Duty Can’t Be Levied On Transaction Not Having ‘Territorial Nexus’ With State: Rajasthan High Court

In the case of Himachal Futuristic Communications Limited v. State of Rajasthan & Ors.(D. B. Special Appeal (Writ) No. 1063/2019), a division bench comprising Justices Manindra Mohan Shrivastava and Birendra Kumar observed, that an instrument executed outside the State of Rajasthan would be chargeable with duty when it bears a “territorial nexus”; it is not that every instrument as specified in the Schedule appended to the Stamp Act of 1998, executed outside the State, becomes chargeable to stamp duty.


The Petitioner-company had amalgamated with one Sunvision Engineering Company and had made an application with the Jaipur Development Authority for mutation of properties held by the latter in the area, to the Petitioner’s name. In response, the JDA formed an opinion that there was deficit of stamp duty and raised a demand not only on the land in question but on the valuation of the instrument as a whole. This included valuation of the shares, which were transferred upon amalgamation.


The division bench held “…insofar as transfer of shares by virtue of order of amalgamation passed by the High Court of Himachal Pradesh is concerned, it did not happen within the territory of the State of Rajasthan. Both the companies are situated outside the territory of Rajasthan. The entire proceedings of arrangement and amalgamation and its sanction took place outside the State of Rajasthan. Therefore, to that extent, stamp duty under the Stamp Act of 1998 would not be leviable “. They observed that interpretation giving wide sweep of legislative power to the State legislature to levy stamp duty on instruments executed outside the State, even when it does not relate to any taxing event having any territorial nexus within the State, would be violative of Article 245 of the Constitution of India. The court held that the appellant would be liable for payment of stamp duty only on the market value of the properties situated in the State of Rajasthan required to be assessed in accordance with the Stamp Act of 1998.



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