LHC orders govt to review stamp duty on mergers

Chief secretary ordered to hold urgent talks

LAHORE:

The Lahore High Court's Rawalpindi bench has directed the Punjab government to thoroughly deliberate on the imposition of stamp duty on corporate mergers, warning that any negligence in addressing the issue could result in significant economic losses for the province.

The directive came during the hearing of an intra-court appeal challenging the levy of stamp duty on mergers, which, according to the petitioners, contradicts Section 282(5) of the Companies Act, 2017. The court is examining whether Punjab can impose stamp duty on corporate mergers when Islamabad and Sindh do not, creating a disparity that affects businesses operating in the province.

A division bench led by Justice Jawad Hassan has ordered Punjab's Chief Secretary to convene a high-level meeting with relevant officials to discuss the legal complexities of the issue.

The court emphasised that a poorly considered decision could force businesses to relocate from Punjab, negatively impacting key commercial hubs such as Lahore, Faisalabad, Multan, Sialkot, and Gujranwala.

The meeting will also be attended by Muzaffar Ahmed Mirza, Chief Prosecutor of the Securities and Exchange Commission of Pakistan (SECP). The chief secretary has been instructed to submit a comprehensive report before the next hearing scheduled for April 15, 2025. If the government fails to reach a resolution, the court will decide the matter based on legal interpretations of the Companies Act and the Stamp Act.

The court has also raised concerns about the misrepresentation of legal provisions in previous cases where stamp duty on mergers was upheld.

It has directed officials to assess whether the province's taxation policies have influenced companies to relocate their business addresses outside Punjab.

Additionally, the court is examining whether a merger sanction order qualifies as a "conveyance" under the Stamp Act and whether stamp duty should apply under Section 27-A of the Act.