Holding that "in the absence of a specific provision that permits the levy of stamp duty on the increase in authorized share capital", it is not open to the Government "to insist upon the Petitioner having to pay stamp duty for the increased authorized share capital" the Delhi High Court in a recent decision in S.E. Investments Ltd. v. Union of India declared that no stamp-duty was payable on increase in share-capital of a company.
The High Court declared the law in the following terms;
10. Having considered the above submissions, this Court is of the view that the Petitioner ought to succeed. The order dated 11th August 2010 of the Collector of Stamps proceeds on the footing that under Article 10 (a) and (b) of Schedule IA of the Act, stamp duty chargeable on the authorized capital of the company is 0.15% of the authorized share capital with a monetary ceiling of Rs. 25 lakhs. There is no provision for charging stamp duty on “increase” in the authorised share capital. Nevertheless Respondent No.4 has proceeded to determine the stamp duty payable on the authorized share capital as Rs. 18,75,000/-. A statute authorizing the levy of stamp duty is in the nature of a fiscal statute inasmuch as it provides for involuntary exaction of money. This cannot be done except by the authority of law. The provisions of a fiscal statute admit of strict construction. In the absence of an express provision in the Act permitting levy of stamp duty on the increase in authorised share capital, it is not possible to legally sustain the impugned demand. The legislatures in Rajasthan and Madhya Pradesh and a few other States have acknowledged the need to have specific provisions and have accordingly amended the Schedule IA of the Act providing for levy of stamp duty on the increase in the authorized share capital.
11. The decisions cited by the learned counsel for the Respondents are not relevant in the facts and circumstances of the present case. One is in the context of the Delhi Rent Control Act, 1958 and the other regarding service rules concerning allotment of government accommodation. On the other hand a Constitution Bench of the Supreme Court, in AV Fernandez v. State of Kerala AIR 1957 SC 657, explained the law relating to interpretation of fiscal statutes as under: (AIR @ 661)
“(I)n construing fiscal statutes and in determining the liability of a subject to tax one must have regard to the strict letter of the law and not merely to the spirit of the statute or the substance of the law. If the Revenue satisfies the Court that the case falls strictly within the provisions of the law, the subject can be taxed. If, on the other hand, the case is not covered within the four corners of the provisions of the taxing statute, no tax can be imposed by inference or by analogy or by trying to probe into the intentions of the legislature and by considering what was the substance of the matter.”
12. The Supreme Court in Commissioner of Wealth Tax, Gujarat-III, Ahmedabad v. Ellis Bridge Gymkhana (1998) 1 SCC 384, held as under: (SCC @ 387)
“The rule of construction of a charging section is that before taxing any person, it must be shown that he falls within the ambit of the charging section by clear words used in the section. No one can be taxed by implication. A charging section has to be construed strictly. If a person has not been brought within the ambit of the charging section by clear words, he cannot be taxed at all.”
13. The Articles of Association and the Memorandum of Association of a company are required to be submitted at the time of registration of the company. At that stage stamp duty is payable in terms of either Article 10 or Article 39 of the Schedule IA to the Act. Neither Article 10 nor Article 39 refers to 'increase' in the authorized share capital as a basis for levy of stamp duty. In the absence of a specific provision that permits the levy of stamp duty on the increase in authorized share capital, it would not be open to the Respondents to insist upon the Petitioner having to pay stamp duty for the increased authorized share capital. The fact that the Petitioner earlier paid stamp duty when the authorized share capital was increased to Rs. 8.5 crores cannot act as an estoppel against the Petitioner. Also, the mere fact that the website of the ROC indicates that stamp duty shall be 0.5% of amount on increase in the authorized share capital does not lend a legal basis for such levy, in the absence of any amendment to the Act to that effect.
14. For the aforementioned reasons, this Court is unable to approve of the decision dated 11th August 2010 of Respondent No. 4. It is directed that the ROC will now proceed to accept the Petitioner's Form 5 and record the increased authorized share capital without insisting on the Petitioner paying stamp duty thereon. This will however not enable the Petitioner to claim refund of any stamp duty paid earlier by it for increase in authorized share capital.
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