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Provincial Governments have Exclusive Authority to Legislate on Stamp Duties under the Constitution of Pakistan, 1973 --- Lahore High Court, Lahore

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Provincial Governments have Exclusive Authority to Legislate on Stamp Duties under the Constitution of Pakistan, 1973 --- Lahore High Court, Lahore

Islamabad 05-12-2024: In a significant judgment, the Lahore High Court, Rawalpindi Bench, dismissed a Petition filed by Jadeed Feeds Industries (Pvt.) Limited challenging the imposition of stamp duty on asset transfers arising from a corporate merger. The case, adjudicated by Mr. Justice Mirza Viqas Rauf, emphasized the legislative competence of provincial governments to impose and regulate stamp duties under the Constitution of Pakistan, 1973.

Jadeed Feeds Industries emerged as a single entity following the merger of two sister companies under a Scheme of Arrangement sanctioned by the Companies Act, 2017. The petitioner argued that no stamp duty was payable on the transfer of assets, citing Section 282(5) of the Companies Act, 2017, which allegedly provided exemptions. However, the Chief Inspector of Stamps, Board of Revenue, Punjab, refused to transfer the merged companies’ assets without payment of stamp duty, leading to the legal challenge.

Whether the transfer of assets through a sanctioned merger constitutes a “transfer” under the Stamp Act, 1899, and is chargeable to stamp duty.
The provincial government’s competence to legislate and impose stamp duties as per Articles 141 and 142(c) of the Constitution.
Whether federal provisions under the Companies Act, 2017, override provincial stamp duty laws.

Mr. Justice Mirza Viqas Rauf ruled that:

The Stamp Act, 1899, defines a merger order as an “instrument” subject to stamp duty under Article 27-A of its Schedule-I.
Provincial governments have exclusive legislative competence over stamp duties under the Constitution.
Section 282(5) of the Companies Act, 2017, applies only to Islamabad Capital Territory unless a province enacts specific exemptions. Punjab had not issued any exemption notifications or legislation in this regard.

The Court referred to Fatima Sugar Mills Limited (PLD 2015 Lahore 632) to support its conclusion that mergers involve asset transfers chargeable under the Stamp Act. It dismissed the Petitioner’s reliance on Total Parco Pakistan Ltd. (2023 CLD 241), which dealt with transfer fees, not stamp duties.