Heavy stamp duty for inter-state amalgamations

The Bombay High Court in Chief Controlling Revenue Authority v. M/s Reliance Industries Limited (Writ Petition No. 1293 of 2007) has held that an amalgamation scheme settled by two companies is not a document chargeable to stamp duty, rather an order passed by the Court sanctioning such a scheme is a document chargeable to stamp duty.

FACTS

Reliance Industries Ltd (“RIL“) having its registered office in Mumbai and Reliance Petroleum Ltd (“RPL“) having its registered office in Gujarat entered into a scheme of amalgamation under Sections 391 to 394 of the Companies Act, 1956 (“Scheme“). Thereafter, both companies filed a petition before the Bombay High Court and Gujarat High Court respectively for getting the Scheme sanctioned. Pursuant to the orders passed by both the High Courts, RIL paid a stamp duty of Rs. 10,00,00,000/- (Rupees Ten Crores) in Gujarat. The stamp duty of a maximum of Rs. 25,00,00,000/- (Rupees Twenty Five Crores) was payable in Maharashtra on the concerned amalgamation. It was contended by RIL that it only needed to pay Rs. 15,00,00,000/- (Rupees Fifteen Crores) since it had already paid the balance in Gujarat. The revenue authorities in Maharashtra refused to provide the set off sought by RIL. After series of appeals, the matter was referred to the Bombay High Court to decide on the questions of law.

ISSUE
  • Whether the Scheme sanctioned between two companies under Section 391 and 394 of the Companies Act, 1956 is one and the same document chargeable to stamp duty regardless of the fact that the order sanctioning the scheme may have been passed by two different High Courts?
  • Whether the company in the State of Maharashtra is entitled for rebate under Section 19 of the Bombay Stamp Duty Act, 1958 (“Act”) in respect of the stamp duty paid on the said scheme in another State?

JUDGMENT

The Bombay High Court held that although the two orders of two different High Courts are pertaining to same scheme but they are independently different instruments and cannot be said to be same document especially when two different petitions were filed by two different companies. The stamp duty is attracted on the “instrument’ and not on the transaction.

The Bombay High Court further ruled that no set-off would be available in Maharashtra for the stamp duty paid in Gujarat because as per Section 19 of the Act, where a document is executed outside a State and is subsequently brought into the State, stamp duty would have to be paid on that instrument after giving setting off duty that has already been paid in another State. However, in the present case the order is made and executed in Mumbai. Hence, no rebate can be claimed.

This judgment is likely to have huge ramifications on stamp duty in relation to inter-state amalgamations.