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MadrasHC StampDuty NCLT Summary

The Madras High Court ruled that NCLT-sanctioned merger schemes are subject to a 2% stamp duty on property value, while a 0.6% share-based duty was deemed invalid due to lack of legislative support. The court's decision has been reaffirmed, and officials have been instructed to apply only the 2% duty. The matter is currently pending before the Supreme Court following a Special Leave Petition.

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56 views1 page

MadrasHC StampDuty NCLT Summary

The Madras High Court ruled that NCLT-sanctioned merger schemes are subject to a 2% stamp duty on property value, while a 0.6% share-based duty was deemed invalid due to lack of legislative support. The court's decision has been reaffirmed, and officials have been instructed to apply only the 2% duty. The matter is currently pending before the Supreme Court following a Special Leave Petition.

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Summary of Madras High Court Judgment – Stamp Duty on NCLT Schemes

This summary provides a concise overview of the Madras High Court’s judgment in The
State of Tamil Nadu vs. M/s Serene Estates Pvt. Ltd. (19 February 2024), and subsequent
developments regarding stamp duty on NCLT-sanctioned merger/demerger schemes.

Key Findings of the Judgment


- An NCLT-sanctioned merger/amalgamation order, with the appended scheme, is an
‘instrument of conveyance’ under Section 2(14) and is liable to stamp duty under Article 23
of the Stamp Act.

- Tamil Nadu is empowered under Section 9(1)(a) of the Stamp Act to reduce or remit
stamp duty. Thus, the 2% duty on the market value of property is valid.

- The alternative levy of 0.6% of share value (‘whichever is higher’) introduced through G.O.
(Ms.) No. 29 of 1 March 2019 was struck down as ultra vires, as it lacked legislative backing.

- Circulars/notifications clarifying stamp duty are considered ‘clarificatory’ and can operate
retrospectively.

- If higher stamp duty has been paid in another state, it can be adjusted against Tamil Nadu’s
duty liability; if lower, the balance must be paid.

Appeal and Current Status


- On 18 July 2024, the Madras High Court reaffirmed that only the 2% duty on property
value is enforceable, quashing notices demanding share-based duty.

- On 9 September 2024, the Inspector General of Registration issued Circular No.


40405/P2/2021, directing officials not to insist on 0.6% share-based duty and to apply only
2% property-based duty.

- A Special Leave Petition (SLP) was filed before the Supreme Court on 20 August 2024. The
Court has issued notice, and the matter is pending hearing.

Conclusion
The current legal position in Tamil Nadu is that stamp duty on NCLT-sanctioned merger or
demerger schemes is payable at 2% of the immovable property’s market value. The share-
based 0.6% levy is no longer enforceable. The matter is sub judice before the Supreme Court
of India.

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