083-NLR-NLR-V-56-M.-N.-M.-SALAHUDEEN-Appellant-and-COMMISSIONER-OF-STAMPS-Respondent.pdf
FERNANDO ASf.—Salahudeen v. Commissioner of Stamps
351i
1954Present: Nagalingam S.P.J. and Fernando A.J.M.N. M. SALAHUDEEN, Appellant, and COMMISSIONEROF STAMPS, Respondent
S. C. 241—Appeal under the Stamps Ordinance
Stamps—Trust in favour of Company which is not yet in existence—Conveyance-by trustee to Company after grant of incorporation—Amount of stamp duty,payable—Stamps Ordinance, Schedule, Part J, Items 23 (/,' (6), 23 (4), 23 (8),27 (Proviso)—Trusts Ordinance, $.84.
Property can be held by a person in trust to convey i t to a Company which is to-come into existence in the future. When immovable property thus held in trustis conveyed by the trustee to the Company when formed, the deed of transfer ia-a conveyance “ by a trustee without consideration to the person beneficiallyentitled ”, and as such attracts only the duty chargeable under Item 23 {4) oftPart 1 of the Schedule to the Stamps Ordinance.
1’1’EAL against a determination of the Commissioner of Stamps
11. W. Tambiak, with A. M. Ameen, for the appellant.M. Tiruchelvam, Crown Counsel, for the respondent.
Cur. adv. vult.
November 24, 1954. Fernando A.J.—
'The appellant contests the correctness oft he opinion of the Commissioner-of Stamps that Deed No. 1,644 of July 15, 1943, is liable to stamp dutyof Rs. 2,840 as a conveyance of property under Item 23 (1) (ft) of Part J ofthe Schedule to the Stamps Ordinance read with the proviso to Item 27,or alternatively to duty of the like amount under Item 23 (8) as a convey-ance not otherwise charged or excepted. He maintains that the deed isa conveyance “ by a trustee without consideration to the person bene-ficially ontitled ”, and as such attracts only the nominal duty of Rs. 10-under Item 23 (4).
The circumstances under which the deed came to be executed are notdisputed by the Commissioner and have an important bearing on the ques-tion we havo to decide. It would appear that one A. R. M. Mohamed inDecember 1942, made an offer of Rs. 177,500 for the purchase of twoestates, and the offer being accepted, a conveyance in his favour was exe-cuted on March 15, 1943. The consideration for the purchase was pro-vided by Mohamed himself and three other persons in varying proportionsand by cheques drawn by or on behalf of each of those persons. Tim doou-monts in the case make it clear that these four persons had decided (a)'to float a private company which would own the two estates and (6) that •
352
FERNANDO A.J.—Snlnhwieen v. Commissioner oj Stamps
they would be allotted shares in the company in strict proportion to theamounts respectively contributed by them towards the total purchase pricepaid for the estates. The application for the incorporation of the proposedcompany was mado in January 1943, but the grant of incorporation wasdelayed, for one reason because the law at that time required tho sanctionof the Governor for tho formation of a company with a capital exceedingone lakh. The Controller of Exchange was informed by tho Proctor for theparties of the purpose of the incorporation and of the fact that it wasintended that the property would be purchased in trust for the companyto be formed. As tho sale had to be concluded before the certificate ofincorporation could be granted, the proctor first teOffered to the vendorsa draft deed in favour of Mohamed “ in trust for the proposed company ”,but the vendors were unwilling to agree to that form and relied on the factthat the offer they had accepted had been made by Mohamed personally.Hence it was that the deed No. 1620 of March 15,1943, purported to be anoutright transfer to Mohamed and contained no reference to the objectwith which tho estates were being purchased. The certificate of incor-poration of tho company was subsequently issued (on June 8, 1943), andin July Mohamod executed, in favour of the company, the conveyanceNo. 1644 which is the subject of this appeal.
The intention of the persons who provided the consideration for theconveyance No. 1620 was that the estates Bhould be purchased on behalfof the company and thereafter owned by the company. It was impossibleat that date for that conveyance to be executed in the name of the com-pany, but only for the reason that the grant of incorporation was delayed.Accordingly, the conveyance was in favour of Mohamed, but with thointention not of vesting the beneficial interest either in himself alone or inhimself, together with his three “ partners ” but rather of vesting the legaltitlo in Mohamed in trust to convey the property to the companywhen formed—a trust which was duly honoured by the execution of thoconveyance No. 1644.
The Commissioner and Crown Counsel both roly on the fact that thecompany was not in existence at the time of the execution of Deed No. 1620,and argue therefrom that there cannot be a trust in favour of a com panywhich is not in existence at the time of the constitution of the trust. Inthe case of Dt Silva and Mendis v. Commissioner of Stamps where atestator appointed trustees and directed them to convert an ostate into acompany and allot shares in the company to the heirs, it was hold that thosubsequent conveyance of the estate to the company was chargeable withduty only as a conveyance by a trustee to the beneficiary. Such a decisioncould only have been reached on the basis that property can be held by aperson in trust to convey it to a company which is to come into existencein the future.
Crown Counsel then contended that since the consideration for the firsttransfer No. 1620 was provided by the four “ partners ”, the ostate wouldbo held by Mohamed in trust for all the partners as a constructive trusted 1
1 {1943) 44 A'. L. R. 402.
Ruporainey. The Queen353-
under Section 84 of the Trusts Ordinance, and not in trust for the proposedcompany, and that accordingly the Deed No. 1644 was not a transfer to thepersons beneficially interested. This contention would undoubtedly havebeen a sound one if the “ partners. ” had not in fact formed and expressed adifferent intention. Although that intention was not specifically expressedin the first conveyance, there is no question but that the company had a.right to demand a conveyance from Mohamed who would have been motby the plea of fraud if he relied upon the absence of a written declarationof trust.
It was lastly argued that the expression “ trustee ” in item 23 (4) coversonly persons holding)ffice as such by express appointment or designation(as in the case of “ executors ” and “ administrators ” who are alsomentioned in the same Item), and that the Court will not be at pains toconsider a person to be a “ trustee ” in order to confer the advantage of alow rate of stamp duty. This is in my opinion an interpretation toonarrow for adoption in the case of a taxing statute. I think Item 23 (4)would bo applicable in every case where the holder of a bare legal titleconveys tho property to persons having the beneficial interest in fulfilmentof an obligation which is a “ trust ” as defined in the Trusts Ordinance.
I would therefore hold that the Deed No. 1644 is chargeable with dutyunder Item 23 (4). The appeal must be allowed with costs.
Naoai.inoam S. P. J.—I agree.
Appeal allowed.
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