has, on scrutiny of the books and papers of the company, made a report to the court that the affairs of the company have not been conducted in a manner prejudicial to the interests of its members or to public interest.] (2) Where an order under this section provides for the transfer of any property or liabilities, then, by virtue of the order, that prope....
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....ved "It was further held that the order of the court was liable to stamp duty as it resulted in transferring the property and that the order of the court which results in transfer of the property would be an instrument as it includes every document." In Litaka Pharma's case (Reported in (1996) 4 BCR 100) this Hon'ble Court had also earlier held that "the amalgamation Scheme sanctioned by the Court would be an instrument within the meaning of sec 2(l)". (v) Having regard to the legal requirement of both the transferor and the transferee company having to secure sanction separately, as also the provision of the Scheme itself, the Scheme as also the first order of this Hon'ble Court sanctioning the Scheme on the Transferee Company's Application, would not constitute an instrument or a conveyance, unless and until the Gujarat High Court had sanctioned the Scheme on the Transferor Company's Application. This is because the Scheme would become effective & operative and the property would stand transferred and vested from the transferor to the transferee, only on the Gujarat High Court making the second order sanctioning the Scheme. In fact if the second High Court ....
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....f schedule-1 of the Bombay Stamp Act 1958. The applicants also submitted that as per section 17 of the Bombay Stamp Act every document chargeable with duty under the Act is required to be charged with duty at the time of execution and therefore, the order dated 7.6.2002 is required to be stamped with duty as per the situation and circumstances on the day of its execution as per the Stamp Act. It was also submitted that the stamp duty payable was on the instrument and not on the underlying transaction. 12 On the stand of the respondent no.1 that they are entitled to a rebate on the stamp duty paid in Gujarat as mentioned in section 19, it is the case of the applicants that section 19 applies only when an instrument chargeable under stamp duty in schedule-I and relating to any property situate or to any in matter or thing done or to be done in this State is executed out of the State and subsequently such instrument or a copy of the instrument is received in this State. As the instrument submitted for adjudication in this State is the order dated 7.6.2002 and which has been executed in the State prior to payment of stamp duty of Rs. 10 crores in Gujarat, the question of taking bene....
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.... liabilities are transferred as provided in Section 394 of the Companies Act and on that transfer instrument, stamp duty is levied. It, therefore, cannot be said that the State Legislature has no jurisdiction to levy such duty". (emphasis supplied) 15 In Hindustan Lever (supra) the apex court also referred to the English Court Judgment in Sun Alliance Insurance Ltd. Vs. Inland Revenue Commissioners (1971) 1 ALLER 135 and observed " It was further held that the order of the court was liable to stamp duty as it resulted in transferring the property and that the order of the court which results in transfer of the property would be an instrument as it includes every document. Paragraphs-23, 24 & 25 of the Hindustan Lever (supra) reads as under :- "23. Point as to whether the stamp duty was leviable on the Court order sanctioning the scheme of amalgamation was considered at length in Sun Alliance Insurance Ltd. Vs. Inland Revenue Commissioners 1971 (1) All England Law Reports 135. The point which arose for determination as to whether the stamp duty was payable on the order of the Judge sanctioning the scheme of arrangement under Section 206 of the Companies Act, it was held:- ....
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....s transferred. 17 Therefore, as the scheme of arrangement or amalgamation has no effect or force unless or until it was sanctioned by the court, it is the order sanctioning the scheme that would be an instrument under Section 2(l). Hence, the order dated 7th June 2012 passed by this court will be the instrument as defined. 18 Section 3(a) of the Bombay Stamp Act, 1958 provides for chargeability of the instruments covered under Schedule-I appended to the said Act, when first executed in the State. As per section 2(i) the words "executed" and "execution" means signed and signature. In this context the Order of the Hon'ble High Court, Bombay was executed on 07/06/2002. As per section 2(d) an instrument becomes chargeable on execution or first execution after the commencement of the Bombay Stamp Act, 1958. Section 17 of the Bombay Stamp Act, 1958 provides for stamping of the instruments executed in the State. This section makes it clear that any instrument chargeable with duty executed in the State is required to be stamped before or at the time of execution or immediately thereafter or on the next working day following the day of execution. Considering all the provisions abo....
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....ment, there can not be a liability to pay duty. Therefore, essentially the duty is leviable on the instrument and not the transactions. Although the Scheme may be same, the Order dated 7.6.2002 being conveyance and it being an instrument signed in State of Maharashtra, the same is chargeable to duty so far as State of Maharashtra is concerned. 21 Although the two orders of two different high courts are pertaining to same scheme they are independently different instruments and can not be said to be same document especially when the two orders of different high courts are upon two different petitions by two different companies. When the scheme of the said Act is based on chargeability on instrument and not on transactions, it is immaterial whether it is pertaining to one and the same transaction. The duty is attracted on the instrument and not on transaction. 22 As regards the amalgamation of Companies is concerned, section 391 r/w. Section 394 of The Companies Act, 1956, contemplates following steps :- (i) Formation of a Scheme mutually agreed by the Transferor and the Transferee company ; (ii) Holding of meeting for approval of the Scheme ; (iii) The Order of the Cou....
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....ioning the Scheme, was issued by this Court on 7th June 2002 and the order states as under :- "AND THIS COURT DOTH ORDER that with effect from the Appointed Date, the Assets/Undertakings of the Transferor Company (as defined in the Scheme of Amalgamation being Exhibit "E" to the petition and in the Schedule hereto) shall without any further act, instrument or deed stand transferred to and vested in or deemed to have been transferred to and vested in the petitioner company pursuant to the provisions of Section 391 to 394 of the Companies Act, 1956 so as to become the properties and assets of the petitioner company." (emphasis supplied) Therefore, the order of this court sanctioning the Scheme was not a conditional order, which was to operate after the scheme was also sanctioned by the Hon'ble Gujarat High Court. By this Order dated 7.6.2002 of this Court itself, it could be considered that the transfer was effected and therefore the said Order of this Court is the 'order made by the High Court under Section 394 of the Companies Act 1956.............." as contemplated by Section 2(g) (iv) of the said Act. For the same reason the order dated 7.6.2002 of this Court is ....
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....ransferor Company, vide it's application dated 18th September, 2002, produced before the appropriate Authority contemplated by the Bombay Stamp Act, 1958 (as applicable in the State of Gujarat), only the order dated 13th September, 2002 of the Hon'ble Gujarat High Court, as is clear from Exhibit '4' to the affidavit filed on behalf of the 1st respondent. The Collector and Additional Superintendent of Stamps, Gujarat State, Gandhinagar, only on the order passed by the Hon'ble Gujarat High Court has imposed a stamp duty of Rs. 10 crores. Admittedly, the respondents have not paid any stamp duty on the order of this Hon'ble court, which is the subject matter of this reference. The order of this court dated 7th June, 2002 was presented for payment of stamp duty for the first time only on 16th October, 2002 by the respondent no.1 - Transferee Company along with application produced at Exhibit '6' to the affidavit filed on behalf of the Transferee-1st respondent and not by the 2nd respondent-Transferor company. 27 The respondent no.2 - Transferor Company has not paid any stamp duty on the order passed by this court either in the State of Gujarat or in th....
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....case. 31 Apart from the aforesaid aspect, as set out in detail in the aforesaid paragraphs, we have to go only by the instrument on which stamp duty is payable and that instrument is the order passed by this Court dated 7th June, 2002. Thus, in absence of 'several instruments' used in 'single transaction', as such, the provisions of Section 4 of the said Act is not applicable. 32 Further Section 19 is not applicable in the present case. Section 19 is applicable in respect of - (i) instrument executed out side State; (ii) of property in the State or thing done or to be done in State; and (iii) subsequently received in the State of Maharashtra. The instrument in question is the order dated 7.6.2002 executed by High Court of Bombay. The order is already in Mumbai and executed in Mumbai. It is not executed out side Maharashtra. The order dated 7.6.2002 is not received in Maharashtra since it originated in Maharashtra. Therefore, the ingredients of Section 19 are not complied. Respondent no.2-transferee while paying duty on the order dated 7.6.2002 of the Bombay High Court can not claim rebate for duty paid on order dated 13.9.2002 in State of Guj....
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....have been passed by two different High Courts by virtue of the fact that the Registered Office of the two companies are situated in different States? Ans. A scheme settled by two companies is not a document chargeable to stamp duty. An order passed by the Court sanctioning such a Scheme under Section 394 of the said Act, which effects transfer is a document chargeable to stamp duty. In case if the Registered Offices of the two Companies are situated in two different States, requiring such Orders, sanctioning the Scheme to be passed under Section 394 of the Companies Act by two different High Courts, then in that event, the order of this High Court which sanctions the Scheme passed under Section 394 of the Companies Act will be the instrument chargeable to stamp duty. (ii) Whether the instrument in respect of amalgamation or compromise or scheme between the two Companies is such a scheme, compromise or arrangement and the orders sanctioning the same are incidental as the computation of stamp duty and valuation is solely based on the scheme and scheme alone? Ans. The orders of the court, sanctioning a Scheme of amalgamation are not just incidental orders even in accordance w....