CHENNAI: The Madras High Court issued notices to the Central and State governments on a petition challenging the State’s authority to levy and collect stamp duty on instruments like mutual funds in the absence of a State legislation. The First Bench of Chief Justice Sanjib Banerjee and Justice PD Audikesavalu ordered notice on a petition filed by one Gnanamani of Chennai.
The bench also instructed that copies of the petition be furnished to the Additional Solicitor General (ASG) and posted the matter to November 17. The petitioner contended that a completely flawed procedure is being followed and investors have been taxed without any authority of sanction of law. Mutual funds and other instruments, which can fall within the ambit of Article 56-A of the First Schedule of the Stamp Act, are taxed at such rate and quantum passed on to individual States.
“The petitioner points out that as far as she is aware, States have not enacted any law to indicate the rate at which such instruments would be subjected to levy of stamp duty and, at any rate, there is no such legislation in the State of Tamil Nadu,” the bench recorded.
She submitted that in the absence of a State setting the rate of stamp duty in respect of such instruments, the very authority to impose tax or receive the same is ‘absent’ and ‘nonexistent.’ Referring to Article 56-A of Schedule I to the Indian Stamp Act, 1899, which provides for the rates of stamp duty pertaining to securities other than debentures, she said the article covers securities other than debentures, derivatives, government securities, and repo on corporate bonds.