Karnataka High Court
Chief Controlling Revenue Authority ... vs Dr. H. Narasimhaiah And Etc. on 22 February, 1991
Equivalent citations: AIR1991KANT392, 1991(2)KARLJ1, AIR 1991 KARNATAKA 392, (1991) 192 ITR 708, (1991) 2 KANT LJ 1, ILR (1991) KAR 1041
Bench: S. Mohan, Shivaraj Patil
ORDER
Shivaraj Paul, J. (For himself and on behalf of S. Mohan, C. J. and K. Rama-chandraiah, J.)
1. Since the common questions are raised and referred for the opinion under Section 54(1) of the Karnataka Stamp Act, 1957 by the Chief Controlling Revenue Authority in Karnataka, Bangalore, we propose to dispose of these cases by this common order.
2. Brief statement of the case in C. R. C. 1988 is set out below :
A document described as the 'Deed of Trust' executed by the President of the National Education Society of Karnataka (Registered) Basavangudi, Bangalore was presented before the Deputy Commissioner for Stamps under Section 31 of the Karnataka Stamp Act. 1957 (for short the 'Act') for adjudication as to proper stamp duty payable on the said instrument. The Deputy Commissioner entertained doubt as to the proper duty leviable on the said document. So acting under section 53(2) of the Act he drew up a statement of the case and referred it, with his opinion thereon, for the decision of the Chief Controlling Revenue Authority. The Chief Controlling Revenue Authority in turn in the order of reference has stated the case thus :--
"The author of the Trust is the President of the National Education Society in Karnataka, a society registered under the Mysore State Registration Act, 1904, now called Karnataka State Societies Registration Act, 1960. The terms of the instrument in brief are :--
1. The National Education Society in Karnataka will become National Education Society Trust.
2. The objects of the Society shall remain the objects of the Trust.
3. All the members of the Governing Council of the society shall become trustees.
4. All the assets and liabilities of the society including all its institutions. Hostels and printing press and other ventures shall become the assets and liabilities of the Trust.
5. This is a public Charitable Trust.
According to the opinion of the Deputy Commissioner of Stamps the entire ownership of the properties in the society is transferred to the trust. There is a disposition of property as well as transfer. As such the documents satisfied the definition of settlement as per Section 2(1)(q)(iii) of the Karnataka Stamp Act, 1957 as there is non-testamentary disposition in writing of movable and immovable properties for any religious or charitable purpose. Hence the duty leviable shall be in accordance with Article 48 of the Schedule to Karnataka Stamp Act, 1957 as a settlement.
The learned counsel Sri C. R. Jayachandra Setty vehemently argued before this Authority that the instrument in question is only a declaration of trust chargeable to stamp duty under Article 54 of the Schedule to Karnataka Stamp Act, 1957 basing his argument mainly on the Full Bench decision of the Madhya Pradesh High Court in Digambar Jain v. Sub Registrar Stamps, Indore. That is a decision on the Indore Stamp Act AJR 1970 Madhya Pradesh 23 wherein their Lordships have held that document merely declaring existence of trust coupled with transfer of its management does not fall within the definition of the term conveyance.
After going through the contents of the instrument in the light of the law laid down in the above case it can be easily said that facts are different. In the above ease it is only a declaration of an existing trust with transfer of management. In the instrument in question, the society becomes a trust and the property also gets transferred as such there is a complete change in the status itself. As such the ratio cannot be followed as a precedent.
Further, according to Section 14 of the Karnataka Societies Registration Act. 1960 the property movable and immovable belonging to the society, shall if not vested in the trustees, shall vest with the governing body. Secondly there is no provision in the Act to change the character of the society to a trust. The only provision is Section 21 which provides for amalgamation of Societies. As there is no provision to convert a society into a trust the transaction in effect amounts to a transfer of the properly thereby attracts higher stamp duty as a settlement. The term declaration of trust as provided in Article 54 of the Act is not defined but recourse can be had to Indian Trust Act where the term trust has been defined as a confidenee reposed in a person regarding a property. As such a declaration of trust involves vesting of property out of confidence reposed in him. Herein this case there is already a society owning properties which transfers the properly into a trust or transforms itself into a trust."
3. On the case stated, the Chief Controlling Revenue Authority has sought for the opinion of this Court under Section 54(1) of the Act on the following questions :
"I. Whether the deed in question is a declaration of trust chargeable to stamp duty under Art. 54(A) of the Schedule to the Karnataka Stamp Act, 1957.
2. Whether it is a settlement liable to duty under Art. 48 of the Schedule to Karnataka Stamp Act, 1957 read with Section 2(i)(q)(iii).
3. Whether it is both a declaration of trust as well as 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."
4. In C.R.C. No. 4/89 also an instrument styled as the 'Deed of Trust' executed by the President of the Maha Bodhi Society, Bangalore, was presented for its registration before the Sub-Registrar, Gandhinagar, Bangalore. The Sub-Registrar seeing the recitals in the document felt doubt as to what is the proper stamp duly leviable on the said instrument. As such he impounded the same under Section 33 of the Act and referred it to the Headquarters Assistant to District Registrar. Bangalore, under Section 37 of the Act for adjudication of stamp duty payable under section 39 of the Act. The Headquarters Assistant to the District Registrar felt doubt as to the proper stamp duty leviable. He made reference to the Chief Controlling Revenue Authority under Section 53(2) of the Act because he felt that substantial question of law is involved. The case as staled in the order of reference of the Chief Controlling Revenue Authority is that :--
"The author of the Trust is the President of the 'Mahabodhi Society' a society registered under the provisions of the Karnataka Societies Registration Act, 1960. The terms of the instrument in brief are :--
1. Mahabodhi Society becomes Mahabodhi Scoiety Trust.
2. The objects of the society shall remain the objects of the Trust.
3. All the assets both movable and immovable and rights and liabilities of the society shall become the assets and liabilities of the Trust.
4. This trust shall be a religious charitable Trust.
According to the opinion of the Deputy Commissioner of Stamps, Bangalore the entire ownership of all the assets and liabilities of the society is transferred to Mahabodhi Society Trust, Bangalore. By virtue of the document the entire ownership of the properties of the society is transferred to the Trust. Further he submits that the document satisfies all the ingredients of settlement as defined under Section 2(1)(q)(iii) of the Karnataka Stamp Act, 1957. Hence the duty leviable shall be in accordance with Article 48 of the Schedule to the Karnataka Stamp Act, 1957 as a settlement.
The learned counsel Sri. S. Srinivasa Murthy argued and filed a written statement before this authority that the instrumenl in question fully answers the definition of a trust, chargeable to stamp duty under Article 54 of the Schedule to Karnalaka Stamp Act, 1957. It is submitted in the written statement that the document cannot be regarded as a settlement as it is not a disposition of property for any of the purposes set out in Section 2(q) of the Act and it is a deed of trust created by the owners of the property namely the society impressing the property with the character of a Trust to be held for the very purposes for which the society exists.
In the instrument in question the society becomes a Trust and the property also gets transferred as such there is a complete change in the status itself. Further according to Section 14 of the Karnataka Societies Registration Act, 1960 the movable and immovable properties belonging to the Society, shall if not vested in the trustees, shall vest with the governing body. Secondly there is no provision in the Act to change the character of the society to a trust. The only provision is Section 21 which provides for amalgamation of Societies. As there is no provision to change a society into a trust, the transaction in effect amounts to a transfer of the property. Thereby it attracts higher stamp duty as a settlement. The term declaration of trust as provided in Article 54 of the Karnataka Stamp Act, 1957 is not defined but recourse can be had to Indian Trust Act, where the term trust has been defined as a confidence reposed in a person regarding a property. As such a declaration of trust involves vesting of property out of confidence reposed on the trustee. Here there is already a society owning properties, which transfers the property into trust or transforms itself into a trust."
5. On the basis of the statement of the case so made, the following questions are referred for our opinion under Sec. 54(1) of the Act :--
"1. Whether the deed in question is a declaration of Trust chargeable to stamp duty under Article 54(A) 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 Karnataka Stamp Act, 1957 read with Section 2(1)(q)(iii).
3. If the same does not fall under any of the above categories, what is the correct nature of the deed and the stamp duty payable thereon."
6. Thus as stated in the beginning the questions of law on which opinion of this Court is sought are common. Even the terms of the document sought to be registered in both these cases are almost similar.
7. It would be useful to refer to the terms of the documents in question since ultimately it is those terms of the documents which will determine the character of the transaction. In CRC 1/1988, the document is styled as a Deed of Trust, the author of the Trust is Dr. H. Narasimhaiah, President, National Education Society of Karnataka (Regd.), Basavangudi, Bangalore-560004. The following are the few extracts from the said documents :--
"I. Whereas the Author of the Trust is the President of the National Education Society of Karnataka, a Society Registered under the provisions of the Mysore Societies Registration Act III of 1904, (i) Registration No. 1013 dated 29-3-1919 (hereinafter referred as The Society), (ii) Registered Office at the National High School Premises, Basavangudi, Bangalore--560004, and (iii) with the following objects :--
1. to establish, within the State of Karnataka Schools, Colleges & Hostels;
xxx xxx xxx II. Whereas the Control and Administration of the above society consisting of the. following Eleven Institutions namely:
Institution Year of Establishment
or Amalgamation.
1. The National College
Basavangudi, 1945
Bangalore--560 004.
XXX XXX XXX XXX
together with all their Assets and Liabilities have vested in the Governing Council as per the Rule 5 of the said National Education Society of Karnataka;
III. Whereas the National Education Society has also been controlling and administering Hostels and Printing Press and other ventures, together with their Assets and Liabilities:
IV. Whereas a careful study of the Rules of the Society and their implications have revealed that there is a lot of scope to inject unhealthy tendencies into the Society by vested interests, and make the Management unwieldy and its working ineffective and this may ultimately cause irreparable damage to the academic and administrative work, and the properties of the Institutions and the Management;
VI. Whereas taking all these factors into consideration and having in view of the future welfare of the Institutions also, the Governing Council of the National Education Society of Karnataka unanimously resolved that the affairs of the Society including all its above Institutions and Hostels, Printing Press and other ventures could he better administered by converting itself into a Trust:
VII. Whereas the said proposal of the Governing Council of the Society was placed before the Special General Body of the National Education Society of Karnataka convened for this purpose on 18-5-1986 and the said Special General Body Meeting of the Society Unanimously resolved to convert the said Society into a Trust as per the proposal of the Governing Council and the said resolution of the Special General Body Meeting of the National Education Society held on 18-5-1986 was placed before another Special General Body Meeting of the National Education Society of Karnalaka convened on 22-6-1986 for confirmation and the said Special General Body Meeting of the Society held on 22-6-1986 Unanimously confirmed the same;
IX. Whereas as per the resolution of the Special General Body Meeting of the Society held on 18-5-1986 and duly confirmed by the Special General Body Meeting of the Society held on 22-6-1986.
xxx xxx xxx
e) the President of the National Education Society of Karnataka has been further empowered to execute all necessary deeds;
f) the existing Rules and Byelaws and Rules of the Society which are not inconsistent with the principles of the constitution of the Trust, shall be in force until the execution of the Trust and the framing of the Rules and the Byelaws by the First Board of Trustees. And
g) All the Assets and the Liabilities of the National Education Society of Karnataka (Regd.) and its Institutions, Hostels, Printing Press and other ventures, shall be the Assets and the Liabilities of the National Exucation Society Trust.
xxx xxx xxx XI. Whereas accordingly the Author of the Trust, who was the President of the National Education Society of Karnataka and who became the President of the Trust as per the resolution mentioned above is executing this Deed of Trust:
XII. (1) 1. Dr. H. Narasimhaiah, the President of the National Education Society of Karnataka (Regd.) Basavangudi, Bangalore-560 004, who have become the President of the Trust, in pursuance and as per the resolutions unanimously passed by the Special General Body Meeting of the National Education Society of Karnalaka held on 18-5-1986 and Unanimously confirmed by the Special General Body Meeting of the National Education Society of Karnalaka held on 22-6-1986 and in pursuance of the resolution of the First Board ol Trustees held on 23-7-1986. Do Hereby Declare that the National Education Society of Karnataka is converted into the National Education Society Trust having all the assets and liabilities of the National Education Society of Karnataka, including the assets and liabilities of its Institutions, Hostels, Printing Press and other ventures as the Assets and Liabilities of the National Education Society Trust;
(2) Public Charitable Trust by name "The National Education Society Trust" is hereby created.
xxx xxx xxx 7. (a) Management:
The Management of the National Education Society Trust shall vest in the Board of Trustees consisting of the following categories xxx xxx xxx
8. Assets and Liabilities :
(i) All the Assets and the Liabilities of the National Education Society of Karnataka (Regd.) including Institutions, Hostels. Printing Press and other Ventures shall be Assets and Liabilities of the National Education Society Trust.
(ii) Assets shall mean and include all the moveable and immoveable properties, deposits and Bank balances. Endowments and Securities.
xxx xxx xxx
12. (a) The Board of Trustees shall have powers to sell, to settle or to exchange any of its properties only with the approval of the General Body of the Trust."
8. Following are the few extracts of the document in CRC 4/89:--
"This Deed of Trust executed on the Twenty seventh day of January One Thousand Nine Hundred and Eighty Eight, by the Maha Bodhi Society, A Society Registered on 6-9-68 No. S. 123/68-69 under the KSR Act No. 17 of 1960 having its office at No. 14, First Main Road, Gandhinagar, Bangalore-560 009, represented herein by its President -- Venerable Sri Acharya Budharakkhita (hereinafter referred to as the Author or as 'Society' which expression shall whenever the context so requires or admits, mean and include its successors in office of One Part :
1. Venerable Sri Acharya Buddharak-khita, age 66 years residing at No. 14, 1 Main Road, Gandhinagar, Bangalore -- 560 009.
xxx xxx xxx
5. Venerable Sudhamma. age 21 years, residing at No. 14, 1 Main Road, Gandhinagar. Bangalore -- 560 009.
I. Whereas the Maha Bodhi Society the Author herein is a Society registered under the provisions of the Karnataka Societies Registration Act, and established to propagate the teaching of Lord Buddha in India and the said Society by a resolution of the Special General Body of its Members passed at their Meeting held on 22-11-1987 decided to create a Trust in furtherance of the objects for which the said Society had been founded :
II. Accordingly These Presents Witnesseth as follows.
Maha Bodhi Society the Author herein, creates Trust by the name of 'Mahabodhi Society Trust' with the objects and upon the terms and conditions hereinafter mentioned;
The Author hereby transfers the premises Sangharama bearing No. 14. situated at First Main Road. Gandhinagar, Bangalore --560 009, morefully described in the Schedule written hereunder to the said Trust and confirms having delivered possession of it to the Trustees :
IV. Nature of the Trust:
This Trust shall be a religious Charitable Trust. All its properties funds and income therefrom shall be applied in India solely for the purpose of this Trust;
XI I, Power of the Trustees:
1. The Trustees shall have full power and authority to administer the Trust, its institutions, properties and funds and to do all acts, deeds and things as are calculated to promote the objects for which this Trust is established.
xxx xxx xxx XXI. Failure of the Trust;
If for any reason, this Trust shall fail or it is resolved to dissolve this Trust, at any future time, the Board of Trustees may transfer its properties, institutions and funds to the Society and in case the Society is not in existence then to any other Trust with some objective established for promotion of Buddhism and which enjoys recognition under section 80-G of the Income-tax Act as may be resolved by the Board of Trustees then in office unanimously or by not less than three-fourths majority."
8A. Learned counsel for the respondents in these cases submitted that the documents in question do not fall within the definition of settlement under Section 2(1)(q)(iii) of the Act. Considering the nature of the documents, the stamp duty payable would be under Article 54-A of the Act. Sri S. G. Sundaraswamy, learned counsel for the respondent in CRC 4/89, urged that the instrument in question attracts stamp duty under Article 52 (d) of the Act. He submitted that the respondent is a society deemed to have been registered under the Karnataka Societies Registeration Act, 1960 (for short the Act, 1960). He drew our attention to Section 2(a) of the Act, 1960 in which 'governing body' is defined thus:--
"governing body" means the governors, council, directors, committee, trustees or other body to whom by the rules and regulations of the society, the management of its affairs is entrusted;"
He submitted that under Section 14 of the Act, 1960, the property moveable and im-moveable, belonging to a society registered under this Act, if not vested in trustees, shall be deemed to be vested, for the time being in the governing body of such society. He contended that the members of the governing body of the society were holding the properties of the society as trustees and the registered society is not a legal entity inasmuch as registration cannot be equated to incorporation. The properties of the societ;, get vested in the Trust created; President and members of the governing body of the society continue to be the President and Trustees of the Trust; and they carry on the same purpose. The transaction covered by the instrument in question is to be construed and considered as transfer of any trust property from the Trustee to another Trustee falling under Article 52(d) of the Act. Society is not a legal entity as distinguished from a Company incorporated. Hence looking to the terms of the documents in question it cannot be said that society transferred its properties to any other body i.e., Trust in these cases.
9. Smt. T. N. Manjula Devi, learned Government Advocate, for the applicant-Revenue contended that the instruments in question are liable for stamp duty under Article 48 of the Schedule to the Act, keeping in view the very terms contained in the instruments and the fact that the properties belonging to the Societies are sought to be transferred in favour of the Trusts.
10. In support of his argument, Sri. Sundaraswamy learned counsel placed reliance on the decision in the case of Pamul-pati Buchi Naidu College Committee, Nidu-brolu v. Govt. of Andhra Pradesh, (AIR 1958 Andh Pra 773, particularly our attention was invited to para-11 in the said Judgment which reads thus :--
"(1) Now, what is the legal effect of the registration of a Society? The Societies Registration Act was enacted for the registration of literary and scientific societies and the object of the Act. as stated in the preamble, is to make provision for improving the legal condition of societies established for the promotion of literature, science, or the fine arts or for the diffusion of useful knowledge, the diffusion of political education, or for charitable purposes.
Under the provisions of the Act, any seven or more persons associated for any literary, scientific, or charitable purpose, or for any such purpose as is described in S. 20 may, by subscribing their names to a memorandum of association and filing the same with the Registrar of Joint Stock Companies, form themselves into a society. The memorandum of association is to contain the name of the society, the objects of the society, the names, addresses and occupations of the governors, council, directors, committee, or other governing body to whom, by the rules of the society, the management of its affairs is entrusted.
The property, movable and immovable belonging to a society may be vested in trustees, and if not so vested, is deemed to be vested for the time being in the governing body of such society, and in all proceedings, civil and criminal, may be described as the property of the governing body of such society by their proper title. Under S. 16 of the Act, the governing body of the society shall be the governors, council, directors, committee, trustees, or other body to whom by the rules and regulations of the society the management of its affairs is entrusted."
In the said Judgment, the applicability of Sections 4 and 5 of the Charitable Endowments Act (VI of 1890) to a registered society came up for consideration. It is in that context the observation was made In para-11 as extracted above. But, in para-19 of the same Judgment it is stated thus :--
"The Society continues to exist and to function as such until its dissolution under the provisions of the Act. The properties of the society continue to be vested in the trustees or in the Governing Body irrespective of the fact that the members of the society for the time being are not the same as they were before; nor will be the same thereafter.
By reason of the provisions of the Societies Registralion Act, once the society is registered with the Registrar, by the filing of the memorandum and certified copy of the rules and regulations and the Registrar has certified that the society is registered under the Act, it enjoys the status of a legal entity apart from the members constituting the same and is capable of suing or being sued."
Then again in para 27 of the same Judgment it is stated thus :--
"If what is vested in the College Committee or its governing body is a right of management simpliciter, there is no question of the members of the society or the members of the governing body being beneficially interested in its property. It necessarily follows that by the fact of appointment of a treasurer, there can be no deprivation of the society of its rights in properly.
The consequence, which would flow on the appointment of a treasurer by the Government under the provisions of the Charitable Endowments Act, would be that he will take charge of the management of the properties held by the society. There is no divesting of the rights of the society in its properties. As already stated, what all the society is deprived of would be right of management which cannot he equated to any right in the properly."
Reliance was also placed on the decision in the case of Board of Trustees, Avurvedic and Unani Tibia College v. State of Delhi (Now Delhi Administration), . Our attention was drawn to paras 14 and i 5 in the said Judgment to state that registration does not result in incorporation but merely entitles the Society so registered to enjoy the privileges conferred by the Act. On careful reading of this Judgment particularly keeping in view what is stated in paras 23 and 25 we do not find that it supports the contention advanced on behalf of the respondents. Similarly, the decisions in the cases of S.P. Mittal v. Union of India. ; Daman Singh v. State of Punjab, , also do not advance the case of the respondents any further inasmuch as these authorities do not lay down that the societies registered are not legal entities or that the societies cannot hold properties.
11. The case of Shri Digambar Jain v. Sub Registrar, Stamps, Indore, (FR) also does not help the respondents. In that case, the document merely declared the existence of Trust coupled with transfer of its management unlike in these cases on hand the properties belonging to the registered societies are sought to be transferred and vested in the newly created Trusts.
12. Section 14 of the Act, 1960 shows that the properties moveable and immoveable belong to a society registered under the Act, 1960. Such properties if not vested in trustees shall deem to be vested for the time being in the governing body of such societies. Thus it follows that the properties belong to society and vest in the governing body for the time being if not vested in trustees. Article 52(d) of the Act, is attracted only to cases of transfer of any trust property from the trustees to another trustee or from a trustee to a beneficiary.
13. In these cases, undisputedly the properties belong to the societies registered under the Societies Registration Act and these properties belonging to the societies are sought to be transferred and vested in the newly created Trusts. The societies existed as separate legal entities, under the instruments in question seek to convert themselves into Trusts and transfer and vest all the properties in the Trusts. There is no provision in the Societies Registration Act to convert the properties of a society into a Trust property. Under these circumstances, looking to the very terms of the instruments in question, it is not possible to apply Art. 52(d) of the Act.
14. In our considered opinion, the documents fall within the meaning of "settlement" as defined under S. 2(1)(q)(iii) of the Act and as such they are liable to duty under Art. 48 of the Schedule to the Act.
15. In view of the facts stated and discussion made above, we record our opinion and answer the questions as stated below :--
(1) The deeds in question are not declaration of Trust chargeable to stamp duty under Art. 54-A of the Schedule to the Act.
12) The instruments are liable to stamp duty under Art. 48 of the Schedule to the Act read with S. 2(1)(q)(iii) of the Act.
Answering other questions does not arise in view of the opinion recorded on questions 1 and 2.
No costs.
16. Order accordingly.