Stamp duty to be reckoned a year from date of approval of arrangement scheme by BIFR: HC

Case Details: State of Gujarat v. Bio Deal Labouratories (P.) Ltd - [2022] 136 taxmann.com 251 (Gujarat)

Judiciary and Counsel Details

• • J.B. Pardiwala and Niral R. Mehta, JJ
  • Ishan Joshi, Ld. Asstt. Govt. Pleader for the Appellant. 
  • Uchit N Sheth for the Respondent.

Facts of the Case

In the instant case, the Company Court sanctioned scheme of amalgamation of transferor company ‘U’ with transferee company ‘B.

In view of definition of term ‘Conveyance’ in section 2(g)(iv) of Gujarat Stamp Act, order of Court was liable to payment of stamp duty in respect of properties and assets of transferor company conveyed to and in name of transferee company.

The Copy of order was to be presented before the Stamp Authorities for purpose of stamp duty within one year therefrom and since, said order was presented after one year, Stamp Authorities passed an order directing transferor-company to make payment of deficit stamp duty and penalty.

The Single Judge held that sanctioning of scheme of amalgamation was subject to approval of BIFR which was accorded on 7-6-2005 and thus, presentation of order of Company Court on 23-2-2006 was within time limit and therefore, impugned order of Stamp Authorities was to be set aside, consequences including refund of amount already paid by transferor would follow.

Supreme Court Held

The Supreme Court, in Hindustan Lever v. State of Maharashtra [2003] 48 SCL 630 in the context of section 2(g)(iv) has held that the transfer is effected by an order of the Court and the order of the Court sanctioning the scheme of amalgamation is an instrument which transfers the properties and would fall within the definition of section 2(l) of the Bombay Stamp Act, which includes every document by which any right or liability is transferred. By the said instrument the properties are transferred from the transferor to the transferee company.

In said case, 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 a transfer of the property would be an instrument as it includes every document

In Li Taka Pharmaceuticals Ltd. v. State of Maharashtra [1996] 8 SCL 102 a division bench of the Bombay High Court had held that an order under section 394 is found or based upon compromise or arrangement between the two companies of transferring assets and liabilities of one company to another company. The order is an ‘instrument’ as defined under section 2(l) of the Bombay Stamp Act which includes every document by which any right or liability is transferred

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).

In view of the above-cited landmark rulings, the Apex Court held that on facts, there was no good reason to disturb a well-reasoned order passed by Single Judge.

List of Cases Referred to

• • Hindustan Lever v. State of Maharashtra [2003] 48 SCL 630 (SC) (para 6)
  • Sun Alliance Insurance Ltd. v. Inland Revenue Commissioners [1971] 1 ALL ER 135 (para 7)
  • Li Taka Pharmaceuticals Ltd. v. State of Maharashtra [1996] 8 SCL 102 (para 8).