Whether Stamp Duty is Payable when there is an increase in the Authorised Share Capital of a Company ?
The recent decision by High Court of New Delhi in S.E. Investments Ltd v. Union of India & Others ( Delhi) is thought provoking and mind blowing .
Increase in authorised capital – Whether stamp duty is payable on the increased quantum – Supreme Court held in negative .
The petitioner S.E Investments Ltd filed E-Form 5 for the increase of Authorised Share Capital from Rs 8.50 Crores to Rs 125 Crores. The petitioner had not paid any stamp duty for this claiming that that there exists no provision in the Delhi Stamp Act to pay stamp duty on increase in the authorised share capital . However , Delhi ROC insisted that if no stamp duty is paid by the petitioner ,then the amount of Rs 58,25,000/= deposited with ROC would be forfeited.
Opposing this , the petitioner filed a suit in the High Court. It was held by the High Court , Delhi that the AOA and MOA are needed to be submitted at the juncture of registration of a company. At that time , stamp duty is payable in terms of either Article 10 or the Article 39 of the Schedule IA to the Act.
High Court further viewed that neither the Article 10 or Article 39 connotes to “ Increase” in the authroised share capital of the company as a basis of levy of stamp duty . It the absence of such specific provision , that permits the levy of the stamp duty on the increase in Authorised share capital , it would not be right on the part of respondent ( ROC , Delhi) to insist upon the petitioner to pay the stamp duty for the increase in authorised share capital.
High Court was of the view that the fact the petitioner earlier paid stamp duty when authorised capital was increased earlier by them cannot act as an estoppel against the Petitioner. Further ,the announcement in the MCA site that the stamp duty of 0.05% is payable on the increase in the authorised share capital does not lend a legal acumen for such levy in the absence of any amendment to the Act to that effect.
The High Court cited the following Supreme Court verdict
Commissioner of Wealth Tax v. Ellis Bridge Gymkhana (1998) held that
“ the rule of construction of a charging section is that before taxing any person , it must be demonstrated that such person falls within the ambit of the charging section without any ambiguity 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.
High Court of Delhi directed the respondent to accept the form 5 and to record the increase in share capital without insisting on the petitioner paying stamp duty thereon. The High Court also held that petitioner is not entitled to claim the refund of stamp duty paid earlier.