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Sita Ram Vs. Board of Revenue - Court Judgment

LegalCrystal Citation
SubjectTrusts and Societies;Property
CourtAllahabad High Court
Decided On
Case NumberStamp Act Reference No. 411 of 1971
Judge
Reported inAIR1979All301
ActsStamp Act, 1899 - Sections 2(24) and 6 - Schedule - Articles 58A and 64A
AppellantSita Ram
RespondentBoard of Revenue
Appellant AdvocateRam Oudh Misra, Adv.
Respondent AdvocateStanding Counsel
Excerpt:
.....- sections 2 (24) (c) and 6, articles 58-a and 64a of schedule i b of stamp act, 1899 - donors entrusted property to new body of trustees - implies property disposed - disposition for charitable purposes comes within ambit of section 2 (24) (c) - charity comes under meaning of word 'settlement' - chargeable to stamp duty under article 58-a as duty greater than that in article 64a - endowment for charity does not fall under article 64a - section 6 states that when instrument falls under two or more descriptions then instrument will be chargeable of higher of such duties. (ii) construction of deed - meaning can be concluded only after referring to entire document. - - the donee failed to observe the conditions. the recitals in the aforesaid document show that as the donee of the..........not a'settlement' within the meaning of section 2(24) and could only be treatedas a declaration of trust and stampedaccordingly. this case, however, wasnot approved by a larger bench inboard of revenue v. sridhar : air1964all537 . it washeld in this case that the reasons givenin narendra singh's case were notsufficient to take an instrument out ofthe category of a settlement contemplated by section 2(24). narendrasingh's case (supra) is, therefore, ofno assistance to us. 17. section 6 of the stamp act provides that when an instrument falls within two or more of the descriptions given in schedule i-a the instrument shall be chargeable with the higher of such duties. even, therefore, when an instrument is covered by both articles 58 and 64 of the stamp act, it would be chargeable under.....
Judgment:

K.C. Agrawal, J.

1. The question involved in this Reference made by the Board of Revenue under Section 57 of the Stamp Act is as under:

'Whether the document under reference (Annexure I) comes within the definition of a 'settlement' as given in Section 2(24) Clause (c) of the Stamp Act and is chargeable with duty under Article 58-A Schedule I-B thereof or is a declaration of trust chargeable under Article 64-A Schedule I-B of the said Act?'

2. The facts leading to the above reference lie within a narrow compass. Sita Ram and Smt. Laxmi Devi were the owners of a house situate in Mohalla Sahabganj Padreuna, District Deoria. On 12-3-1962, the house was transferred to Goswami Tulsidas Vidyalaya, Padrauna. The donee failed to observe the conditions. Con-sequently, Sita Ram and Smt, Laxmi Devi, who were the donors, took over possession of the said house. On 31-5-1967, they executed the document under reference. The recitals in the aforesaid document show that as the donee of the previous gift had failed to observe the conditions, the gift deed was revoked. After revoking the gift of 1962, they created a trust and entrusted the management of the said building in the said body in perpetuity. The document further showed that possession over the building had been given to the trustees and it was stated that the trust was irrevocable.

3. The document was presented for registration before the Sub-Registrar of Padrauna, who forwarded it to the Collector under Section 38(2) of the Stamp Act. The Collector had the market value of the property determined, which was reported to be Rs. 25,000/-. He was of the view that the document being revocation of the previous settlement, the fresh settlement was chargeable separately to stamp duty under Articles 58-B and 58-A of Schedule I-B of the Stamp Act. However, being unable to come to a definite conclusion, he referred the document to the Board of Revenue under Section 56(2) of the said Act

4. After hearing counsel for the parties, the Board referred the case under Section 57 of the Stamp Act to the High Court.

5. While the executants' contention was that the deed was a declaration of Trust and, as such, chargeable only to a comparatively small duty and not maximum fixed under Article 64 of Schedule I-B of the Stamp Act, the Revenue's contention was that the deed was chargeable with stamp duty as an instrument of settlement under Article 58 of the said Schedule, the duty being the same as chargeable on a Bond.

6. For a proper appreciation of the points involved, it would be relevant to refer to the provisions of Section 2(24) of the Stamp 'Act, which defines the expression 'settlement'. An analysis of the aforesaid provision would show that in order to be a 'settlement' within the meaning of Section 2(24), there must be:

(i) a non-testamentary disposition of of property, movable or immovable,

(ii) an instrument in writing in respect of such disposition, and

(iii) the disposition must be in consideration of marriage, or for distribution of property amongst the settlor's family or his dependents or those for whom the settlor desires to provide, or for religious or charitable purpose.

7. In this case, we are concerned with Clause (c) of Section 2(24). Before we come to Clause (c), it may be pointed out that in order to be a 'settlement', it is necessary that it must be a non-testamentary disposition. The word 'disposition' has not been defined in the Act. However, before we deal with the meaning of the expression 'Disposition', it appears necessary to consider the scope of 'religious or charitable purposes'. Inasmuch as it is clear that if there is a disposition for any religious or charitable purpose, the requirement of the definition of the expression 'Settlement' may be satisfied. Religious and chariable purposes have nowhere been defined The expression 'charitable purpose', however, does not admit of a rigid definition. Mukherjea in his book on 'Hindu Law of Religious and Charitable Endowments':, 1970 edition, at page 38, says:

'For the purpose of conveying its legal sense one can at the most enumerate its various aspects and characteristics, as they have been recognised by the law of a particular country.'

8. It was pointed out in J. K. Charitable Trust v. Commr. of Income Tax : [1955]28ITR110(All) , that although the Indian Trust Act does not apply to charitable trusts, it was clear that three requirements for such a charitable trust are:

(i) Declaration of trust binding on the settlor,

(ii) setting apart definite asset or income, and

(iii) a statement of the object for which the property is to be held.

9. Applying the aforesaid tests in our case, there is little doubt that the trust created fulfilled the aforesaid three requirements.

10. The next thing, however, to be seen is as to whether the document was a disposition. The word 'disposition', since it has not been denned, we have to go by its dictionary meaning. While doing so, the context will also have to be borne in mind. This word is defined in the Chambers's Dictionary as 'arrangement; plan for disposing one's property'. In Stroud's Judicial Dictionary, the term 'disposition'' has been defined as 'a device intended to comprehend a mode by which a property can pass, whether by act of parties or by an act of the law.'

11. Counsel appearing for the executants contended that as in order to constitute a 'disposition', ownership of the property has to pass or to be transferred, the mere execution of the trust deed would not amount to a disposition unless the ownership was also transferred. In the first place, the words used in Section 2(24) are 'disposition of property' and not 'transfer'. A transaction may amount to a 'disposition of property', though it may not be a 'transfer'. Disposition is a word of much wider connotation than a transfer. When a man creates a trust, he undoubtedly disposes of his property, though he may not be transferring it. Such a transaction results in effectively passing on the property from the donor to the trustees. On a disposition being made, the trustees become entitled to manage the property and to use the same for the beneficiaries. The use of the word 'disposition' must have been intended to comprehend every conceivable mode by which a property can pass. As stated above, the word 'Disposition' is apt to include an act by an owner of property, the legal effect of which is that he ceases to be the owner of any kind of interest in that pro-perty. Looking at its context, this ordinary meaning is not cut down. In these circumstances, it appears to us that a direction given by an owner whereby the beneficial interest vested in him becomes vested in others, is a 'disposition'. It is not possible to give it a narrower meaning and to read as if it were synonym of sale, gift, or assignments, (See Grey v. Inland Revenue Commr., 1960 A. C. 1 (HL)) : In our view, it appears that there is no justification for giving the word 'Disposition' a narrower meaning than what it bears.

12. Looking at the controversy from the above angle, it would be found that when the donors or the executants entrusted the property to a new body of trustees created under the document under reference, they disposed of the property. This act amounted to a disposition. In Superintendent of Stamps and Chief Controlling Revenue Authority v. Govind Farmeshwar Nair : AIR1967Bom369 , a Full Bench of the Bombay High Court ruled:

'When a man creates a trust and constitutes himself a trustee, he undoubtedly disposes of his property though he is not transferring it.'

13. As the disposition was for a charitable purpose, the same would amount to a settlement under Section 2(24) of the Act. Since this was a settlement, the same was chargeable with duty under Article 58-A of Schedule I-B of the Stamp Act. As a result of the arrangement, which was given effect to the legal position was that the property no longer belonged absolutely to the settlors and the beneficial interest in the property got vested in the bene-ficiaries.

14. In Goli Eswariah v. Commr., of Gift Tax : [1970]76ITR675(SC) , the Supreme Court considered the meaning of the word 'Disposition' used in Section 2(24) of the Gift Tax Act, 1958. It observed :

'The word 'disposition' is not a term of law. Further, it has no precise meaning. Its meaning has to be gathered from the context in which it is used.'

15. There is yet another reason which impels us to hold that the instrument in question did not attract Article 64. It may be noted here that the word 'Trust' is not defined in the Stamp Act. It may, therefore, be taken to have been used in the same sense as in the Indian Trusts Act, 1882. Section 1 of the Indian Trusts Act provides that 'Nothing hereinafter contained applies to public or private religious or charitable endowments'. It will thus be clear that religious or charitable endowments, whether public or private, do not fall within the purview of the Trusts Act. Article 64 of Schedule I-B of the Stamp Act provides for the levy of stamp duty on trust. Accordingly, Article 64 of Schedule I-B cannot be pressed into service in a case like the present which deals with charitable trusts.

16. Strong reliance was placed on adecision of a Special Bench of thisCourt in Narendra Singh v. Board ofRevenue AIR 1947 All 141. In thiscase, the High Court considered a deedwhere the owner of the propertytransferred a part of it to three trusteeswho were to manage the same on hisbehalf during his lifetime and wereto make some arrangement in theevent of his death. The Special Benchheld that the document was not a'settlement' within the meaning of Section 2(24) and could only be treatedas a declaration of trust and stampedaccordingly. This case, however, wasnot approved by a larger Bench inBoard of Revenue v. Sridhar : AIR1964All537 . It washeld in this case that the reasons givenin Narendra Singh's case were notsufficient to take an instrument out ofthe category of a settlement contemplated by Section 2(24). NarendraSingh's case (supra) is, therefore, ofno assistance to us.

17. Section 6 of the Stamp Act provides that when an instrument falls within two or more of the descriptions given in Schedule I-A the instrument shall be chargeable with the higher of such duties. Even, therefore, when an instrument is covered by both Articles 58 and 64 of the Stamp Act, it would be chargeable under Article 58, as the duty chargeable thereunder is higher than the duty chargeable under Article 64. In Sridhar's case (supra) the Full Bench decision of this court in a similar situation, it was held that Article 58 would be applicable. The Full Bench observed:

'The definition of the word 'settlement' itself makes it clear that even instruments which are executed containing a declaration of trust can be settlements provided the conditions laid down earlier in that definition are satisfied. The question, in these circumstances, that falls for our opinion is whether a particular instrument, to which this reference relates, is a settlement or not, even though it may, on the face of it, be a deed of Trust. Under Section 6 of the Stamp Act, if a deed of Trust also amounts to a settlement, the stamp duty will be chargeable on it as an instrument of settlement under Article 58 of the Schedule I-B of the Act, and not as an instrument of Trust under Article 64 of Schedule I-B of the Act.'

18. It was next contended that as the trust was made only for the management of the property, no disposition of the property had been done. In this context, counsel laid emphasis on the fact that the trustees had neither been given any right of transferring the property nor the right of ownership. The submission is devoid of substance. In this context, it is material to note the rule of construction applicable to such a document. The rule is that the whole of the document must be read for finding the true meaning of the instrument. The rule does not permit the picking of a sentence and to construe a document on its basis. In Limmer Asphalte Paving Co. v. Commrs. of Inland Revenue (1872) 7 Ex. 211, it was stated :

'In order to determine, whether any, and if any, what stamp duty is chargeable upon an instrument the legal rule is that the real and true meaning of the instrument is to be ascertained; that the description of it given in the instrument itself by the parties is immaterial, even although they may have believed that its effect and operation was to create a security mentioned in the Stamp Act, and they so declare.'

19. This case was approved by the Supreme Court as laying down the correct law in Madras Refineries v. Board of Revenue : [1977]2SCR564 .

20. A reading of the whole of the document would show that the contention of the executants has no force. Through this document, the property was given to the trust absolutely, and that the donors ceased to have any concern with the same.

21. The result is that the document in question is liable to stamp duty as an instrument of settlement under Article 58 of Schedule I-B of the Stamp Act. Let this opinion be returned to the Chief Controlling Revenue Authority. In the circumstances, we direct the parties to bear their own costs.


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