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Stamp duty – If payable on every increase in share capital of a company

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In 1992, the respondent increased its share capital from Rs.36 crores to Rs.600 crores and paid the stamp duty of Rs.1,12,80,000/- as per Article 10 of Schedule I of the Bombay Stamp Act, 1958.

On 2.8.1994, Article 10 was amended and maximum cap of Rs.25 lakhs on stamp duty payable by a company was provided.

Subsequently, the respondent Company increased its share capital to Rs.1,200 crores and inadvertently paid Rs.25 lakhs as stamp duty.   As a result, the respondent requested the appellant no.2 for refund of Rs.25 lakhs since it had already paid the same in 1992.

The refund requested was rejected on 20.1.1998 holding that on every occasion of increase in share capital the stamp duty is payable. 

The High Court allowed the writ petition holding that stamp duty can only be charged on Articles of Association where the maximum duty of Rs.25 lakhs is payable.  The appellants filed appeal in the Supreme Court.

HELD that the Form No.5 Notice sent to the Registrar of Company to increase its share capital as recorded in the Articles of Association is not an “instrument” as defined in Section 2(1) of the Bombay Stamp Act.   Such a notice is only prescribed method to notify increase in share capital sent to the Registrar of Company.

The maximum cap on stamp duty is applicable as one time measure applicable on increase of share capital and not on each subsequent increase in the share capital of a company.

Judgment dated 5.4.2024 of the Supreme Court in Civil Appeal No.8821 of 2011 of State of Maharashtra & another  Vs. National Organic Chemical Industries Ltd.

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