ALEMBIC PHARMACEUTICALS LIMITED Vs. CHIEF CONTROLLING REVENUE AUTHORITY
LAWS(GJH)-2013-7-548
HIGH COURT OF GUJARAT
Decided on July 18,2013

Alembic Pharmaceuticals Limited Appellant
VERSUS
CHIEF CONTROLLING REVENUE AUTHORITY Respondents




JUDGEMENT

- (1.)THIS is a Reference under Section 54[1A] of the Gujarat Stamp Act, 1958, by which the following four questions have been referred to this Court.
"[A] Whether the order passed by this Hon'ble High Court for demerging the applicant company from his parents company can be considered as reconstructing or amalgamated as per Article 20[d] of the said Act or not.

[B] Whether the applicant has to pay for the change of ownership as per Section 2[g] and Article 20[d] of the Stamp Act or not.

[C] Whether the deponent is entitled to take stamp duty on the share price of appointed date i.e. Rs. 50.05/ - on the appointment date Transferor Company transferred the said share to the transferee company? The contention of the applicant is that the share was originally transferred to the transferee company for the face value of Rs. 2/ - only or [sic; and not for] Rupees 50.05/ -.

[D] Whether the deponent has to consider the market value [Rs.50.05/ -] as per the statement of SEBI or face value [Rs. 2/ -] i.e. on the date of appointment date i.e.1 st April, 2010."

(2.)BRIEF facts of the case may be narrated thus:
2.1 The applicant is Alembic Pharmaceuticals Limited, a company registered under the provisions of Companies Act, 1956 and having its office at Alembic Road, Vadodara [Gujarat] which made a demerger from the parent company known as Alembic Limited by virtue of the order passed by this High Court in Company Petition No. 152 of 2010 and Company Petition No. 153 of 2010 dated 21 st March, 2011 under Section 394 of the Companies Act. Pursuant to such order, the transferor company transferred 13,35,15,914 equity shares to the transferee company. The appointed date of the transfer of the said shares of the transferee
company was 1st April, 2010.
2.2 The applicant made an application to pay stamp duty regarding demerger instrument under Section 31 of the Bombay Stamp Act, 1958, now known as the Gujarat Stamp Act, [for short, "the said Act"] before the office of the Collector [Stamp] and Additional Superintendent of Stamp of Gandhinagar.

2.3 The Collector considered all the aspects and provisions of law and came to the conclusion that the applicant company is required to pay 1% of the conveyance deed in terms of Article 20[d] of Schedule -I of the said Act. The Collector opined that after the payment of Rs. 6,68,24,715/ -, the stamp office would certify the order of demerger which had been carried out in accordance with Sections 391 and 394 of the Companies Act, 1956 pursuant to the order of the High Court dated 21st March, 2011 passed in Company Petition No. 153 of 2011.

2.4 Being dissatisfied with the order passed by the Collector and the Additional Superintendent Stamp, Gandhinagar, Gujarat State, the applicant challenged the said order under Section 53[1 -D] of the said Act before the Chief Controlling Revenue Authority [for short "CCRA"] by way of Appeal No. 20 of 2011.

2.5 In terms of the said demerger of the applicant company from its parent company, one share was additionally issued to the original share holders of Alembic Limited, i.e., the parent company.

2.6 The CCRA, after giving the opportunity of hearing and examining all the documents produced by the petitioner, passed an order dated 30th November, 2011 and confirmed the order passed by the Collector, which had been forwarded to the applicant on 12th December, 2011.

2.7 The applicant, being dissatisfied with the order passed by CCRA, preferred an application under Section 54[1 -A] of the said Act with the following prayer:

"Your Lordship may be pleased to draw up a statement of the case being Appeal No. 20 of 2011, and refer the same to the Hon'ble High Court of Gujarat, as provided under Section 54[1 - A] of the Bombay Stamp Act, 1958 in the interest of justice".

In order to appreciate the points involved in this Reference, it will be profitable to refer to the provision contained in Article 20[d] of Schedule -I of the said Act which is quoted below along with the explanations applicable to all the sub -articles to Article 20:

Description of Proper Stamp duty: instrument: CONVEYANCE so far as it Subject to maximum of twenty five crores relates to reconstruction rupees - or amalgamation of [i] an amount equal to 1 per cent companies by an order of the aggregate amount comprising of the High Court under of the market value of share issued section 394 of the or allotted in exchange of or Companies Act 1956. otherwise, or the face value of such shares, whichever is higher and the amount of consideration, if any, paid for such amalgamation, or [ii] an amount equal to 1 per cent of the true market value of the immovable property situated in the State of Gujarat of the transferor company whichever is higher."

[Explanation 1] For the purpose of this Article and subject to sub -item (a) of item (ii) of clause (f) of article 45 an agreement to sell an immovable Property or an irrevocable power of attorney shall, in case of transfer of possession of such property before, at the time of, or after the execution of such agreement or power of attorney, be deemed to be a conveyance and the stamp duty thereon shall be chargeable accordingly: - Provided that the provisions of section 32 -A shall apply mutatis mutandis to such agreement or power of attorney as are applicable to a conveyance: Provided further that where subsequently a conveyance is executed in pursuance of such agreement of sale, or an irrevocable power of attorney, the stamp duty, if any, already paid and recovered on the agreement of sale or an irrevocable power of attorney which is deemed to be a conveyance, shall be adjusted towards the total duty leviable on the conveyance
.
[Explanation -II] For the purpose of this Article, the expression "premises" means any land or building or part of a building including any flat, apartment, tenement, shop or warehouse therein and includes: - [i]. gardens, grounds and outhouses, if any, pertaining to such building or part of a building, and [ii]. Any fittings affixed to such building or part of a building for the more beneficial enjoyment thereof.

[explanation -III]. For the purpose of clause (d) the market value of share - (a). in relation to the transferee company, whose shares are listed and quoted for trading on a Stock Exchange, means the market value of shares as on the appointed date mentioned in the scheme of amalgamation, or when the appointed date is not so fixed the date of order of the High Court, (b). in relation to the transferee company, whose shares are not listed or listed but not quoted for trading on a Stock Exchange means the market value of the share issued or allotted with reference to the market value of share of the transferor company. [c]. Where the transferee company and the transferor company whose shares are not listed or listed but not quoted for trading on a Stock Exchange means the face value of the share issue for allotted with reference to the face value of the share of the transferee company.

(3.)MR . S.N. Soparkar, the learned Senior Advocate appearing on behalf of the applicant, has, at the very outset, conceded that by virtue of the order of the High Court under Section 391 of the Companies Act, the transfer of interest was one of demerger and the same comes within the expression "reconstruction" within the meaning of the said Act and, therefore, falls within the charging part of Article 20(d) of Schedule -I of the said Act. Mr. Soparkar, in this connection, makes threefold alternative submissions.
4.1 The first branch of argument of Mr. Soparkar is that under the main provision [de hors the explanation], there are two parameters for quantifying the stamp duty payable. The first applies only to amalgamation and, therefore, the only parameter for demerger is the second one.

4.2 Mr. Soparkar contends that if a view is taken that both the parameters must be applied, then, the very quantification provision and the consequential levy would fail, and therefore, it should be held that there could be no levy of stamp duty on demerger. In this connection, Mr. Soparkar has placed strong reliance upon two Supreme Court decisions; one in the case of C.I.T. v. B.C. SRINIVASA SETTY reported in 128 ITR 294 [SC] and the second in the case of PNB FINANCE LTD. v. CIT (SC) reported in 307 ITR 75 [SC].

4.3 The second branch of submission made by Mr. Soparkar is that the only way to uphold the levy of stamp duty on demerger is by holding that only the second parameter would be applicable in case of demerger and for that purpose, the phrase "whichever is higher" be treated as otiose in case of demerger. Therefore, according to Mr. Soparkar, the only parameter for demerger is the second one and it would not be possible to treat the phrase "for such amalgamation" as otiose, as otherwise, the court would be legislating by making an entry of a taxing statute applicable to a transaction [demerger] which legislature has not provided. In support of such contention, Mr. Soparkar has relied upon the two decisions of the Supreme Court; one in the case of UNION OF INDIA and ANR. vs HANSOLI DEVI and ORS. reported in AIR 2002 SC 3240 and in the case of THE LABOUR CONTRACT CO -OP. SOCIETY vs. DIRECTOR OF MINES AND GEOLOGY, HYDERABAD reported in AIR 1993 SC 147.

4.4 According to the third branch of submission, if the above two propositions are rejected, in that event, of the above three rules for computation, the second one could not apply to the scheme of demerger. In other words, according to Mr. Soparkar, under the first parameter, the levy is on the market value of the share issued or allotted. The second rule of computation applies only in case of amalgamation and if in the parent provision, the phrase "for such amalgamation" is ignored, then, correspondingly, the second rule of computation also needs to be ignored. Mr. Soparkar contends that the transferee company alone allots the shares. It is the value of its shares which is relevant for the purpose of determining the consideration for transfer of the assets from the transferor company. According to Mr. Soparkar, in case of demerger, the value of the shares of the transferor company is wholly irrelevant. Mr. Soparkar asserts that stamp duty is a tax on the transfer of an asset and it is to be levied on the market value of such asset. Such market value, Mr. Soparkar continues, can be determined by the value of the asset transferred [second parameter] or the consideration paid [first parameter]. Mr. Soparkar maintains that the market value of the shares of the transferor company is wholly irrelevant for this purpose.

4.5 Lastly, Mr. Soparkar contends that an explanation, by way of computation rule, cannot go beyond the parent provision of levy, viz. the parameter. In support of such submission, Mr. Soparkar has relied upon a decision of the Supreme Court in the case of S. SUNDARAM PILLAI vs. V.R. PATTABIRAMAN reported in AIR 1985 SC 582.



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