1991 (2) TMI 60 - HC - Income Tax

Summary

Issues Involved:
1. Whether the deed in question is a declaration of trust chargeable to stamp duty under article 54A of the Schedule to the Karnataka Stamp Act, 1957.
2. Whether it is a settlement liable to duty under article 48 of the Schedule to the Karnataka Stamp Act, 1957, read with section 2(1)(q)(iii).
3. Whether it is both a declaration of trust as well as a settlement chargeable to aggregate stamp duty.
4. If the document does not fall under any of the items aforesaid, what is the correct nature of the deed and the stamp duty payable thereon?

Detailed Analysis:

Issue 1: Declaration of Trust
The court examined whether the deeds in question could be classified as declarations of trust under article 54A of the Karnataka Stamp Act, 1957. The argument presented by the learned counsel for the respondents was that the instruments should be treated as declarations of trust, as they merely converted existing societies into trusts without transferring property to a new entity. However, the court found that the deeds involved the transfer of property from the societies to the newly formed trusts, thereby altering the status of the properties and the entities holding them. The court concluded that the deeds were not simple declarations of trust but involved substantive changes in property ownership and entity status.

Issue 2: Settlement
The court then considered whether the deeds were settlements under article 48 of the Schedule to the Karnataka Stamp Act, 1957, read with section 2(1)(q)(iii). The Deputy Commissioner of Stamps had opined that the deeds constituted settlements because they involved the transfer of property ownership from the societies to the trusts. The court agreed with this interpretation, noting that the deeds satisfied the definition of "settlement" as they involved a non-testamentary disposition in writing of movable and immovable properties for charitable purposes. The court emphasized that the properties were transferred and vested in the trusts, which constituted a complete change in status and ownership.

Issue 3: Aggregate Stamp Duty
Given the court's findings on the first two issues, the question of whether the deeds were both declarations of trust and settlements, thus requiring aggregate stamp duty, did not arise. The court's determination that the deeds were settlements under article 48 rendered this issue moot.

Issue 4: Correct Nature of the Deed and Stamp Duty
The court concluded that the deeds were settlements and not declarations of trust. Therefore, the correct nature of the deeds was that of settlements, and the stamp duty payable was as per article 48 of the Schedule to the Karnataka Stamp Act, 1957.

Conclusion
The court concluded that:
1. The deeds in question are not declarations of trust chargeable to stamp duty under article 54A of the Schedule to the Karnataka Stamp Act, 1957.
2. The instruments are liable to stamp duty under article 48 of the Schedule to the Karnataka Stamp Act, 1957, read with section 2(1)(q)(iii).
3. The other questions did not arise in view of the opinion recorded on questions Nos. 1 and 2.

No costs were awarded.