Stamp duty on Share Certificates in Delhi

NOTE ON PAYMENT OF STAMP DUTY ON SHARE CERTIFICATES IN DELHI

Definitions:

      Ø     2(26) “stamp” means any mark, seal or endorsement and includes an adhesive or impressed stamp for the purpose of duty chargeable under the act.

Ø  2(6) "Chargeable" means, as applied to an instrument executed or first executed after the commencement of this Act, chargeable under this Act, and, as applied to any other instrument, chargeable under the law in force in India when such instrument was executed or, where several persons executed the instrument at different times, first executed.

Ø  2(12) "Executed" and "execution", used with reference to instruments, mean "signed" and "signature".

Ø  2(14) "Instrument" includes every document by which any right or liability is, or purports to be, created, transferred, limited, extended, extinguished or record.

As per section 56 of the Companies Act, 2013 read with relevant rules made there under, the Share Certificate shall be issued:

i.                     Within 2 months of the incorporation of company to the subscribers to the Memorandum of Association

ii.                   Within 2 months of the allotment of shares, in case of fresh allotment

iii.                  Within 1 month of the receipt of instrument of transfer/ transmission of shares

As per the Section 46 of Companies Act, 2013 read with relevant rules made there under, the Share certificate issued under the Common seal, if any, shall be signed by Two Directors or Director and Company secretary, if appointed, of the Company.

STAMP DUTY IN DELHI:

As per section 3 of the Indian Stamp Act, 1899 (hereinafter referred to as the Act) every instrument mentioned in the schedule is chargeable with the proper duty. The duty payable in accordance with section 10 of the Act by means of stamps indicated on the instrument.

Article 19 of the schedule – IA of the Indian Stamp Act, 1899 (as applicable to Delhi) governs payment of proper duty on the instruments evidencing the right or title of the holder thereof or any other person to any share or stock in any incorporated company or body corporate or to become proprietor of share or stock of any such company or body.

The proper stamp duty payable in all such instrument is Rs. 1/- for every Rs. 1000/- or part thereof of the value of the share or stocks including the amount of premium. The Company shall pay the stamp duty online within 30 days of issue of Share Certificate (See proviso of Section 32 of the Indian Stamp Act, 1899). In case the stamp duty is not paid within 30 days then also go for online procedure. (See Procedure below)

In case of non-payment of stamp duty or evasion of payment of stamp duty on the issue of share certificate in case of allotment of share, the company shall be liable for heavy penalty under the Act, which may extend to 10 times of the duty. (See proviso of Section 35 of the Indian Stamp Act, 1899)

In case of duplicate / split share certificate, Stamp duty of Rs. 10/- shall be paid (As per Article 25 of the Schedule – 1A of the Indian Stamp Act, 1899 (as Applicable to Delhi), because the stamp duty has already been paid on the respective share certificates bearing distinctive number of shares.

The stamp duty must be paid where the registered office of the company is situated otherwise it shall lead to Loss of revenue of the State (As stamp duty on share certificate is state matter). In this regards, Collector of Stamp, NCT of Delhi has issued notice to companies to pay the stamp duty on the grounds that registered office of the Company is situated in Delhi and stamp duty shall be paid in NCT of Delhi only.

Link for Payment of Stamp duty Online in Delhi:  https://www.shcilestamp.com/estamp_share_issuance.html

PROCEDURE OF PAYMENT OF STAMP DUTY WITHIN 30 DAYS OF ISSUANCE OF SHARE CERTIFICATES:

1.       Make account on the above mentioned website for login.

2.       Fill the details in the shares Details entry form

3.       Upload the Documents:

a.       PAS -3 with Challan filed to ROC

b.      Executed Share Certificate

c.       List of Allottees

d.      List of Directors

e.      Copy of Board or shareholders resolution of allotment of shares.

f.        Board Resolution of issuance of share certificate and authorization for the payment of stamp duty.

g.       COI, MOA and AOA of the Company

h.      Certificate of previous stamp duty paid, if any.

NOTE: All the documents shall be in pdf format and digitally signed by Director or person authorized for the same.

4.       Submit the details

5.       Reference number will be generated after submission.

6.       Request initiated can be seen in the status column and after 1-2 weeks the challan shall be generated.

7.  Pay the Stamp Duty amount using Net Banking/Debit Card/ Cash/ NEFT/ RTGS. Print the acknowledgement and collect the e-Stamp Certificate from the nearest branch of Stockholding in Delhi by producing the printed acknowledgement at the counter.

8.      Upload the Scan copy of e-stamp Certificate

9.     After scrutiny and patching of e-Stamp Certificate, the Certificate of payment of stamp duty shall be issued and Certificate can be downloaded from the status menu.

PROCEDURE OF PAYMENT OF STAMP DUTY IF STAMP DUTY NOT PAID WITHIN 30 DAYS OF ISSUANCE OF SHARE CERTIFICATE:

1.       Make account on the above mentioned website for login.

2.       Fill the details in the shares Details entry form

3.       Upload the Documents:

a.       PAS -3 with Challan filed to ROC

b.      Executed Share Certificate

c.       List of Allottees

d.      List of Directors

e.      Copy of Board or shareholders resolution of allotment of shares.

f.        Board Resolution of issuance of share certificate and authorization for the payment of stamp duty.

g.       COI, MOA and AOA of the Company

h.      Certificate of previous stamp duty paid, if any.

NOTE: All the documents shall be in pdf format and digitally signed by Director or person authorized for the same.

4.       Submit the details

5.       Reference number will be generated after submission.

6.       The request initiated status can be seen in the status column.

7.     Now, the hearing date shall be shown in the status column after 1-2 weeks or shall be provided via email or if not received within the specified time please contact to the Collector of Stamp, NCT of Delhi.

8.       In hearing with SDM, the penalty shall be levied up to 10 times of duty. The Penalty shall depend on justification of the Professional authorized for the same.

9.       The challan shall be generated within 1-2 week of hearing.

10. Pay the Stamp Duty amount using Net Banking/Debit Card/ Cash/ NEFT/ RTGS. Print the acknowledgement and collect the e-Stamp Certificate from the nearest branch of Stockholding in Delhi by producing the printed acknowledgement at the counter.

11.   Upload the Scan copy of e-stamp Certificate

12.   After scrutiny and patching of e-Stamp Certificate, the Certificate of payment of stamp duty shall be issued and Certificate can be downloaded from the status menu.

Loopholes in the Act:

The share certificate shall bear the stamp duty as per the respective State/Union Territory from where certificate is issued. So, it is not necessarily required to pay Stamp duty on share certificate in that state in which registered office of the company is situated, it shall depend on the execution of share certificate.

Execution of Share certificate:

The question always arise where to pay stamp duty – the place where registered office situated or where the resolution was passed by the Board of Directors for issuance of share certificate. It shall depend on the place where execution of share certificate shall be done.

Executed or Execution means Signed or Signature (See the definition 2(12) above).

First Concept: As the stamp duty is payable only on the instrument hence, the place where the resolution by the Board of Directors is passed is not relevant. When the Board of a company passes a resolution for allotment of shares, the instrument i.e. a share certificate is not in existence. The instrument of share certificate came into existence only when, in terms with resolution, the share certificate sealed, if any, and signed.

Second Concept: The Board meeting can be held anywhere in the India and nowhere written in the Indian Stamp Act, 1899 and Companies Act, 2013 that Share certificate shall be issued only on registered office. The Common seal provision has already become optional as per the Companies (Amendment) Act, 2015 dated 29^th May, 2015.

Conclusion:

So, on the above Concept, it is clear that execution of share certificate can be made anywhere in India.  Companies can take advantage of this loophole but it is depend on case to case basis that what would be beneficial for the Company.

But it is advice to all please pay the stamp duty in that state where registered office of the company is situated.

Contact Details:

VISHAL SHARMA

Company Secretary

Mob: 9716763754

Email: csvishalpbs@gmail.com

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Disclaimer: The Content is prepared on the basis of our general understanding and on the basis of relevant provision of the concerned Act read with rules made there under. The whole content is only for the knowledge sharing purpose, we do not take any responsibility for the correctness of the same.