Salahudeen V. Commissioner Of Stamps

1954 Present: Nagalingam S.P.J. and Fernando A.J.

M. N. M. SALAHUDEEN, Appellant, and
 COMMISSIONER OF 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 1, Items 23 \1) (6), 23 (4), 23 (8)r 27 (Proviso)-Trusts Ordinance, 5.84.

Property can be held by a person in trust to convey it to a Company which is to-come into existence in the future. When immovable property thus held in trust is conveyed by the trustee to the Company when formed, the deed of transfer is a conveyance " by a trustee without consideration to the person beneficially entitled ", and as such attracts only the duty chargeable under Item 23 (4) of; Part 1 of the Schedule to the Stamps Ordinance.

APPEAL against a determination of the Commissioner of Stamps

H. W. Tambiah, 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 of the opinion of the Commissioner-of Stamps that Deed No. 1,644 of July 15, 1943, is liable to stamp duty of Rs. 2,840 as a conveyance of property under Item 23 (1) (6) of Part 1 of the 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 conveyance not otherwise charged or excepted. He maintains that the deed is a conveyance "by a trustee without consideration to the person beneficially entitled ", 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 not disputed by the Commissioner and have an important bearing on the question we have to decide. It would appear that one A. R. M. Mohamed in-December 1942, made an offer of Rs. 177,500 for the purchase of two-estates, and the offer being accepted, a conveyance in his favour was executed on March 15, 1943. The consideration for the purchase was provided by Mohamed himself and three other persons in varying proportions and by cheques drawn by or on behalf of each of those persons. The documents 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 (b) that-

they would be allotted shares in the company in strict proportion to the amounts respectively contributed by them towards the total purchase price paid for the estates. The application for the incorporation of the proposed company was made in January 1943, but the grant of incorporation was -delayed, for one reason because the law at that time required the sanction of the Governor for the formation of a company with a capital exceeding one lakh. The Controller of Exchange was informed by the Proctor for the parties of the purpose of the incorporation and of the fact that it was intended that the property would be purchased in trust for the company to be formed. As the sale had to be concluded before the certificate of incorporation could be granted, the proctor first tendered to the vendors a 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 fact that 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 an outright transfer to Mohamed and contained no reference to the object with which the estates were being purchased. The certificate of incorporation of the company was subsequently issued (on June 8, 1943), and in July Mohamed executed, in favour of the company, the conveyance No. 1644 which is the subject of this appeal.

The intention of the persons who provided the consideration for the conveyance No. 1620 was that

Click Here to Read the rest of this document