Official guidance, Tamil Nadu land law
Circular No.40405/P2/2021, Stamp Duty on Company Amalgamations
The Office of the Inspector General of Registration, Chennai, issued Circular No.40405/P2/2021 dated 9 September 2024, directing registering officers on stamp duty for property transferred through company amalgamation or reconstruction schemes approved by specified authorities. Following the Madras High Court judgment dated 19 February 2024, stamp duty must be calculated at 2 per cent of the market value of the immovable property, without applying the alternative calculation based on share value.
What the circular governs
Circular No.40405/P2/2021 dated 9 September 2024, issued by the Office of the Inspector General of Registration, Chennai, concerns transfers of property under schemes for the amalgamation or reconstruction of companies. It applies where the scheme has been sanctioned by the High Court, the National Company Law Tribunal, or the Board for Industrial and Financial Reconstruction.
The circular gives instructions to all Sub Registrars, District Registrars and Deputy Inspectors General of Registration following the Madras High Court judgment dated 19 February 2024 in Writ Appeal No.758 of 2022.
What the Madras High Court decided
The Madras High Court disposed of challenges to earlier registration circulars and government orders concerning stamp duty on company schemes. The circular records that the Court:
- Upheld Inspector General of Registration Circular No.49282/P1/2018 dated 20 November 2018.
- Quashed the part of G.O. (Ms.) No.29 dated 1 March 2019 that referred to 0.6 per cent of the aggregate market value of shares, whichever was higher.
- Kept the remaining parts of G.O. (Ms.) No.29 dated 1 March 2019 valid.
- Held G.O. (Ms.) No.47 dated 19 February 2020 valid.
- Allowed stamp duty to be collected at 2 per cent of the market value of the immovable property.
- Directed that excess duty collected from the writ petitioners should be refunded.
G.O. (Ms.) No.47 dated 19 February 2020 had superseded the notification issued under G.O. (Ms.) No.29 and provided reduced stamp duty with effect from 1 April 1956 for qualifying schemes sanctioned by the High Court or National Company Law Tribunal.
Practical effect for companies and property holders
Circular No.40405/P2/2021 requires registering officers to apply reduced stamp duty of 2 per cent of the market value of immovable property transferred through a qualifying amalgamation or reconstruction scheme. They must not demand stamp duty calculated at 0.6 per cent of the aggregate market value of the shares.
Stamp duty already paid when the amalgamation order or scheme was presented in another State must be taken into account. Tamil Nadu authorities may demand only the balance remaining after setting off that payment.
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Common questions
What stamp duty applies to immovable property transferred through a company amalgamation scheme?
For a qualifying scheme sanctioned by the High Court, National Company Law Tribunal, or Board for Industrial and Financial Reconstruction, the circular directs collection of stamp duty at 2 per cent of the market value of the immovable property.
Can a registering officer calculate duty using 0.6 per cent of the value of the company shares?
No. Circular No.40405/P2/2021 instructs registering officers not to insist on stamp duty calculated at 0.6 per cent of the aggregate market value of the shares.
Will stamp duty already paid in another State be recognised in Tamil Nadu?
Yes. Duty paid in another State when presenting the amalgamation order or scheme must be set off, and only any remaining balance may be demanded in Tamil Nadu.
Does the concession cover schemes approved by the Board for Industrial and Financial Reconstruction?
Yes. The circular states that qualifying amalgamation or reconstruction schemes sanctioned by the Board for Industrial and Financial Reconstruction are covered by the reduced stamp duty.
