2 May 2023
Gujarat High Court seeks to settle stamp duty conundrum on the scheme of amalgamation
Recently Gujarat High Court has passed an order in the matter of Chief Controlling Revenue Authority vs Coastal Gujarat Power Limited and others (Civil Appeal No. 6054 of 2015) (said Order). The said Order seeks to provide better clarity on several aspects of stamp duty payable under the Gujarat Stamp Act (GSA) on the order approving the scheme of amalgamation between the companies.

The said Order was passed in eight connect matters under the composite scheme of amalgamation. The appeal emanated from the order passed by the Revenue Authority levying stamp duty on the composite scheme of amalgamation along with interest and penalty.

The below table summarizes the position of the Revenue Authority and order passed by the Court on the key issues involved:
Issues involved Revenue Authority's Contention Order of Courts
Whether the composite scheme is of amalgamation is a single instrument or several distinct matters in a single instrument. It was contended that as per Section 5 of the GSA the composite scheme covers several 'distinct matters'; hence stamp duty shall be chargeable with the aggregate amount of duty payable on each separate instrument. The Court held that a composite scheme of arrangement cannot be segregated when the said arrangement was pursuant to a single composite order.
Whether 'premium' to be included in the 'market value' of shares issued on amalgamation by an unlisted company. It was contended that by giving the meaningful interpretation, consideration should include 'premium'. Furthermore, consideration means full consideration, which includes premium.
  • The Court held that as per Explanation III(c) to Article 20(d) of Schedule -I of GSA, the 'market value' of shares of unlisted companies means 'face value' of shares. Hence, including 'premium' into face value would amount to reading into the provision that is not found in the statute.
  • Therefore, going by the literal construction of the aforesaid explanation, 'premium' shall not be included in the 'market value' of shares issued on amalgamation by an unlisted company.
Whether stamp duty payable is applicable on the 'appointed date' or 'date of execution.' It was contended that levy of stamp duty should be considered on execution of an instrument, i.e., on the date of order passed by the Tribunal approving amalgamation. The Court held that the "appointed date" is relevant for the purpose of levy of stamp duty and not the order date. Relying on various judicial precedents, effectively, the Court ruled that once the scheme is approved, it relates back to and takes effect from the 'appointed date.'
Whether stamp duty paid in another state concerning immovable properties situated in Gujarat can be set-off in Gujarat. It was contended that stamp duty paid in other states does not amount to payment of stamp duty as envisaged under GSA. The Court held that the duty is paid in another state on the same instrument hence the set-off must be allowed as per Section 19 of GSA, and any differential stamp duty that arises due to the higher rate in Gujarat that needs to be paid.
Whether 'capital work-in progress' can be included in the definition of 'immovable property' for the purpose of levy of stamp duty. It was contended that capital work-in-progress is to be considered as immovable property for the purpose of levy of stamp duty. The Court held that capital work-in-progress cannot be considered as an asset to be in existence for the purpose of levying stamp duty and hence, it cannot be included in the definition of immovable property.
Our Comments
Stamp duty levy on the scheme of amalgamation is deeply contentious across the states. Against that backdrop, the said Order is very significant as it has dealt with several aspects concerning the stamp duty levy on the composite scheme of amalgamation. The said Order delved deep into the finer aspects of the stamp duty provisions as prevailing in GSA and sought to clarify contentious issues. The Hon'ble Court re-emphasized the well settled principles of statutory interpretation that taxing statutes should be strictly interpreted, particularly when the language used by the legislature is clear and unambiguous. It is not permissible for the courts to read something into the provisions which is not found in the statute. Furthermore, the said Order could be considered as a guiding principle on stamp duty aspects that can be kept in mind while conceptualizing the scheme of amalgamation.
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