Supreme Court Ruling- Landmark Decision on Stamp Duty for Increased Share Capital

June 6, 2024
duty for increased share capital

By Devika Mehra and Apalka Bareja


In the dynamic landscape of corporate finance, companies often find themselves in need to raise additional capital whether it’s for expansion, investment or other strategic purpose. When a company decides to increase its share capital, several steps come into play. One of the crucial step is to deposit stamp duty on increased share capital. For many business in India, navigating complexities of stamp duty has been a murky affair. The ambiguity surrounding the application of stamp duty, particularly maximum cap, has often led to confusion and potential overpayment. The Supreme Court in its recent judgement of State of Maharashtra & Anr., versus National Organic Chemical Industries Limited [1]gave clarity about hike in stamp duty on increase in share capital. The Hon’ble Apex court held that once the maximum duty payable on the authorized share capital of a company is paid, as prescribed under the relevant stamp laws, no additional duty is payable for subsequent increase in the share capital., unless the law requires payment of additional stamp duty. This article analyzes the Hon’ble Apex court’ss judgement in detail, exploring the reasoning behind this decision and its implication for businesses across the nation. This article aims to empower companies with the knowledge they need to navigate stamp duty on increased share capital.

Facts of the case-

  • National Organic Chemical Industries Limited, the respondent, was involved in a legal dispute regarding stamp duty payments on increase in share capital. The respondent firm was first incorporated with a share capital of Rs. 36 crores.
  • In 1992, it increased its share capital to Rs. 600 crores and paid the required stamp duty. The State/appellant changed Article 10 of Schedule -1 and set a maximum amount of Rs. 25 lakhs that a firm might be required to pay in stamp duty. The respondent then passed a resolution to increase its share capital to Rs. 1,200 crores and in turn paid a stamp duty of Rs. 25 lakhs .
  • As per section 97 of the Companies Act,2013, companies must file a notice in Form No. 5 with the Registrar of Companies (ROC) to register such an increase.
  • The respondent, however, claims that this was done inadvertently as it was soon realized that stamp duty was not liable to be paid by them since the maximum stamp duty of Rs. 25 Lakhs had already been paid. As a result, the respondent sent a letter requesting a refund of the Rs. 25 lakhs in stamp duty that they had paid. This request was denied, with the reason given being that stamp duty is a continuous expense that must be paid each time a company’s authorized share capital increases and must be filed with Form No. 5.
  • The respondent filed a writ suit in the Bombay High Court for a reimbursement of the stamp duty of Rs. 25 lakhs, together with interest.
  • The government argued that the notice constituted an “instrument” under the Bombay Stamp Act, 1958. However, the Hon’ble Bombay High Court held that Form No. 5 is not an instrument as described by Section 2 of the Stamp Act, and ruled in favor of the respondent, holding that stamp duty can only be imposed on AOAs where the maximum payment (Rs. 25 lakhs), due in accordance with the amendment, has already been paid. An appeal was thereafter filed by the State against the decision of the Bombay High Court before the Apex Court.

Legal Arguments: Appellants vs. Respondents-

The appellants contended that irrespective of previous payments, every increase in share capital is a distinct taxable event and requires stamp duty payment. On the other hand, the respondents argued that subsequent increases in share capital should be treated as part of the original document and be subject to the initial stamp duty paid, with stamp duty only being applied to the Articles of Association (AOA).


The Hon’ble Supreme Court, in a unanimous decision, sided with the respondent. The court held that the Form No. 5 notice does not qualify as an “instrument” as defined by the Act. The court highlighted the distinction between the Articles of Association (AoA) and the notice. The AoA is a fundamental document outlining the company’s structure and powers, and it attracts stamp duty based on the authorized share capital. However, the Form No. 5 notice simply informs the Registrar of the increase, not altering the company’s core structure.

Court’s Analysis and Verdict-

The relevant sections of the Companies Act and stamp duty laws were carefully examined by the Supreme Court. It made clear that under stamp duty legislation, filing Form No. 5, which notifies the Registrar of share capital increases, does not qualify as a separate document. Rather, it confirmed that stamp duty only applies to the articles of association and that future increase in share capital do not significantly change the nature of the association to justify the imposition of further stamp duty.

In addition, the Court decided that the Rs. 25 lakh upper limit imposed by the Maharashtra Stamp Act Amendment, 2015 is a one-time measure that only applies to the initial stamp duty payment on the AOA. Therefore, above this threshold, additional stamp duty payments are not triggered by successive increases in share capital.

Implication on Businesses across the Nation-

This case interpretation has a  far-reaching impact on the companies willing to increase their share capital, as it provides clarity on the applicability of stamp duty. It can also promote business in following manner:

  • Predictable Costs- Knowing that the stamp duty is a one-time cost allows businesses to plan their finances more accurately and manage their budget effectively.
  • Encourages Capital Raising- With the certainty of a single payment, businesses may be more inclined to raise capital through share issuance, knowing they will not face recurring fees charges.
  • Stimulates Growth- The ability to raise capital more confidently can enable businesses to invest in expansion, research and development, and other growth-oriented activities.
  • Investor Confidence- Simplified and predictable stamp duty costs can make investments more attractive to potential investors, leading to easier access to capital.
  • Regulatory Clarity- A clear, one-time fee can reduce administrative burden and complexity, allowing businesses to focus more on their operations and strategic planning.

Overall, a one-time stamp duty on increased share capital can provide clarity and predictability, encouraging businesses to engage in capital-raising activities that support their growth and development.


The Supreme Court’s decision clarifies stamp duty laws pertaining to increase in the share capital of business and offers direction for similar upcoming transactions. This case sets a precedent for a more streamlined and cost-effective approach to company filings. This ruling emphasizes how crucial it is to comprehend how company rules and stamp duty laws are conjointly readin order to ensure compliance and spare companies from needless financial obligations.

Aishwarya Rajput , Assessment Intern at S.S Rana & Co. has assisted in the research of this article.


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