TaxTMI 
TaxTMI 
2024 (4) TMI 308
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 36 crores. In 1992 it increased its share capital to Rs. 600 crores and accordingly paid a stamp duty of Rs. 1,12,80,000/- as per Article 10 of Schedule-I of the Bombay Stamp Act, 1958 (hereinafter "Stamp Act"). At that time, the provision read as under: 1 2 Description of Instrument Proper Stamp Duty 10. ARTICLES OF ASSOCIATION OF A COMPANY - Where the Company has no share capital or nominal share capital or increased share capital. One thousand rupees for every rupees 5,00,000 or part thereof. The State of Maharashtra (appellant no. 1) on 02.08.1994 amended Article 10 and introduced a maximum cap of Rs. 25 lakhs on stamp duty which would be payable by a company. The amending notification is reproduced below in part: "In exercise of the powers conferred by clause (a) of Section 9 of the Bombay Stamp Act, 1958 (Born. LX of 1958), the Government of Maharashtra, having satisfied that it is necessary to do so in the public interest, hereby reduces, with effect from the 1st August, 1994, the maximum duty chargeable on Article of Association of a Company under Article 10 of Schedule-I to the said Act, to Rs. Twenty Five Lakhs." Subsequently, the resp....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... Therefore, the stamp duty paid earlier cannot be taken into consideration in any case. 4. On the other hand, learned senior counsel for the respondent submits that it is only the Articles of Association of a company which are chargeable to Stamp Duty under Article 10. Form No. 5 which is being contended by the appellants to be a separate instrument, is completely alien to the Stamp Act as it serves a very limited purpose of giving notice to the Registrar that a company has increased its share capital beyond the authorised share capital. She would further submit that increase in the share capital of a company does not materially or substantially alter the character of the Articles of Association so as to fall within Section 14A of the Stamp Act. She refers to Section 31 of the Companies Act to submit that any alterations made to the Articles of Association are valid and are to be taken as if originally contained therein. Finally, she relies on a catena of judgements to contend that fiscal statutes have to be construed strictly and in case of any ambiguity in the charging provision, the same has to be resolved against the Department. 5. Let us now examine the relevant prov....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nder this sub-section which has the effect of converting a public company into a private company, shall have effect unless such alteration has been approved by the Central Government. (2) Any alteration so made shall, subject to the provisions of this Act, be as valid as if originally contained in the articles and be subject in like manner to alteration by special resolution. (2-A) ... (3) ..." (emphasis supplied) Any alteration in the share capital of a limited company is provided under Section 94 of the Companies Act, which reads as under: "94. Power of limited company to alter its share capital.- (1) A limited company having a share capital, may, if so authorised by its articles, alter the conditions of its memorandum as follows, that is to say, it may- (a) increase its share capital by such amount as it thinks expedient by issuing new shares; (b) ... (c) ... (d) ... (e) ... (2) The powers conferred by this section shall be exercised by the company in general meeting and shall not require to be confirmed by the Court. (3) ..." (emphasis supplied) A perusal o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n instrument within the meaning of Section 2(l) of the Stamp Act, was answered in the affirmative. It was observed that the Court passes the order of sanction based on the arrangement arrived at between the parties and thereby affects transfer of assets and liabilities between them, which binds all. This is what was said: "32. In view of the aforesaid discussion, we hold that the order passed by the Court under Section 394 of the Companies Act is based upon the compromise between two or more companies. Function of the court while sanctioning the compromise or arrangement is limited to oversee that the compromise or arrangement arrived at is lawful and that the affairs of the company were not conducted in a manner prejudicial to the interest of its members or to public interest, that is to say, it should not be unfair or contrary to public policy or unconscionable. Once these things are satisfied the scheme has to be sanctioned as per the compromise arrived at between the parties. It is an instrument which transfers the properties and would fall within the definition of Section 2(1) of the Bombay Stamp Act which includes every document by which any right or liability is tra....
X X X X Extracts X X X X
X X X X Extracts X X X X
....l or of members of a company has to be sent to the Registrar, within 30 days of passing of such resolution. The Registrar then has to record such increase in share capital or members, and carry out the necessary alterations in the articles. Stamp Duty is affixed on Form No. 5 as a matter of practical convenience because a company itself cannot carry out the alterations and record the increase in share capital in its Articles of Association. It is only the articles which are an instrument within the meaning of Section 2(l) of the Stamp Act and accordingly have been mentioned in Article 10 of Schedule-I of the Stamp Act. 10. Counsel for the appellants, however, contends that increase in the share capital of the respondent from Rs. 600 crores to Rs. 1,200 crores, materially alters the character of the instrument, i.e., Articles of Association. As such, it requires a fresh stamp according to its altered character and needs to be charged as a separate instrument. On the other hand, learned senior counsel for the respondent refers to Section 31(2) of the Companies Act, which provides that any alteration of the articles shall, subject to the provisions of this Act, be valid as if it we....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Egerton Woollen Mills, In re, (supra) there is no concept of a company having new Articles of Association. Thus, Section 14A of the Stamp Act would not be of any help to the appellants. 13. We may here add that the Legislature has specifically mentioned Articles of Association in Article 10 of Schedule-I of the Stamp Act, where stamp duty is to be charged inter alia on increase in the share capital of a company. Thus, in spite of Section 31(2) of the Companies Act stamp duty will be payable on increased share capital. This is however subject to the maximum, i.e., Rs. 25 lakhs which we shall refer to in a while. If there is no specific provision for charging the increase, then no stamp duty is payable for any increase in the share capital of a company. In order to clarify, we may refer to a decision of the Delhi High Court in S.E. Investments Ltd. v. Union of India, 2011 SCC OnLine Del 1867. In Delhi, the charging provision of the Indian Stamp (Delhi Amendment) Act, 2007 which was under consideration of the High Court was as follows: 10 ARTICLES OF ASSOCIATION OF A COMPANY:- (a) When the authorized capital of the company does not exceed one lac ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ly. This Court in CWT v. Ellis Bridge Gymkhana, (1998) 1 SCC 384 held as under: "5. The rule of construction of a charging section is that before taxing any person, it must be shown that he falls within the ambit of the charging section by clear words used in the section. No one can be taxed by implication. A charging section has to be construed strictly. If a person has not been brought within the ambit of the charging section by clear words, he cannot be taxed at all." Thus, even though "increased share capital" is a part of Article 10, which column it has been placed in assumes importance. Column 1 of the Schedule describes the instrument on which stamp duty is to be levied whereas Column 2 prescribes the stamp duty payable. Column 1 has to be construed as describing three situations or contingencies relating to Articles of Association, i.e., "where the company has no share capital or nominal share capital or increased share capital". In cases where a company has no share capital it would have to pay no stamp duty and if a company is submitting its articles for the first time, stamp duty would be calculated as per the nominal share capital. The effect of adding "i....