The Government has released a draft Bill seeking to amend the century-old Indian Stamp Act 1899 in a bid to enlarge its scope and introduce numerous changes in the extant provisions, including introducing a definition of conveyance.

The proposed amendments once accepted will put to rest the controversy surrounding the levy of stamp duty on orders approving schemes of amalgamation or restructuring of companies under section 394 of the Companies Act 1956.

As every such order of the courts or tribunals is purportedly included as an instrument of conveyance on which stamp duty is applicable as per the schedule attached to the charging section 3 of the Indian Stamp Act.

A client alert sent out by Vaish Associates stated:

By way of proposed amendment in the Central Statute, the Central Government has intended, on the basis of the comments to be received from all the State Governments, to put to rest the controversy on leviability of stamp duty on any order of the Tribunal or High Court sanctioning the scheme of amalgamation / reconstruction and at the same time, increase the revenue of the exchequer. On the other hand, the proposed amendment may act as a dampener for the corporates to undertake corporate restructuring exercise.  

The said proposal is of vital importance in any amalgamation, merger or demerger transaction. In this regard, the aspect of levy of stamp duty on an order of High Court under section 394 of the Companies Act, 1956 has been in dispute for long. Over a period of time, contrary judgments have been pronounced by various High Courts, particularly, in respect of those States where order of the Court under section 394 of the Companies Act, 1956 is not specified in the Schedule as amounting to conveyance."

It further noted that any order made by the Reserve Bank of India in respect of amalgamation or reconstruction of banking companies under section 44A of the Banking Regulation Act 1949 will also be considered a conveyance document.

Also, the transfer of property by one co-owner to another co-owner is proposed to be made chargeable as a part of the term conveyance if it is not an instrument of partition.   

However, doubts persist on the computability of the rate of stamp duty on conveyance which is dependent on the market value of the subject matter of conveyance.

The draft bill has been introduced by the Ministry of Finance through department of revenue on 6 May 2010 and awaits comments of all stake holders including the state governments.