The Madras High Court on Wednesday ordered notices to the Centre, State governments, National Stock Exchange Clearing Limited, National Stock Exchange of India Limited, Indian Clearing Corporation Limited, Bombay Stock Exchange Limited and Securities and Exchange Board of India on a writ petition to declare as illegal the levy of stamp duty on purchase units of mutual funds by investors in Tamil Nadu.
Chief Justice Sanjib Banerjee and Justice P.D. Audikesavalu directed State Government Pleader P. Muthukumar to take notice on behalf of the Chief Secretary and ordered that case papers be served on Additional Solicitor General R. Sankaranarayanan too. He sought the response of the respondents within a fortnight after the petitioner’s counsel claimed that ₹79 lakh crore had been collected across the country.
Y.R. Gnanamani, 61, of Alapakkam in Chennai, had filed the writ petition on being aggrieved by fixation of rates of stamp duty on certain instruments. The petitioner pointed out that Parliament had amended the Indian Stamp Act of 1899 and imposed stamp duty on mutual funds, Real Estate Investment Trusts (REITs) and other instruments on fixed rates as provided under Article 56A of Schedule I to the Indian Stamp Act.
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The amending Act was enacted on February 21, 2019 and came into force from July 1, 2020. However, the petitioner claimed that it was in violation of the constitutional provisions which empower the Centre to levy stamp duty only on transfer of shares, debentures and so on. It was brought to the notice of the court that only the State government was empowered to fix rate of stamp duty for other securities such as mutual funds.
Since the Government of Tamil Nadu was yet to enact a law for levy of such stamp duty, the collection by the central agencies was illegal, the litigant claimed and sought an interim stay on the collection in the State.