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The Chief Controlling Revenue Authority Vs. Banarsi Dass Ahluwalia - Court Judgment

LegalCrystal Citation
SubjectCivil;Trusts and Societies
CourtDelhi High Court
Decided On
Case NumberStamp Duty Reference No. 3 of 1969
Judge
Reported inAIR1972Delhi128
ActsStamp Act, 1899 - Sections 2(24) and 6 - Schedule - Article 58 and 64
AppellantThe Chief Controlling Revenue Authority
RespondentBanarsi Dass Ahluwalia
Appellant Advocate B.N. Kirpal, Adv
Respondent Advocate S.P. Kalra, Adv.
Cases ReferredIn Goli Eswariah v. Commissioner of Gift Tax
Excerpt:
.....58 and 64--'settlement'--meaning of--instrument creating charitable trust--chargeability to stamp duty.; religious or chariable endowments, whether public or private, are excluded form the purview of 'trust' chargeable to duty under article 64 of schedule 1-a of the stamp act. non-testamentary disposition of movable or immovable property made for the three purposes specified in clauses (a), (b) and (c) of section 2(24) have to be regarded as 'settlement' whether they are made by way of a declaration of trust or otherwise. the meaning of 'settlement' cannot be restricted to any particular kind of dealing with property or money. whatever is included in the definition in section 2(24) has to be regarded as a 'settlement' for the purposes of stamp act. it is inevitable, thereforee,..........1899 is :-'whether the instrument (annexure a) is a deed of declaration of trust, chargeable to stamp duty under art. 64 of sch. i-a of the indian stamp act or is a deed of settlement within the meaning of section 2(24) of the act?'.2. the deed opens with the following recitals :-'whether the creation of a charitable trust for the real benefit of the public has been the dream of the founder; and whereas the founder has accordingly created a charitable trust having appointed himself as first trustee and has dedicated and endowed upon trust his various assets and properties. ................... it is considered desirable to execute a formal deed of trust'.the founder then proceeds to declare that the business and the properties described in the deed shall no longer be the personal.....
Judgment:

V.S. Deshpande, J.

1. The question referred to us for opinion under Section 57(2) of the Indian Stamp Act, 1899 is :-

'Whether the instrument (Annexure A) is a deed of declaration of trust, chargeable to stamp duty under Art. 64 of Sch. I-A of the Indian Stamp Act or is a deed of settlement within the meaning of Section 2(24) of the Act?'.

2. The deed opens with the following recitals :-

'Whether the creation of a Charitable Trust for the real benefit of the public has been the dream of the Founder;

And whereas the Founder has accordingly created a Charitable Trust having appointed himself as first Trustee and has dedicated and endowed upon Trust his various assets and properties. ................... it is considered desirable to execute a formal deed of Trust'.

The Founder then proceeds to declare that the business and the properties described in the deed shall no longer be the personal business or property of the Founder or any other person but shall be held in Trust. The objects of the Trust are of a public and charitable nature. The Founder of the Trust is to be sole trustee with power to appoint co-trustees who will have full power to manage the income of the trust properties.

3. While the Founder trusted contends that the deed is a declaration of Trust and as such chargeable only to a comparatively small stamp duty not exceeding the maximum fixed under Article 64 of Schedule I-A of the Stamp Act, the Revenue is of the opinion that the deed is chargeable to stamp duty as an instrument of settlement under Art. 58 of the said Schedule, the duty being the same as the duty on a Bond for a sum equal to the amount or value of the property settled in the deed of settlement. Since the dispute has arisen mainly because of the smaller and the higher stamp duties payable under these two articles, it may be mentioned here that even a higher scale of stamp duty is chargeble for a conveyance under Art. 23 of the Schedule. The legislative policy seems to he that a conveyance such as the sale or a gift being outright transfers either for valuable consideration or for love and affection, the stamp duty on them should be high under Arts. 23 and 33. Next comes the settlement which is defined in Section 2(24) of the Stamp Act which is as follows :-

'Settlement' means any non-testamentary disposition, in writing, of movable or immovable property made - (a) in consideration of marriage.

(b) for the purpose of distributing property of the settler among his family or those for whom he desires to provide, or for the purpose of providing for some person dependent on him, or

(c) for any religious or charitable propose; and includes an agreement in writing to make such a disposition and, where any such disposition has not been made in writing any instrument recording, whether by way of declaration of Trust or otherwise, the terms of any such disposition'.

As the settlement is different from an ordinary transfer or conveyance and is actuated with a desire to benefit some one other than the settlor, the stamp duty on it is half of the duty on conveyance. Last comes the Trust which is also made for the benefit of others by the creator of the Trust. The scope of the Trust is more limited than the scope of the settlement and the stamp duty chargeable on an instrument of trust is thereforee even less than the one chargeable on an instrument of settlement.

4. The word 'trust' is not defined in the Stamp Act, 1899. It may, thereforee, be taken to have been used in the Stamp Act in its popular sense similar to its meaning in the Indian Trusts Act, 1882. Section 1 of the Indian Trusts Act 1882, states that 'nothing herein contained ........... applies to public or private religious or charitable endowments'. It would appear, thereforee, that religious or charitable endowments, whether public or private, are excluded from the purview of 'trust' chargeable to duty under Article 64 of Schedule I-A of the Stamp Act. Further, the definition of 'settlement' in Section 2(24) expressly includes a settlement 'for any religious or charitable purpose ........... in writing .............. whether by way of declaration of trust or otherwise'. Even if the word 'trust' in Article 64 is regarded as having the same meaning as it has in the Trusts Act, still 'public of private religious or charitable endowments' are excluded by Section 1 of the Trusts Act from the scope of that Act and the 'trust' as understood in that Act does not include religious or charitable endowments. The deed under examination is expressly entitled to be a charitable trust. In view of Section 1 of the Trusts Act, it falls outside the ambit of 'trust' chargeable to duty under Article 64 of the Schedule to the Stamp Act. On the other hand it is expressly covered by the definition of 'settlement' in Section 2(24) of the Stamp Act. Non-testamentary disposition of movable or immovable property made for the three purposes specified in clauses (a), (b) and (c) of Section 2(24) have to be regarded as 'settlement' whether they are made by way of a declaration of trust or otherwise. It would be true to say, thereforee, that while a trust made for the purpose specified in Section 2(24) would always be a settlement, the converse may not be true. That is to say, a settlement made for any of these three purposes may be made either by way of a trust or other wise. The reason why a 'settlement' has a wider connotation than a 'trust' is to be found in the history of these two concepts.

5. The expression 'settlement' has originated in the English law of real estate. Historically, 'settlement' was a device adopted by the English landed gently to order the future destiny of their lands and to prevent them from being sold out of their family. The creation of a settlement determined the tenure by which an estate or interest in land may be held. An estate or interest prescribed the length of time for which a person was entitled to hold land such as, fee simple (virtually for every) or in Tail (for as long as he and his descendants lived), for life or for a period of years. Formerly the capacity of a land owner at common law to create future interests was restricted only to the simplest forms of settlement. This was liberalised by coming into vogue of the device of trust which enabled the creation of equitable estate. The equitable estate was a pliable instrument that could be moulded into suitable forms to extend the modes of dealing with property, i.e., of settlement.

6. From its inception thereforee, 'settlement' has a larger ambit than 'trust'. This is reflected in the definition of 'settlement' in Section 2(24) of the Stamp Act which includes instruments made 'whether by way of declaration of trust or otherwise'. In fact, settlement may be of other kinds than those specified in Section 2(24). They can also be made differently such as by 'will'. They are excluded from the definition of Section 2(24).

7. Learned counsel for the Founder trusted argued that according to Section 6 of the Trusts Act, a trust is created by transfer of the trust property to the trustee unless the author of the trust is himself to be the trustee. He argued that the Founder trusted being himself the author of the trust, three is no transfer of property made by the deed in question. The word 'disposition' used in the definition of 'settlement' means transfer of property. As there is no transfer of property made by the deed in question, it is not a deed of 'settlement'. This argument is not convincing. Firstly, the disposition of property made by the deed cannot be a 'trust' according to the Trust Act inasmuch as it is made for a charitable purpose. Even if, thereforee, it is made by way of a trust it is a charitable trust and as such outside the Trusts Act. Secondly, the word 'disposition' is not restricted to a transfer as such. It seems to have a very wide connotation. For instance in Section 188(17) of the English Law of Property Act, 192, 'disposition' includes a conveyance also a device bequest and an appointment of property contained in a will which are to take effect in equity only, and 'dispose of' has a corresponding meaning In Section 43 of the English Universities and Colleges Estates Act, 1925, the words 'disposition' and 'conveyance' include a mortgage, charge by way of legal mortgage, lease, assent, vesting declaration, vesting instrument, disclaimer, release and every other assurance except a will. In Goli Eswariah v. Commissioner of Gift Tax, Andhra Pradesh, : [1970]76ITR675(SC) , the Supreme Court had occasion to consider the meaning of the word 'disposition' used in Section 2(24) of the Gift Tax Act, 1958. In paragraph 12, their Lordships observed as follows:-

'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.'

In view of this wide meaning of which the word 'disposition' is capable, the meaning of 'settlement' cannot be restricted to any particular kind of dealing with property or money. On the other hand whatever is included in the definition in Section 2(24) has to be regarded as a 'settlement' for the purpose of the Stamp Act. It is inevitable, thereforee that many charitable trust would be included in it. In fact, there is no article in the Schedule specifically dealing with a charitable trust. It is not surprising, thereforee, that a charitable trust like the one created by the deed in question is covered by S. 2(24) and is chargeable to duty under Art. 58 of Schedule I-A of the Stamp Act.

8. Further, Section 6 of the Stamp Act says that when an instrument fails within two or more of the descriptions in Schedule I, it shall be chargeable with the highest of such duties. Even thereforee, when an instrument is covered by both Article 58 and article 64 of the Stamp Act, it would be chargeable under Article 58 as the duty chargeable there under is higher than the duty chargeable under Art. 64.

9. We are, thereforee of the view that the deed in question is a 'settlement' chargeable under Article 58 of Sch. I-A of the Stamp Act and not under Article 64 thereof.

10. Reference answered accordingly. There will be no order as to costs.

11. Reference answered accordingly.


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