IN THE HIGH COURT OF JUDICATURE AT MADRAS
Dated : 09.02.2007
CORAM:
THE HON'BLE MR. JUSTICE M.E.N.PATRUDU
W.P.Nos.12920 & 12921 of 2006 &
WPMP NO.14511, 14512, 14514 &n 14515 of 2006
M/s.Waterfall Estate (East) Pvt. Limited
Reg. Office New No.68, (Old NO.63)
Cathedral Road, Gopalapuram
Chennai - 500 086
Rep. By its Director. ... Petitioner in W.P.No.12920/06
M/s.Waterfall Estate (West) Pvt. Limited
Reg. Office New No.68, (Old NO.63)
Cathedral Road, Gopalapuram
Chennai - 500 086
Rep. By its Director. ... Petitioner in W.P.No.12921/06
versus
1. The State of Tamil Nadu
Rep. By the Secretary to Government
Land and Administration
Secretariat, Fort St. George
Chennai - 600 009.
2. The District Collector of Coimbatore
Coimbatore District
Coimbatore - 641 018.
3. The District Registrar (Stamps)
Tiruppur
Coimbtore District.
4. The Chief Controlling Revenue Authority-cum-
Inspector General of Registration
120, Santhome High Road
Chennai - 600 028. ... Respondents in both WPs
Petitions filed under article 226 of the
Constitution of India for issuance of a writ of Certiorari
calling for the records of the 4th respondent dated
14.03.2006 passed in D.Dis.No.61782/P(1)/2003 and quash the
same as the same being illegal, arbitrary and
unconstitutional to the provisions of the Indian Stamp Act
and Notification No.1224 dated 25.04.1964.
For Petitioners : Shri.Sathish Parasaran
For Respondents :Smt.C.K.Vishnupriya, G.A
COMMON ORDER
1.00 Whether remission of stamp duty for registering
the document is permissible in the transfer of property
between the parent and its subsidiary company?
2.00 The said common question is involved hence
common order is pronounced in both the writs.
3.00 The forceful argument of Shri.Sathish Parasaran,
the learned counsel appearing for the petitioner is that the
petitioner is exempted from paying the stamp duty and can
get the document registered as per notification issued by
the state of Tamil Nadu and therefore the demand to pay the
stamp duty is illegal and the order impugned is to be
quashed.
4.00 If the said argument is accepted undoubtedly the
writ petitions are to be allowed.
4.01 But the contention of the learned Government
Advocate appearing for the respondents is that the
notification is not applicable in the case of the
petitioner's transaction. Hence the petitioner cannot
claim any exemption under the notification.
5.00 Thus it is necessary to go into the details of
the notification and the nature of notification and its
applciation.
6.00 Before doing this exercise, the Court has to read
the relevant facts.
7.00 Facts
:
(i) M/s.Kothari Industrial Corporation Limited
transferred its two Tea Estates to two of its owned
subsidiary companies by name
1)M/s.Waterfall Estate (East) Private Limited
2)M/s.Waterfall Estate (West) Private Limited
(ii) Both of them are private limited and wholly owned
by petitioner. Two instruments of transfer dated 28.09.2001
and 30.11.2001 under Document Nos. 2558 of 2001 and 2582 of
2001 are executed in favour of the above two private limited
company. The documents were presented before the Sub
Registrar of Annamalai alongwith the other documents with
certified copy of the annual returns, balance sheet, etc.,
and claimed the remission of stamp duty relying on the
notification No.1224 issued by the Government of Tamil Nadu.
(iii) In brief the notification says that where the
transfer takes place between the parent company and its
subsidiary company and one of which is the beneficial owner
of not less than 90% issued capital share it is entitled
to remission of stamp duty.
(iv) The sub Registrar registered the document and
accepted the instruments of transfer.
(v) While so, the audit objected.
(vi) Hence the District Registrar, Tiruppur had issued
a show cause notice dated 13.02.2003 under section 33(A) of
the Indian Stamp Act asking to show cause as to why Stamp
duty should not be collected from the the petitioners.
(vii) The basis for issuing the said show cause notice
is, to avail stamp duty remission under Notification
No.1224, the transferor company should hold 90% of the
issued Capital of the transferee company, and that the
transferor company was holding less than 90% of the issued
Capital and therefore the stamp duty remission was wrongly
given.
8.00 Case of petitioner:
(i) The contention of the petitioners is that there is
misconception of law and leading of the provision of the
company law Act. It is stated that there is no distinction
between issued capital and subscribed capital, but there is
difference between authorised capital on the one hand and
issued subscribed capital on the other. It is staid that
the law is well settled in this regard. Hence, the demand
by the third respondent holding that the petitioners were
not entitled to the remission of Stamp duty is incorrect.
(ii) When the petitioner appealed before the fourth
respondent, the fourth respondent confirmed the earlier
orders through the impugned order dated 14.03.2006.
(iii) The petitioners are challenging the legality and
correctness of the said impugned order before this Court.
(iv) The main ground on which the petitioners is
challenging are that the respondents did not properly
appreciate the provisions of the Notification No.1224. It
is non-application of mind by the respondents and
Notification has to be read as a whole.
(v) It is contended that M/s. Kothari Industrial
Corporation Limited is company and the petitioners’ units
are its subsidiary companies and the notification is
applicable in the instant case.
9.00 Counter:
(i) The respondents filed detailed counter.
(ii) It is stated that the deed of transfer executed
by M/s. Kothari Industrial Corporation Limited in favour of
M/s. Waterfalls Estate (West) Limited conveying the
property in question for a consideration amount of
Rs.11 crores and the duty borne by the deed is nil.
However, the said sale deed was registered. Then
Accountant General’s audit noted the incorrect remission of
stamp duty was accorded leading to loss of proper stamp duty
and it is huge loss of revenue.
(iii) The forceful contention of the respondents is
that the transferor company is not holding more than 90% of
the issued share capital of the transferee company.
Whereas, under the notification, the transferor company must
hold more than 90% of the issue share capital of the
transferee company. It is stated that the deed in question
is not entitled for remission. Parent company is holding
100% in the subscribed and paid up share capital.
10.00 Discussion on Point:
(i) Registration : The law of Registration is an
important branch of law. The object and purpose of the
registration of document is to give information to people
regarding legal rights and obligations arising or affecting
a particular property, and to, perpetuate document which
may afterwards be of legal importance, and also may prevent
fraud. Therefore, the object of registering document is to
give notice to the world that such a document has been
executed, to prevent fraud and forgery and to secure a
reliable and complete account of transactions effecting the
title of the property.
(ii) The Registration Act 1908 popularly known as Act
No.XVI of 1864 laid down formalities which must be complied
with before the document is presented for registration. The
State Government shall prepare a table of fees payable for
the registration of document.
(iii) Stamp Act : Indian Stamp Act deals with the
instruments chargeable with duty and what are the nature of
stamp duties.
(iv) The subject relating to stamp duty occurs at Entry
44 in list 3 of VII schedule of Constitution. The rates of
stamp duty are provided in Entry 63 of List II.
(v) The Indian Stamp Act was enacted by Indian
Parliament in exercise of Entry 44 List III.
(vi) The stamp Act is a fiscal measure enacted to
secure revenue for the State on certain classes of
instruments, it is not enacted to arm a litigant with a
weapon of technicality to meet the case of his opponent. The
stringent provisions of the Act are conceived in the
interest of the revenue.
(vii) In the fiscal statues like stamp Act, the
interpretation has to be according to strict letter of the
law and not only in case of doubt but even in case of
beneficial interpretation favouring the subject, the rule is
to tend in favour of the subject. The sole object of the
Indian Stamp Act is to increase revenue and its provisions
must be construed as having in view only the protection of
revenue. The provisions contained in the act impose
pecuniary burdens as this act is a fiscal enactment.
(viii) In order to determine whether any, and if any,
stamp duty is chargeable upon an instrument the legal rule
is that the real and true meaning of the instrument is to
be ascertained. It is a sound cannon of construction that
all parts of a document are to be read together and no
portion can be read disjunctly or in isolation or omitted.
(ix) In order to interpret a provision or a
notification which is neither ambiguous nor incomplete, the
recitals in the said document ought to be generally the
safe and sole guide for any interpretation.
(x) In B.Ratnamala Vs. Rudramma reported in AIR 2000
AP 167, the Division Bench of the Andhra Pradhesh High
Court has expressed the following view on interpretation of
the provision under the Stamp Act at para 9.
” While considering the provisions of the
Indian Stamp Act, it has to be borne in mind
that the said Act being a fiscal statue, plain
language of the section as per its natural
meaning is the true guide. No inferences,
analogies or any presumptions can have any place.
As the incidence of duty is one the execution of
the deed, regard must, therefore, be had only to
the terms of the document.”
(xi) It is to be borne in mind that this Act with
which at present I am concerned is as Act imposing
liability for collecting stamp duty. The notification
which I am dealing is fiscal in nature. Therefore, it must
not only literally construed but must be strictly construed
in order to find out whether a liability is fastened or
not. The subject is to be taxed or not to be taxed and for
that purpose and also that every Act of parliament or
legislation must be read a wording to its natural
construction of words.
(xii) Justice Rowlatt of England said long time ago,
“that in a taxing act one has to look merely and fairly what
is clearly said. There is no room for any intendment.
There is no equities about a tax. There is no presumption
as to tax. Nothing is to be read in. Nothing is to be
implied. One has to look fairly at the language used. The
question as to what is covered must be found out from the
language, according to its natural meaning fairly and
squarely read”.
(xiii) Justice Krishna Iyer in Martand Dairy and
Farm Vs. Union of India reported in AIR 1975 SC-1492 has
observed that ‘taxing consideration may stem from
administrative experience and other factors of life and not
artistic visualisation or neat logic and so the literal,
though pedestrian, interpretation must prevail’.
(xiv) Therefore, to find out the intention of
legislature if possible it should be found out from the
language employed and in case of doubt, the purpose of
legislation should be sought for to clarify the ambiguity
only if any. Thus it is time to note the language in the
notification.
(xv) Notification”-
The said notification is extracted below:
“(38) Instrument evidencing transfer of property
between companies limited by shares as defined in
the Companies Act, 1956, in a case where (i) at
least 90% of the Issued Share Capital of the
transferee company is in the beneficial ownership
of the transferor company, or (ii) where the
transfer takes place between a parent company and
a subsidiary company one of which is the
beneficial owner of not less than 90% of the
issued share capital of the other or (iii) where
the transfer takes place between two subsidiary
companies of each of which not less than 90 per
cent of the share capital is in the beneficial
ownership of a common parent company.
Provided that a certified copy of the
relevant records of the Companies kept in the
office of the Registrar of Companies, Madras, is
produced by the parties in the instrument to prove
that the conditions above prescribed are
fulfilled.”
(xvi) Plain reading of the notification discloses when
ever there is transfer of property between the companies
limited by shares and in a case where atleast 90% of the
Issued Share Capital (Emphasis supplied) of the transferee
company is in the beneficial ownership of the transferor
company or where the transfer takes place between a parent
company and the subsidiary company which is in a beneficial
ownership of not less than 90 per cent of the Issued Share
Capital of the other. Then only, the remission will apply.
Therefore, the State is its wisdom has issued a notification
as mentioned supra through item No.38 dealing with
reductions and remissions in respect of payment of stamp
duty, that the remission will apply only to cases of
transfer of properties between two as mentioned in the
notification.
(xvii) As the Court has already indicated that in a
case of fiscal nature true meaning of the statue is to be
taken into consideration and there is no scope for any
interpretation.
(xviii) Shri.Sathish Parasaran, learned counsel
appearing for the petitioner forcefully contended that the
notification is to be read for the benefit of the parties
and beneficial owner becomes eligible to the rights when the
shares get subscribed from out of the issued share capital.
Hence, it should be construed that the issued share capital
means subscribed share capital.
(xix) It is also contended that the issued share
capital break up is the amount approved by the
shareholders for issue and allotment to the persons
subscribing to the said issued capital of the company and it
means Directors of the company has power to issue and allot
shares to the subscribers up to that nominee value of the
issued capital and the entire nominal value which is
essential requirement to be fulfilled under the notification
in order to become eligible for stamp duty exemption.
(xx) It is also forcefully contended that beneficial
owner becomes eligible to the rights only when the shares
get subscribed from out of the issued share capital. Hence,
it should be construed that the issued share capital means
subscribed share capital.
(xxi) It is stated that break up figures of the shares
capital are shown and the same are also dealt by the 4th
respondent in the impugned order.
(xxii) Perused the impugned order. The Inspector
General of Registration who is the Chief Controlling Revenue
Authority has passed the impugned order on 14.03.2006,
while considering the revision petitions of the petitioners
herein, questioning the orders of the District Registrar
who is the 3rd respondent demanding payment of stamp duty.
The description of the documents are furnished in the
orders. In para 3 of the order, it is clearly stated that
as per Document NO.2558 of 2001 out of the issued share
capital of 90,350 shares of the Transferee Company only
14,500 shares were paid and subscribed and out of that the
Transferor company i.e. the parent company is holding only
14,493 shares. Similarly, as far as Document No.2582 of
2991, out of the issued share capital of 35,350 shares of
the Transferee Company only 8,850 shares were paid and
subscribed and out of the Transferor company i.e. the parent
company is holding only 8,585 shares.
(xxiii) By noting the above, the 4th respondent has
come to a specific conclusion that the holding of the issued
share capital of the Transferor Company is 14,493 shares
under in one transaction and 8,585 shares in other
transaction. Hence, the 4th respondent came to a definite
conclusion that the condition laid down in the notification
issued in G.O.Ms.No.1224/Revenue, dated 25.04.1964 and
G.O.Ms.No.37/CT & RE Department dated 25.01.1995 for
according remission of transfer duty is that atleast 90%
of the issued share capital of the transferee company is in
the beneficial ownership of the transferor company and
since 90% of the issued share capital of the transferee
company is not held by the transferor company, the
petitioner is liable to pay the stamp duty.
(xxiv) I do not find any irregularity or illegality in
the impugned order. It is a reasoned order. In the case of
registration of payment of stamp duty the real and true
meaning of instrument is to be ascertained to determine
whether the stamp duty is to be chargeable and what stamp
duty is to be demanded upon instrument.
(xxv) The Supreme Court of India in various cases like
AIR 1977 SC 500 clearly held that in order to determine
whether any, and if any what stamp duty is chargeable upon
an instrument, the real and true meaning of the instrument
is to be ascertained for description of it given in the
instrument itself. The Full Bench of Madras High Court in
AIR 1975 – 161 clearly held that when a question arises
whether a document should be chargeable or not, the first
thing to be looked into is the document itself in order to
determine the character thereof. Therefore, the recitals of
the document should not be lost sight and all parts of the
document has to be read together and it is a sound cannon
of construction that all parts of the document are to be
read together, no portion can be read disjunctily or in
isolation or omitted and the Revenue Authorities cannot
ignore recitals and terms of document in order to interpret
a document which is neithr ambiguous nor incomplete and the
recitals in the said document ought to be generally accepted
and there is no further necessity to interpret in a
different way. Therefore, the contention of the counsel for
the petitioner that issued share capital must be treated as
subscribed share capital in unacceptable.
(xxvi) Shri.Sathish Parasan, while highlighting the
arguments stated that sections 397, 398 and 399 of the
Companies Act deals with the issue, It is not correct,
They are with application for relief in case of Oppression
and application in case of Mismanagement and right to
apply under sections 397 and 398. They are nothing to do
with the issue before us.
(xxvii) The learned counsel also cited a decision
reported in Re Vs Albert David Limited 68 C.W.N.-163. It
is a case disposed of under the Companies Act 1956 under
section 397, 398 and 399 and while dealing with a matter
under the companies Act, there was detailed discussion on
facts with regard to averments in the petition and nature of
verification, circumstances justifying exercise of court’s
discretion and appointment of administrator. In the above
case the priority under section 399 of the Act, the right to
apply under section 397 and 398 is gone into, inter alia, to
members holing not less than one tenth of the issued share
capital of the company, provided that the applicant or
applicants have paid all calls and other sums due on their
shares. In the course of discussion it is noted at page 170
that whether shares not actually issued i.e. subscribed and
paid for are to be considered Issued Share Capital within
the meaning of section 399 of the Act is the actual
subscribed capital. Therefore, there was no interpretation
under the Companies Act what is meant my Issued Share
capital and what is meant by Subscribed Share Capital.
(xxviii) The facts and circumstances and the findings
in the above case are not at all applicable in the case
before me. In this case, we are dealing with the payment of
stamp duty by the petitioners for registration of
the document and the very object of the stamp Act is fiscal
measure enacted to secure revenue of the State on certain
classes of instruments. I have highlighted that in a case
of such statues, the real and true meaning of the
instruments, the provision and the notification must be
taken and there is no scope for any interpretation.
19.00 For all the foregoing reason, I hold that there
are no merit in the writ petitions. Therefore, the
impugned order is upheld and the writ petitions are
dismissed. No costs.
rj
To
1. The Secretary to Government
Land and Administration
Secretariat, Fort St. George
Chennai – 600 009.
2. The District Collector of Coimbatore
Coimbatore District
Coimbatore – 641 018.
3. The District Registrar (Stamps)
Tiruppur
Coimbtore District.
4. The Chief Controlling Revenue Authority-cum-
Inspector General of Registration
120, Santhome High Road
Chennai – 600 028.