TaxTMI 
TaxTMI 
2020 (12) TMI 288
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....r has its registered office at Mumbai as did VIL. As the owner, the Petitioner transferred the property comprising land and building at Door No.52, Armenian Street, Chennai - 600 001 (the Property) by way of the Sale Deed in favour of VIL. The Sale Deed was registered on 06.08.1997 before the District Registrar, Chennai North, by claiming an exemption from stamp duty in terms of G.O.Ms.No.1224, Revenue, dated 25.04.1964 (G.O.Ms. No1224). G.O.Ms.No.1224 provided for an exemption from stamp duty subject to fulfilment of any one of three conditions at the time of the transaction. The first of such conditions was if at least 90% of the issued share capital of the purchaser/transferee was in the beneficial ownership of the vendor/transferor. The second condition was where the transfer is between a parent company and its subsidiary and one of them is the beneficial owner of not less than 90% of the issued share capital of the other. The third condition was where the transfer of property was between two subsidiary companies and the common parent or holding company holds not less than 90% of the issued share capital of each of the subsidiaries. 3.After the registration of the Sale Deed,....
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....ed counsel referred to the Annual Return of VIL, which was made up to 23.09.1997. With specific reference to page 95 of the additional typed set of papers filed by the Petitioner (the relevant page of the above mentioned Annual Return), he substantiated the contention that Voltas Limited( the Petitioner herein) held 5,99,994 shares in VIL. He also referred to the order of the Hon'ble Bombay High Court dated 19.09.2001 in C.P.No.528 of 2001 in and by which the Court sanctioned the Scheme of Amalgamation between VIL and Voltas Limited. As a consequence of the said amalgamation, he submitted that VIL merged with Voltas Limited and was dissolved without winding-up in terms of the order of the Bombay High Court. Therefore, the writ petition was filed by Voltas Limited. 7. In order to substantiate the contention that the exemption notification is applicable to the transaction, he referred to said exemption notification and pointed out that the Petitioner satisfies the condition of holding at least 90% of the issued share capital of the purchaser/transferee, namely, VIL, at the time of transaction. As regards the proviso to the notification, he contended that the proviso deals with....
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....d be available only if both the companies have their registered offices within Tamil Nadu. By order dated 29.06.2009, in the earlier W.P.No.20249 of 1999, this Court concluded that G.O.Ms.No.37 is not applicable to the transaction in question because the said Government order came into force only in the year 2000 whereas the transaction was executed in the year 1997. Thus, he contended that the required that the registered offices should be in Tamil Nadu is not applicable as regards this transaction. 8. In response and to the contrary, Mr.S.R.Rajagopal submitted that the exemption is extended as a benefit to companies which are incorporated in Tamil Nadu and that neither the Petitioner nor the VIL were incorporated in the State of Tamil Nadu. Both these companies were incorporated in the State of Maharashtra. According to Mr.S.R.Rajagopal, the relevant entry of the exemption notification, G.O.Ms.No.1224, should be read as a whole. If the relevant entry 38 is read as a whole, the proviso thereto assumes significance. The said proviso specifies that a certified copy of the relevant records of the company kept in the office of the Registrar of Companies, Madras should be produced b....
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....ication or provision. In this case, the claim is based on G.O. Ms. No.1224. By G.O. Ms. No.37, entry 38 of G.O. Ms.No.1224 was modified by including a second proviso. The second proviso is as under: "Provided further that the remission will apply only to cases of transfer of properties situated in the State of Tamil Nadu and to companies with their registered office in the State of Tamil Nadu." VIL challenged the appellate order imposing stamp duty on the Sale Deed by filing W.P. No.20249 of 1999. This writ petition was allowed by order dated 29.06.2009 largely on the basis that G.O.Ms.No.37 was not applicable to the Sale Deed because it came into force in the year 2000, and the said order was not carried in appeal and attained finality. Therefore, the claim for exemption, in this case, should be tested entirely with reference to G.O.Ms.No.1224 and G.O. Ms.No.37 should not be taken into consideration. 11. The learned counsel for the Petitioner contended that the Petitioner is entitled to the exemption because the first condition in entry 38, i.e. that the vendor/transferor should, as on the date of transfer, hold at least 90% of the issued share capital of the purcha....
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.... copy of the relevant records of the companies kept in the office of the Registrar of Companies, Madras, is produced by the parties to the instrument to prove that the conditions above prescribed are fulfilled."(emphasis added). Upon examining the text of entry 38 of G.O.Ms.No.1224, it is evident that it provides for an exemption under any one of three circumstances. The first of these is where the vendor holds at least 90% of the issued share capital of the purchaser. As stated above, it is clear from the Annual Return of VIL, as of 23.09.1997, that Voltas Limited held 5,99,994 shares in the issued share capital of VIL. The total issued share capital of VIL was 6,00,000 shares at the relevant point of time. Thus, Voltas Limited held more than 99% of the issued share capital of VIL. Accordingly, the undoubted position is that the "at least 90%" share holding condition is fulfilled. 13.This leads to the next question as to whether the proviso imposes additional conditions and whether the Petitioner's claim for exemption is liable to be rejected on account of the proviso. In order to test this aspect, the text of the proviso should be examined closely. The proviso doe....
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....n fabrics produced by any Cooperative Society formed of owners of cotton power looms which is registered or which may be registered on or before March 31, 1961" subject to four conditions set out in the notification. In the next notification dated April 30, 1960 exemption was granted to "cotton fabrics produced on power looms owned by any cooperative society or owned by or allotted to the members of the society, which is registered or which may be registered on or before March 31, 1961" subject to, the conditions specified in the notification. It was contended on behalf of the appellant that under the contract between the appellant and the society there was no relationship of master and servant but the appellant supplied raw material and the contractor i.e. the Society produced the goods. But even on the assumption that the appellant had manufactured the goods by employing hired labour and was therefore a manufacturer, still the appellant was entitled to exemption from excise duty since the case fell within the language of the two notifications dated July 31, 1959 and April 30, 1960, and the cotton fabrics were produced on power-looms owned by the cooperative society and there is n....
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....urt of Law or Equity, what the Legislature intended to be done or not to be done can only be legitimately ascertained from that which it has chosen to enact, either in express words or by reasonable and necessary implication." It is an application of this principle that a statutory notification may not be extended so as to meet a casus omissus. As appears in the judgment of the Privy Council in Crawford v.Spooner [6 Moo PCC 8] . "... we cannot aid the legislature's defective phrasing of the Act, we cannot add, and mend, and, by construction, make up deficiencies which are left there". Learned Counsel for the respondents is possibly right in his submission that the object behind the two notifications is to encourage the actual manufacturers of handloom cloth to switch over to power looms by constituting themselves into Cooperative Societies. But the operation of the notifications has to be judged not by the object which the rule-making authority had in mind but by the words which it has employed to effectuate the legislative intent. Applying this principle we are of opinion that the case of the appellant is covered by the language of the two notificati....
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....ment with reference to the source of accumulation of unutilised credit. The law on the interpretation of a proviso was considered therein with particular reference to the judgment of the Hon'ble Supreme Court in S.Sundaram Pillai v. V.R.Pattabiraman (1985) 1 SCC 591 (Sundaram Pillai). Paragraphs 27 and 43 of the judgment of the Hon'ble Supreme Court in Sundaram Pillai are relevant and the said paragraphs are extracted below: "27. The next question that arises for consideration is as to what is the scope of a proviso and what is the ambit of an Explanation either to a proviso or to any other statutory provision. We shall first take up the question of the nature, scope and extent of a proviso. The well established rule of interpretation of a proviso is that a proviso may have three separate functions. Normally, a proviso is meant to be an exception to something within the main enactment or to qualify something enacted therein which but for the proviso would be within the purview of the enactment. In other words, a proviso cannot be torn apart from the main enactment nor can it be used to nullify or set at naught the real object of the main enactment. 43.W....
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....the Hon'ble Supreme Court in M.A.Tulloch, whereas the learned Additional Advocate General relied upon the judgment in Grasim Industries, Wood Papers and Dilip Kumar. The law on the interpretation of exemption provisions and exemption notifications is no longer res integra and has been authoritatively settled by judgments of the Hon'ble Supreme Court. For the present purposes, it is sufficient to refer to four judgments. In Wood Papers, it was held as under in paragraph 4: "4. Entitlement of exemption depends on construction of the expression "any factory commencing production" used in the Table extracted above. Literally exemption is freedom from liability, tax or duty. Fiscally it may assume varying shapes, specially, in a growing economy. For instance tax holiday to new units, concessional rate of tax to goods or persons for limited period or with the specific objective etc. That is why its construction, unlike charging provision, has to be tested on different touchstone. In fact an exemption provision is like an exception and on normal principle of construction or interpretation of statutes it is construed strictly either because of legislative intention or on e....
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....registration does, in fact, mention that the goods are intended for resale by him, and for that purpose it has chosen one exclusive method of proving the fact before a Sales Tax Officer. He further urges that no other method of proving that fact is permissible. Rule 27(2) is mandatory and if there is breach of it the selling dealer is not entitled to deduction. The learned counsel for the respondent, on the other hand, contends that Rule 27(2) is directory. He points out that the word "shall" should be read as "may", in the context. He further says that supposing the selling dealer brought the original certificate of registration of a buying dealer and produced it before the Sales Tax Officer, according to the appellant, this would not be enough, but this could never have been intended. In our opinion, Rule 27(2) must be reconciled with the section and the rule can be reconciled by treating it as directory. But the rule must be substantially complied within every case. It is for the Sales Tax Officer to be satisfied that, in fact, the certificate of registration of the buying dealer contains the requisite statement, and if he has any doubts about it, the selling dealer must satisfy....
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....bt or ambiguity, the benefit of it must go to the State. A Constitution Bench of this Court in Hansraj Gordhandas v. CCE and Customs [AIR 1970 SC 755 : (1969) 2 SCR 253] held that (Novopan India Ltd. Case [1994 Supp (3) SCC 606] , SCC p. 614, para 16) 16. ... such a notification has to be interpreted in the light of the words employed by it and not on any other basis. This was so held in the context of the principle that in a taxing statute, there is no room for any intendment, that regard must be had to the clear meaning of the words and that the matter should be governed wholly by the language of the notification i.e. by the plain terms of the exemption. 31. Of course, some of the provisions of an exemption notification may be directory in nature and some are mandatory in nature. A distinction between the provisions of a statute which are of substantive character and were built in with certain specific objectives of policy, on the one hand, and those which are merely procedural and technical in their nature, on the other, must be kept clearly distinguished(emphasis added). In TISCO Ltd.[(2005) 4 SCC 272] this Court held that the principles as regard construction of an ex....
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....ectory requirements. In cases where substantial compliance has been found, there has been actual compliance with the statute, albeit procedurally faulty. The doctrine of substantial compliance seeks to preserve the need to comply strictly with the conditions or requirements that are important to invoke a tax or duty exemption and to forgive non-compliance for either unimportant and tangential requirements or requirements that are so confusingly or incorrectly written that an earnest effort at compliance should be accepted. 34. The test for determining the applicability of the substantial compliance doctrine has been the subject of a myriad of cases and quite often, the critical question to be examined is whether the requirements relate to the "substance" or "essence" of the statute, if so, strict adherence to those requirements is a precondition to give effect to that doctrine. On the other hand, if the requirements are procedural or directory in that they are not of the "essence" of the thing to be done but are given with a view to the orderly conduct of business, they may be fulfilled by substantial, if not strict compliance. In other words, a mere attempted compliance m....
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....mining the aforesaid judgments, the following illustrative principles are discernible as regards interpretation of exemption provisions or notifications: (i) An exemption provision or notification is required to be construed strictly as regards eligibility conditions. (ii) Any ambiguity in the exemption provision or notification in a fiscal statute, as regards applicability, would be construed in favour of the revenue. (iii) Once the eligibility conditions are satisfied, it is sufficient if there is substantial compliance with the over all requirements of the exemption provision or notification. (iv) In order to test whether there is substantial compliance, it is necessary to ascertain whether essential requirements for availing the exemption have been fully satisfied. (v) All eligibility conditions for an exemption would be construed as essential, whereas methods of proving the fulfilment thereof would not be construed as essential provided there are reasonable alternative methods of proving fulfilment thereof. (vi) Because the method of establishing fulfillment of conditions for availing an exemption would ordinarily be constr....
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.... offices of the companies should be in Tamil Nadu but G.O.Ms.No.37 has been held to be inapplicable to this transaction. The other aspect to be considered is whether the production of certified copies of the relevant records from the Registrar of Companies, Madras is an essential requirement for availing the exemption. The question could be framed as follows: is the claim for exemption liable to be rejected because the Petitioner was unable to produce records from the Registrar of Companies, Madras in order to prove the fulfillment of the eligibility condition and instead produced records from the Registrar of Companies, Mumbai, Maharashtra? As stated earlier, the production of the relevant records of the companies concerned from the Registrar of Companies, Madras is not a condition for availing the exemption, and, on the contrary, is merely a method of proving that the conditions specified in the principal clause are fulfilled. The Petitioner produced the records from the office of the Registrar of Companies, Mumbai, Maharashtra, to prove the fulfillment of the condition. Both the Registrar of Companies, Mumbai, and the Registrar of Companies, Madras/Chennai are statutory authorit....