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RAWALPINDI: The Lahore High Court (LHC) Rawalpindi Bench has stopped the Punjab government from collecting stamp duty on corporate mergers.
The order was issued in a case challenging the Punjab government’s decision to impose a stamp duty on corporate mergers.
The case, Jadeed Feeds Industries (Pvt) Limited vs Board of Revenue, Punjab, centred on whether the imposition of stamp duty on mergers violated Section 282(5) of the Companies Act, 2017.
The provision exempted such transactions from stamp duty in Islamabad and allowed provinces to adopt the exemption through notification.
Earlier, a single-member bench endorsed the provincial government’s decision.
However, a two-member division bench comprising Justices Jawad Hassan and Malik Javed Iqbal Wains suspended that order.
During proceedings before the division bench, Barrister Talha Ilyas Sheikh, the counsel for the appellant, argued the duty discriminated against businesses, as Sindh and Islamabad do not charge stamp duty on mergers.
He referred to the Sindh High Court’s 2023 judgment, which deemed similar levies unlawful.
The Punjab government, represented by Chief Secretary Zahid Akhtar Zaman and Assistant Advocate General Barrister Raja Hashim Javed, sought time to review legal complexities.
The court highlighted Section 282(5) of the Companies Act, which stated that “no stamp duty shall be payable on transfer to the transferee company” in mergers okayed by the Securities and Exchange Commission of Pakistan (SECP).
While this exemption applies immediately in Islamabad, provinces must issue notifications to adopt it.
The bench emphasised that under Article 143 of the Constitution, federal laws prevailed over provincial statutes like the Stamp Act, 1899, raising questions about Punjab’s authority to impose such duties.
The court directed Chief Secretary Zaman to convene an urgent meeting with provincial secretaries, revenue authorities and SECP to address whether Punjab’s Stamp Act contradicted the Companies Act.
The court warned that failure to resolve the matter could lead to a ruling, stressing that mergers involve transfers “by operation of law,” not voluntary instruments subject to stamp duty.
The court noted that the SECP chief prosecutor, Muzaffar Ahmed Mirza, acknowledged that Section 282(5) had an overriding effect and urged Punjab to align its policies with federal law.
The court temporarily stayed the implementation of the single-bench order till the next hearing on April 15.
Published in Dawn, March 30th, 2025
