Stamp duty on allocation and transfer of shares (pvt. ltd.)

This query is : Resolved

Tarannum (Querist)
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20 November 2012 Dear Sir,

Please advice on the below

1. if the shares are allocated at the time registration and if no duty has been paid

2. if the shares are being transferred and no stamp duty is paid so what are the consequences arises and if the same can be paid now ?

Ajay Mishra

Ajay Mishra (Expert)
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21 November 2012 Hi

If shares are alloted and share certificate is not properly stamped then it will not be a properly issued share certificate by Company.

The Revenue Department will in future demand to the reason for not payment of stamp duty and can impose penalty upto ten time of stamp duty.

Ajay Mishra

Ajay Mishra (Expert)
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21 November 2012 Validity of unstamped/non-cancelled stamped on transfer deed

Section 108 requires that where share transfer form is delivered to the Board it should be duly stamped. It means stamp of adequate value should be affixed and cancelled on transfer deed. Unless a transfer form is duly stamped when it was delivered to the Board of directors for registration of transfer, it could not be said that the mandatory requirement of section 108 is complied with and the company is justified to refuse the transfer. [Patel Engineering Co. v B.Y. Invest. Pvt. Ltd. & Others Case No. 20/CLB/WR/91]
It is not necessary that stamps be affixed before transfer deed is executed, they are to be affixed before delivery. [Prafulla Kumar Rout v Orient Engg. Works (P) Ltd. (1986) 60 Comp Cas 65 (Ori)].
If adhesive stamp on transfer deed is not defaced, a fresh deed is to be submitted; company is not obliged to cancel stamp. [Nuddea Tea Co. Ltd. v Asok Kumar Saha (1988) 64 Comp Cas 775 (Cal)].
Unless a particular mode of cancellation is prescribed in any State, crossing of stamps is sufficient. [Prafulla Kumar Rout v Orient Engg. Works (P) Ltd. (1986) 60 Comp Cas 65 (Ori)].

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Ajay Mishra

Ajay Mishra (Expert)
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21 November 2012 Determination of valuation of shares for affixing stamps on the transfer deed

In case shares are not quoted, the value of the shares for the purpose of stamp means the price that the shares would fetch at the time of transfer or consideration agreed, whichever is higher. [Union of India v Kulu Valley Transport Ltd. (1958) 28 Comp Cas 29 (Punj)].
In case if the shares are listed on stock exchange, the valuation will be determined on the basis of the quotations available on the stock exchange on the date of execution of transfer deed or the consideration paid which ever is higher.
However, no transfer duty is applicable for transfer of shares in case of shares are in D-mat form.

Ajay Mishra

Ajay Mishra (Expert)
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21 November 2012
Value of share transfer stamps to be affixed on the transfer deed

Stamp duty for transfer of shares is 25 paise for every Rs. 100 or part thereof of the value of shares as per Notification No. SO 130(E), dated 28-01-2004 issued by the Ministry of Finance, Department of Revenue, New Delhi.

Exemption from payment of transfer duty

No duty shall be chargeable in respect of any instrument executed by or on behalf of or in favour of the Government in cases where but for this exemption, the Government would be liable to pay the duty chargeable in respect of such instrument.