The Delhi High Court, in its recent judgment dated 21.04.2011, has ordered that no Stamp duty can be levied on the increased amount of Authorised Share Capital.
The Petitioner – M/s S.E. Investments questioned the authority and competence of the Registrar of Companies and the Collector of Stamps- Govt. of National Capital Territory of Delhi to levy and collect the stamp duty on the ii increased Authorised Share Capital under Indian Stamp (Delhi Amendment) Act 2007.
The Hon’ble High Court of Delhi in its order stated that the Stamp Act, as applicable to NCT of Delhi does not provide for payment of Stamp Duty when a Company increases its Authorized Share Capital beyond the amount it had at the time of incorporation. It also stated that the legislatures in Rajasthan and Madhya Pradesh and a few other states have acknowledged the need to have specific provisions and have accordingly amended the Schedule IA of the Indian Stamp Act providing for levy of stamp duty on the increase in Authorised Share Capital. The Court however clarified that the Company would not be entitled for refund of the stamp duty amount already paid towards increase in the Authorised Share Capital.
When the Petitioner increased its authorized share capital from Rs. 8.50 crores to Rs. 125 crores the amendment was to the MOA and not the AOA.
After perusing Article 10 and Article 39 Schedule 1A of the Indian Stamp Act as applicable to Delhi the Court held that no stamp duty is payable in Delhi when authorised Capital is increased.
The Court noted that some State legislatures have amended the Article 10 of the Indian Stamp Act (e.g. Rajasthan, Madhya Pradesh and Andhra Pradesh) to deal with increase in Authorised Capital. However, in Delhi there is no provision for charging stamp duty on increase in the authorised share capital.
A statute authorizing the levy of stamp duty is in the nature of a fiscal statute inasmuch as it provides for involuntary exaction of money. This cannot be done except by the authority of law. The provisions of a fiscal statute admit of strict construction. In the absence of an express provision in the Act permitting levy of stamp duty on the increase in authorised share capital, it is not possible to legally sustain the impugned demand.
Also held that the fact that the Petitioner earlier paid stamp duty when the authorized share capital was increased to Rs. 8.5 crores cannot act as an estoppel against the Petitioner.
Also, the mere fact that the website of the ROC indicates that stamp duty shall be 0.5% of amount on increase in the authorized share capital does not lend a legal basis for such levy, in the absence of any amendment to the Act to that effect.
The Hon’ble High Court has further provided the fiscal statutes like the Stamp Act need to be construed strictly and unless the subject is squarely covered by clear words of the charging section, it can not be taxed merely by implication.
The Registrar of Companies will now have to proceed to accept the Petitioner’s Form 5 for increased authorized share capital without insisting on the Petitioner paying stamp duty thereon.