TaxTMI 
TaxTMI 
2025 (5) TMI 777
X X X X Extracts X X X X
X X X X Extracts X X X X
....egraph Act, 1885 for providing telecom services in the specified license service areas and as such exercises power of a Telecom Authority under Section 4 of the Indian Telegraph Act. Tata Teleservices (Maharashtra) Limited (TTML) is a Company incorporated under the provisions of the Companies Act, 1956 and was also engaged in the business of providing telecommunication services in the State of Maharashtra. 3) A Scheme of Arrangement for demerger of consumer mobile business of TTML into the Petitioner as a going concern was entered as per mutual understanding between the shareholders of two Companies (Scheme of Arrangement). The Scheme of Arrangement was prepared after seeking of the valuation of consumer mobile business of TTML and accordingly share entitlement ratio was decided as approved by the shareholders of both the Companies. Company Petition (CAA) No. 3596 of 2018 was filed before the National Company Law Tribunal, Mumbai Branch (NCLT, Mumbai) seeking sanction of Scheme of Arrangement. The Scheme was sanctioned by NCLT, Mumbai vide order dated 4 December 2018. Simultaneously Petitioner also filed Company Application before NCLT, Delhi seeking sanction to the Scheme of Ar....
X X X X Extracts X X X X
X X X X Extracts X X X X
....der provisions of Section 53 (1A) of the Stamp Act against the order dated 14 November 2022. During pendency of the Appeal, Petitioner offered to pay stamp duty of Rs. 1,86,70,450/- calculated on the basis of market value of immovable property of TTML, which was higher than 0.7% of market value of the shares of Rs. 23,75,081.90/-. The Collector of Stamps issued notice dated 21 December 2023 calling upon the Petitioner to pay ascertained stamp duty of Rs. 7,38,99,000/- alongwith interest of Rs. 8,12,88,900/-. Since Appeal of the Petitioner was not being heard and decided, it filed Writ Petition No. 11074 of 2022 in this Court, which was disposed of by order dated 10 January 2024 directing CCRA to decide Petitioner's Appeal within eight weeks. Petitioner was directed to deposit sum of Rs. 1,86,70,450/- with the Collector of Stamps without prejudice to its rights and contentions. During pendency of the Appeal, Respondents were directed not to recover any further amount from the Petitioner. It appears that the Petitioner made deposit of amount of Rs. 1,86,70,450/- with Collector of Stamps on 18 January 2024. 6) CCRA conducted hearings on 17 January 2024 and 24 January 2024 which....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y the Scheme of Arrangement seeks to allot one share of Petitioner against 2,014 equity shares of TTML. That the Scheme of Arrangement must be considered as a whole and the Respondents have erred in selectively taking into consideration the enterprise value of TTML's consumer mobile business. 8) Mr. Jamsandekar would submit that under provisions of Article 25 (da) of the Stamp Act, the stamp duty is payable either at the rate of 5% of market value of immovable property transferred by demerged company to the resulting company or at the rate of 0.7% of aggregate of market value of shares issued or allotted in exchange and the amount of consideration paid, whichever is higher. That since the amount representing 0.7% of the value of shares of Petitioner issued and allotted to the shareholders of TTML is less than 5% of market value of immovable properties of TTML, the correct stamp duty payable on the Scheme of Arrangement would be Rs. 1,86,70,450/-. 9) Mr. Jamsandekar would rely upon judgment of this Court in Li Taka Pharmaceuticals Ltd. and another Versus. The State of Maharashtra and others AIR 1997 Bom. 7 in support of his contention that assets and liabilities of the tra....
X X X X Extracts X X X X
X X X X Extracts X X X X
....deration which has actually flown through the Scheme. That in the present case, while transferring consumer mobile business of TTML, the spectrum is also transferred. That though spectrum also forms part of assets of TTML, the future license fees payable for such spectrum has erroneously been indicated in the valuation report as 'debts' payable by TTML. That therefore the Collector of Stamps has rightly ignored the debts indicated in the valuation report. That license fees payable in respect of the transferred spectrum cannot constitute debt. It is submitted that in a Scheme of Arrangement, it is often not possible to find out the real transaction by adopting any straight jacket formula and that it is for the Adjudicating Authority to call for relevant information from the parties to arrive at the exact nature of transaction. It is submitted that the Collector of Stamps has properly appreciated the exact nature of transaction flowing through the Scheme of Arrangement and in absence of an element of perversity, there is no warrant for interference in the adjudicating authority's decision. They would pray for dismissal of the Petition. 13) Rival contentions of the parties now fall....
X X X X Extracts X X X X
X X X X Extracts X X X X
....order of the Reserve Bank of India under section 44A of the Banking Regulation Act, 1949 in respect of amalgamation or reconstruction of Banking Companies 2[and every order made by the Board for Industrial and Financial Reconstruction under section 18 or 19 of the Sick Industrial Companies (Special Provisions) Act, 1985, in respect of sanction of Scheme specified therein or every order made by the National Company Law Tribunal under section 31 of the Insolvency and Bankruptcy Code, 2016, in respect of approval of resolution plan. 10 per cent. of the aggregate of the market value of the shares issued or allotted in exchange or otherwise and the amount of consideration paid for such amalgamation : Provided that, the amount of duty, chargeable under this clause shall not exceed, (i) an amount equal to 5 per cent of the true market value of the immovable property located within the State of Maharashtra of the transferor company; or (ii) an amount equal to 0.7 per cent, of the aggregate of the market value of the shares issued or allotted in exchange or otherwise and the amount of consideration paid, for such amalgamation, whichever is higher: Provided ....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... 1055,70,00,000/- is arrived at Rs. 7,38,99,000/-. 17) Since the stamp duty payable at the rate of 0.7% on net worth of demerged unit of TTML is found to be higher (Rs. 7,38,99,000/-) than the stamp duty at the rate of 5% on true market value of immovable properties of TTML located in the State of Maharashtra (Rs. 1,86,70,450/-), the Collector of Stamps has directed payment of stamp duty of Rs. 7,38,99,000/- on the Scheme of Arrangement. 18) During the course of hearing of the Petition, initially the debate between the learned counsel was with regard to the consideration of amount of Rs. 1055.70 crores as the market value of shares of TTML for the purpose of application of Article-25 (da) (ii) of the Stamp Act. According to the Petitioner, from the enterprise value of consumer mobile unit of TTML of Rs. 1055.70 crores, the amount of gross debt of Rs. 950 crores is required to be deducted and the true market value of shares is required to be considered as Rs. 105.70 crores. 19) In the light of the contention raised by the Petitioner and TTML for deduction of debt amount from the enterprise value for the purpose of adjudication of stamp duty, the Collector of Stamps framed ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....uly certified by C.A. Naw via letter dated 01/08/2022 Company has submitted the Valuation Report prepared /signed by SR. Batliboi & Co. LLP C.A. (Sanjay Vij) & also Walker Chandiok & Co. LLP. C.A. (Per Shashishekhar Chaugule) in which The Net Worth of demerged undertaking of CNB Unit of Demerged Company is Rs. 10557 Mn. i.e.- Rs. 10557000000/- Same is Considered as a market value for assessment. 23) The Collector of Stamps has thus proceeded to determine the stamp duty payable on the Scheme of Arrangement on the net worth of demerged undertaking of consumer mobile business unit of TTML. While doing so, it has relied upon joint valuation report of M/s. S. R. Baltiboy & Co. LLP and Walker Chandiok & Co. LLP dated 19 December 2017. It appears that Petitioner had appointed Walker Chandiok & Co. LLP as its valuer and TTML has appointed M/s. S.R. Baltiboy & Co. LLP as its valuer. Both the valuers have submitted joint valuation report for the purpose of determining the Share Entitlement Ratio to be placed before the Board of Directors of both the Companies. Both the valuers apparently worked independently. They calculated valuation of Consumer Mobile Business of TTML by using Comparabl....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... (9,500) (9,500) Equity Value 169 639 Equity Value in INR per share 0.09 0.33 Note 1: Enterprise Valuation of TTML's CMB unit based on EV/Revenue multiple Currency INR mn Value-Lower Range Value-Upper Range EV/Revenue multiple Chosen multiple 1.28 1.34 Revenue-TTML's CMB Unit - FY18 estimate 7,541 7,541 Enterprise Value of TTML's CMB Unit 9,669 10,139 25) There is not much difference between the equity value determined by both the Valuers. The enterprise value was taken by TTML's borrower as Rs. 1055.70 crores whereas the same was taken by Petitioner's borrower at Rs.10,139 crores. Both the valuers were ad-idem that the gross debt of TTML was Rs. 950 crores. Thus, S.R. Baltiboy & Co. LLP (Petitioner's Valuer) indicated equity value of consumer mobile business unit of TTML at Rs. 105.7 crores whereas as per the valuer of TTML, the same was Rs. 63.9 crores. Based on the equity value so determined, the equity value of per share of TTML was indicated at INR 0.54 by Petitioner's Valuer and INR 0.33 by TTML's Valuer. Based on equity value per share of T....
X X X X Extracts X X X X
X X X X Extracts X X X X
....orth' of consumer mobile business unit of TTML. 29) From the application filed by TTML before the Collector of Stamps, following details of consideration were indicated : 8. Consideration Part Ratio Transferor Co. Transferor Co. No. of Paid up Shares of Transferor Co. No. of Shares to be allotted by transferee Co. to the shareholders of transferor Co. Price of each Share of the Transferee Co. As on appointed Date Total Market Value of Shares to be allotted by transferee co. to shareholders of transferor co. 1) 2,014 equity shares of Rs. 10/- each 1 equity share of Rs. 5/- each 195,49,27,727 fully paid up equity shares of Rs. 10/- each 970,668 equity shares of face value 5 each Rs. 348.50 per share as per NSE closing Rs. 338,277,798 2) 20,18,00,000 RPS of Rs. 100/-each 10 RPS of Rs. 100/- each 20,18,00,000 RPS of Rs. 100/-each 10 fully paid-up redeemable, non-participating, non-cumulative preference shares of face value Rs.100 each. Rs. 100/- each Rs. 1,000/- 30) Thus, from the information revealed in the application, it appears that Rs. 9,70,668/- equi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s sought to be contended on behalf of Respondents that while performing adjudicatory function, it is for the Collector of Stamps to discover the true nature of transaction. That for performing such adjudicatory function, various documents and information can be requisitioned by the Adjudicating Authority as it is impossible to fit all transactions into a straitjacket formula. Though Adjudicating Authority has necessary jurisdiction to ascertain the exact transaction between the parties flowing through a Scheme of Arrangement, it does not mean that it can give a complete go-by to the prescribed manner of levy of stamp duty under Article-25 (da) (ii). Once the Legislature has mandated that the stamp duty leviable on a Scheme of Arrangement must be determined on market value of shares issued/allotted in exchange plus amount of consideration paid, it would be beyond the jurisdiction of the Adjudicating Authority to determine the stamp duty payable on any other basis. Mere vesting of jurisdiction in the Adjudicating Authority to ascertain true nature of transaction flowing out of Scheme of Arrangement would not mean that it can compute the stamp duty by adopting its own basis. The basis....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ctor of Stamps. It is therefore not possible to accept the oral submissions advanced across the bar that the amount of Rs. 1055.70 crores constitutes consideration paid under the Scheme of Arrangement. 36) It is also sought to be argued, again through oral submissions unsupported by any pleadings, that license fees payable in respect of spectrum has been erroneously reflected as gross debts in the valuation report. It is submitted that Petitioner has acquired license of 2G Spectrum which would be exploited throughout the territory of Mumbai and Maharashtra for next several years and that therefore the license fees payable to the Government towards use of spectrum cannot constitute debt for determining valuation of TTML. Again, this reason of erroneous reflection of spectrum license fees as debts is nowhere to be found in the impugned orders passed by the Collector of Stamps and CCRA. This ground is not even pleaded in the Affidavit-in-Reply. Therefore, the oral submission sought to be advanced in this regard deserves outright rejection. 37) It is well settled position of law that validity of orders passed by the administrative and quasi-judicial authorities must be tested on ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.....55 on the relevant day) against 2014 shares of TTML. Thus 2014 shares of TTML are valued at only Rs. 349.55. The allotment of shares to shareholders of TTML is decided after taking into consideration that the actual worth of TTML was only 105.7 crores considering the huge liability to pay spectrum license fees to the Government. The Collector of Stamps cannot sit in appeal over this commercial wisdom of shareholders of both the companies and which is accepted by the NCLT and assume that TTML was actually worth more than what is accepted by the shareholders and NCLT. In my view, the oral submissions made about error in reflection of spectrum license fees as debts, which are unsupported by reasons in impugned orders or even by pleadings deserve outright rejection. 39) In my view, therefore the Collector of Stamps has grossly erred in computing the stamp duty leviable on the Scheme of Arrangement by taking into consideration 'net worth' of consumer mobile business unit of TTML. The Collector ought to have computed stamp duty payable on aggregate market value of shares issued and allotted in exchange plus consideration paid for the transaction. Since no separate consideration is pa....