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STAMP DUTY ON BUSINESS RESTRCUTURING - DEMYSTIFIED By Sanjay Buch, Advocate & Solicitor Taxation Laws in India are notoriously mysterious and ambiguous. The only thing clear is that citizens have to bear and pay taxes for the overall development of the country, the state and the society as a whole. Stamp duty is a state subject and all the states in India are empowered by the Constitution to frame their own laws for imposing tax in the nature of stamp duty on “instruments”, and not on “transactions”. Besides being payable on documents conveying or transferring immoveable property, stamp duty is also payable on all such documents or instruments that have the effect of transferring right, title or interest to or in the property. Like all central Acts, Indian Stamp Act, 1862 (the “ISA”) is the mother law pursuant to which various states have framed their own stamp laws applicable to the state. The state of Maharashtra has been the pioneer state in developing its stamp duty law being the Bombay Stamp Act, 1958 (the “BSA”). This paper deals with the subject of applicability of stamp duty in the cases of business restructuring through amalgamations, de-mergers, sale of business by slump-sale and itemised sale of assets method, conversion of entities under part IX of the Companies Act, 1956 (the “CA”). Since each of the foregoing modes involves transfer and vesting of property and capital assets, the Transfer of Property Act, 1882(the “TP Act”) and the related aspects with reference to stamp duty under the Indian Income Tax Act,1961 (the “IT Act”) are also relevant to be understood as follows: 1. STAMP DUTY ON AMALAGAMATION/ MERGER: The term Amalgamation is not defined in the CA. However, Section 2 (1B) of the IT Act defines the term “Amalgamation” as follows: “Amalgamation”, in relation to companies, means the merger of one or more companies with another company or the merger of two or more companies to form one company (the company or companies which so merge being referred to as the amalgamating company or companies and the company with which they merge or which is formed as a result of the merger, as the amalgamated company) in such a manner that● all the property of the amalgamating company or companies immediately before the amalgamation becomes the property of the amalgamated company by virtue of the amalgamation; ● all the liabilities of the amalgamating company or companies immediately before the amalgamation become the liabilities of the amalgamated company by virtue of the amalgamation; ● shareholders holding not less than three-fourths in value of the shares in the amalgamating company or companies (other than shares already held therein immediately before the amalgamation by, or by a nominee for, the amalgamated company or its subsidiary) become shareholders of the amalgamated company by virtue of the amalgamation; ● otherwise than as a result of the acquisition of the property of one company by another company pursuant to the purchase of such property by the other company or as a result of the distribution of such property to the other company after the winding up of the firstmentioned company”. Section 394 of the CA provides for facilitating reconstruction and amalgamation of companies and inter-alia provides as follows: “(1) Where an application is made to the High Court under section 391 for the sanctioning of a compromise or arrangement proposed between a company and any such persons as are mentioned in that section, and it is shown to the High Court- 1


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