Hind Lever pegs Tomco merger duty at Rs 6 crore

The case pertains to the merger of Tata Oil Mills Company (Tomco) with HLL on 28 December 1994. HLL issued over 28 lakh shares to Tomco shareholders.

On 1 April, 1993, the market value of the shares was about Rs 110 crore. After a court cleared the merger, the Maharashtra government slapped a stamp duty on mergers and amalgamations, varying from 3 per cent to 10 per cent, depending on the location of assets.

It argued that both assets and liabilities would be transferred and that duty had to be paid separately on the "conveyance" of both. Tomco had assets and liabilities within and outside Maharashtra.

"The question was with reference to what value did the stamp duty have to be paid," Sharma said.

"The total consideration would have to be split into five "" 10 per cent stamp duty for Tomco property in Mumbai (and Tomco had only a few residential premises here), 8 per cent for Tomco property in moffusil towns, duty for real estate outside Maharashtra and 3 per cent duty for the assignment of liabilities in Maharashtra and outside," he explained.

HLL went to the Mumbai High Court in 1995. But the court ruled against it in 1996, but said the duty for all the five components could not exceed Rs 110 crore, that is, the value of the shares offered to Tomco shareholders.

The court also ruled that the tax was on one composite transaction, including on the transfer of assets and liabilities.

The Maharashtra government didn't appeal to the Supreme Court against this (it, in fact, amended its 10 per cent duty rate to 7 per cent or 0.7 per cent of the total value of the shares and later imposed a duty ceiling of Rs 25 crore).

But the West Bengal government subsequently slapped a stamp duty. A year ago, the Kolkata High Court concurred with the Mumbai High Court's ruling.

The HLL vice-chairman said it was now up to the stamp duty suprintendent to decide how to apportion the duty and warned that HLL will contest in court any unfair apportionment.