Waharaka Investment Co., Ltd. V. Commissioner Of Stamps

1932 Present : Macdonell C.J. and Garvin S.P.J.

WAHARAKA INVESTMENT CO., LTD. v.
COMMISSIONER OF STAMPS.

28 (Inty.)-Appeal under section 32 of Stamp Ordinance.

Stamps-Incorporation of Company-Transfer of shares to Company-Consideration for transfer-Market value of shares-Dtity on instrument- Ordinance No. 22 of 1909, ss. 20 and 22.

A company styled the Waharaka Investment Company was formed, principally for the purpose of acquiring all the interests in Ceylon of one R. D. and was registered on March 15, 1930.

It was part of the arrangement entered into with R. D. upon which the Company was incorporated, that the Directors would not allot any shares in the Company to any persons other than the said R. D. or persons nominated by him, and that upon the application and payment in full by the said R. D. for shares, they would be allotted to him or his nominees.

On March 18, 1930, a resolution was passed at a meeting of the Directors, all of whom were nominees of the said R. D., that they should negotiate for the purchase of the assets, the property of R. D., specified in the resolution for the prices stated therein.

One of the assets conveyed consisted of 670 shares in the Great Western Tea Company transferred to the Company by the instrument in question. The consideration for the transfer was Rs. 13,400 while the market value of the shares was Rs. 63,650.

Held, that the consideration for the transfer was the price specified in the instrument and that the instrument was chargeable with duty assessed on that consideration.

APPEAL from a decision of the Commissioner of Stamps under section 30 of the Stamp Ordinance to the effect that the transfer of certain shares in the Great Western Tea Company of Ceylon by one A. R. Dawson to the appellant Company was liable to a stamp duty of Rs. 640 instead of Rs. 135, which the Company claimed was the duty chargeable. The facts are briefly stated in the headnote.

H. V. Perera (with him Choksy and D. W. Fernando), for appellant.-The true consideration is the actual value paid. It is only legal consideration that matters. A person may be willing to sell at different prices to

different individuals. If the transaction is genuine then the reasons that determine the consideration do not matter. A transaction is genuine where it is for the agreed consideration. Stamp duty is payable only on the consideration stated in the document. If the consideration is more than the value of the property then stamp duty will be payable on the consideration and not on the value of the property, (Ex parte Chellappa [1 19 N. L. R. 116 at p. 119. ]). There is no doubt that consideration is not merely money consideration. But the consideration must be stated in the document. The word consideration must be understood in its legal sense. Motive is excluded. Section 74 of the Finance Act of 1891 deals with cases in which the consideration is so inadequate as to make the transaction almost a gift. Valuable consideration does not mean adequate consideration. The element that matters is the good faith of the parties.

In the present case it cannot be said that there is another consideration over and above the one expressed in the instrument of transfer. There is no evidence of an agreement to that effect. The transferor is the major shareholder in the Waharaka Company but he cannot for that reason be identified with the Company, which being a corporate body is a separate legal entity. (Foster & Sons. v. Commissioner of Inland Revenue [2 (1894) 1 Q. B. 516. ],) The transfer in this case falls within the principle in Spargo's case [3 (1872) L. R. 8 Ch. Ap. 407.].

M. W. H. de Silva, Acting Deputy S.-G. (with him Basnayake, C.C.), for the Commissioner of Stamps.-The shares were sold to the Company at the rate of 20 rupees. The market value is. 75 rupees. Therefore on the face of the transaction, it was one th

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