IN THE H IGH COURT OF JUDICATURE AT MADRAS DATED: 04.03.2011 CORAM THE HONOURABLE Mr. JUSTICE T.RAJA W.P.No.7319 of 2010 and M.P.No.1 of 2010 The National Missionary Society of India, Rep. by its General Secretary, #126, Peters Road, Royapettah, Chennai - 600 104. ... Petitioner Vs. 1.The Inspector General of Registration, Santhome High Road, Chennai - 600 028. 2.The District Registrar, Office of the District Registrar, Vellore - 4. ... Respondents PRAYER: Writ Petition filed under Article 226 of Constitution of India praying to issue Writ of certiorarified mandamus to call for the records of the 1st respondent dated 22.02.2010 passed in Letter No.68443/P1/05 and quash the same and to direct the petitioner not to collect the stamp duty under Section 2(24) r/w Article 58(a)(ii) of the Stamp Act on the documents bearing No.4240 of 2002, registered at the office of Sub-Registrar, Thirupathur and pass such further orders. For Petitioner :Mr.M.K.Kabir, SC for Mr.A.Dhiravianathan For Respondents :Mr.S.Sivashanmugam, GA ORDER The petitioner has filed the present writ petition seeking issuance of writ of certiorarified mandamus to call for the records of the 1st respondent dated 22.02.2010 passed in Letter No.68443/P1/05 and quash the same and to direct the petitioner not to collect the stamp duty under Section 2(24) r/w Article 58(a)(ii) of the Stamp Act on the documents bearing No.4240 of 2002, registered at the office of Sub-Registrar, Thirupathur. https://hcservices.ecourts.gov.in/hcservices/ 2. Mr.M.K.Kabir, learned Senior counsel appearing for the petitioner submitted that though the petitioner is a Religious and Charitable Institution registered under the Societies Registration Act, it is engaged in more charitable works, therefore, it is a charitable trust. Whileso, one another Trust, namely, Christukula Ashram, Tirupathur, Vellore District, which is also a Religious Charitable Trust, registered as a Trust, is a Ashram running an Orphanage in order to help the destitute children and also deserted children, who are deserted by the parents. The very purpose of the Ashram is to dedicate its lives to selfless service to the sick and poor, especially among the villages and also to establish institutions and to realise the said purpose, the trust has started and established the Ashram under the name of Christukula Ashram with an object more particularly specified in the Rules and Regulations. The Trust has got property and money, which shall be held by the Trust, of which the Truestees shall be appointed by the Sevaks and there shall be five trustees and out of five trustees, three trustee shall be from Sevaks of the Ashram and two persons outside the Ashram. The Trust deed says further that if at any time, the Ashram Sevaks find themselves unable to run one or both of these institutions, they may discontinue either one or both of them for such time as they deem fit. If at any time the Ashram becomes discontinued or dissolved, three lakhs reserved for the hospital and half lakh reserved for the school shall be handed over to the National Missionary Society of India (hereinafter referred to as "N.M.S.") to be used as detailed in Section X. 3. Further, he contended that when a public charitable and religious trust is unable to carry on its activities in furtherance to its objects, safe provision is made in the Deed itself to handover the management of the trust to another trust/society having similar objectives. The purpose is to ensure that the charitable institution should not be dissolved, but charity should continue to reach the beneficiaries, who are the public at large. Only in view of the difficulties faced by the trustees as per the conditions stipulated in the trust deed, for the reason that the trustees have become weak in view of their old age, it was decided to give effect to the objective and purpose of the trust by handing over the management of the trust to another trust having the similar objectives. On that basis, when the management or the trusteeship was handed over to another trust or society having similar objectives, the said handing over of the management or the trusteeship would not constitute transfer of immovable property within the meaning of conveyance, but would fall under Article 62(e) of the Stamp Act, because the transfer of Trusteeship is in pursuant to the object of the trust and in consonance to the provisions of the Income Tax Act without involving selling of properties of the trust and appropriate the sale consideration and as such, the maximum duty payable is Rs.30/-. But in the present case, Rs.90+210 were paid as duty, but, surprisingly, https://hcservices.ecourts.gov.in/hcservices/ the registering authority after registering the same, demanded a sum of Rs.70,000/- vide letter No.1670/A1/1999, dated 26.04.2001, without even giving full particulars, viz., under what provision, the said amount of Rs.70,000/- was calculated. After the payment of Rs.300/- (90+210), though the document was released on 31.10.2002, by notice dated 04.06.2004, a further sum of Rs.21,16,779/- consisting of Rs.19,16,779/- towards duty and Rs.1,53,000/- of penalty, were demanded. The said demand is arbitrary and suffers from the vice of non-application of the provision of the Act. 4. In his further submission, he added that a trustee is not the owner of the property, but merely holds and manages the property for the benefit of the beneficiaries specifically provided in the deed. Therefore, there is no transfer of ownership, but only handing over the management of the property to be managed by a different set of trustees or organization having similar objectives and as the basic and fundamental element in a trust is that the ownership does not vest with the trustees, a transfer of trusteeship cannot attract duty under conveyance or settlement, but only would fall under Article 62 (e) of the Stamp Act. Again, it was contended that in any event, since the trustees of the Ashram in view of their old age, virtually rendered themselves unable to run the Ashram, for the reason that the administration of the Ashram would end up in failure of the objectives sought to be achieved by the trust and in the larger interest of the students, who are orphanage students taking food and education from the Ashram, the Trusteeship and the management of the trust itself is transferred for the effective administration of the Ashram, to another society having similar objectives and on the transfer of the management of the trust, if a religious charitable society is taxed to remit an exorbitant and unreasonable quantum of stamp duty on a wrong presumption that there is an element of conveyance, then the very object of the trust itself would get defeated and this would result in closing down of the trust intended for the benefit of the public and it is for the reason, the impugned order claiming a sum of Rs.24,02,694/- will amount to dissolve the Ashram or closing down the Ashram and on that basis, he sought for setting aside the impugned order. 5. Per contra, Mr.S.Sivashanmugam, learned Government Advocate appearing for the respondents, while objecting the argument advanced by the learned Senior counsel for the petitioner, submitted that the contention of the petitioner that the deed contemplated the transfer of office of Trusteeship and the administration of the trust is not tenable, in as much as the immovable property belonging to Christukula Ashram has been transferred by the said deed in favour of the N.M.S./the petitioner herein. Secondly, it was contended that the petitioner is not the beneficiary of the Transferor Trust, because the claim of the petitioner that the properties are held for the benefits of the https://hcservices.ecourts.gov.in/hcservices/ beneficiaries is not correct. Even the Accountant General has observed that the said deed is to be classified as settlement under Section 2(24) of the Indian Stamp Act, 1899 and the stamp duty shall be levied under Article 58(a)(ii) of Schedule I to the Indian Stamp Act, 1899. Only based on the observation of the Accountant General, the petitioner was directed to pay the deficit stamp duty under a notice dated 04.06.2004 issued by the 2nd respondent with a clear indication to the petitioner that if he fails to pay the deficit stamp duty, action will be initiated under Section 33(A) of the Indian Stamp Act. As the petitioner has failed to pay the deficit stamp duty, the 2nd respondent commenced enquiry under Section 33(A) of the Act by issuing a show cause notice dated 14.09.2009 in proceedings No.3617/B1/2004, as to why the deficit stamp duty of Rs.24,02,694/- shall not be collected from the petitioner. On receipt of the show cause notice, the petitioner has also sent a detailed representation dated 23.09.2004 against the said notice of the 2nd respondent, but the 2nd respondent, after considering the representation of the petitioner in detail with reference to the provisions of the Act, passed the final order dated 16.11.2004 rejecting the claim of the petitioner and to pay the deficit stamp duty of Rs.24,02,694/-. In the said order, he was also informed that he can make an appeal to the Chief Controlling Revenue Authority under Section 33(A)(3) of the Act. In pursuant to the said order, the petitioner has also preferred an appeal and the Appellate Authority has also considered the case of the petitioner in accordance with law. 6. In his further submission, it was contended that the Government of Tamil Nadu issued an order in G.O.Ms.No.224, Commercial Taxes Department, dated 11.12.2003 making a proviso that 50% of the stamp duty reduction granted to gift or settlement for charitable or religious purpose, shall be allowed only in cases where the trust is approved under Section 80(g) of the Income Tax Act, 1961. Therefore, it is not open to narrow or whittle down the operation of the Act by accepting the arguments advanced by the petitioner. 7. Heard the learned counsel appearing on either side and perused the materials available on record. 8. Originally the transferor of trust, namely, Christukula Ashram, Tirupathur, Vellore District, a registered trust, was established as a religious and charitable trust, by having its headquarters at Tirupattur, North Arcot District, with an object to form a fellowship, or fellowships, of Christ's disciples in which unmarried men of all countries and colours, communities and denominations may have a place and be bound together by the love of Christ, even as the name "Christukula" (Family of Christ). To carry out the objectives, the Ashram had undertaken health service through well equipped hospital established in the Ashram and it has also established educational institution by admitting poor students and https://hcservices.ecourts.gov.in/hcservices/ orphanage. The membership on the Ashram is also regulated through admission procedure and the Ashram consisted of two Sevaks/original founders and three others duly elected from among the eligible persons on the unanimous decision of the existing Sevaks. In order to be eligible, a person shall:- i. be a Christian ii. whole heartedly accept the Basis, Aim and Object of the Ashram. iii. he shall vow to remain in the Ashram for his life time, or at lest for 10 years with the intention to renew his vow for life. iv. be of at least 25 years of age, be physically fit and shall ordinarily have completed at least the School Final Examination or other equivalent. v. he should have served as a Bala Sevak for at least 3 years and have shown growth in love, humility and in sharing the burdens and responsibilities of the Ashram Family. vi. he should be unmarried and shall get freed from family responsibilities and should not own any private property or money. Sevaks shall receive no salary, but they shall have their personal necessities and other expenditure provided from the Ashram Trust as God supplies. 9. The deed had also specified clearly the method of management of trust. It states that the management of the Ashram shall vest in the Sevaks. If the number of Sevak exceeds seven, they may elect out of their number five or seven members to constitute the Committee of Management. The Ashram property and money shall be held by a Trust of which the trustees shall be appointed by the Sevaks. The Trust deed further says that if at any time, the Ashram Sevaks find themselves unable to run one or both of these institutions on a voluntary basis, they may discontinue either one or both of them for such time as they deem fit. If at any time the Ashram becomes discontinued or dissolved, three lakhs reserved for the hospital and half lakh reserved for the school shall be handed over to the N.M.S/the petitioner herein, to be used as detailed in Section X, which is extracted as under:- https://hcservices.ecourts.gov.in/hcservices/ X DSSOLUTION "1. During the life time of the Founders the Ashram shall not be dissolved except at their joint decision. 2. If one of the Founders is dead the surviving Founder may carry on the work of the Ashram. If he is unable to do so and desires that the Ashram should be dissolved, he will follow the procedure indicated below for dissolution. 3. The question of continuing the Ashram or of dissolution may arise under any of the following circumstance. (a) If after the death of both the founders the number of persons serving as Sevaks is so reduced that there are less than two Sevaks for a period of two years and at the end of that time there are no Bala Sevaks who are eligible and fit for admission as Sevaks within the following year, or (b) There is continued disagreement among the Sevaks for a period of three years, so that the life and work of the Ashram is hindered and the practical working of the services is rendered difficult or impossible. 4. If the Ashram is dissolved, the whole of the property movable and immovable then existing together with the three and a half lakhs of rupees (intended to be set apart for the endowment of the hospital and school) and any other monies remaining in the hands of the Trustees or with the Treasurer of the Ashram shall be handed over to the National Missionary Society. It is the desire of the Founders that in this case the N.M.S. shall endeavour to carry on the hospital and the school either themselves or through a special committee or committees appointed for the purpose and that the three lakhs of rupees be used as Endowment for the running of the Hospital and the half lakh of rupees be similarly used for the carrying on of the school, with such developments or modifications as the Society consider desirable. If the N.M.S. by itself finds that it is not practicable to continue one or both of these institutions as channels of Christian love and service, it should invite the co-operation of other Christian body or bodies to carry on the institution or institutions with the endowment or endowments ear-marked for them. If this also proves https://hcservices.ecourts.gov.in/hcservices/ impossible, the N.M.S. shall be free to use the property and money as it seems best to them for the extension of Christ's Kingdom." A mere reading of the Section X of the Trust Deed clearly goes to show that if the Ashram is dissolved, the whole of the property shall be handed over to the National Missionary Society. In the present case, all consisting of five trustees held a meeting at the premises of the Ashram and passed the resolution dated 26.02.1999 stating that in the light of the present age and health condition of the Sevaks and Trustees, it was decided to transfer the entire property of the Christukula Ashram at Tirupathur, Mahavalam and Courtallam along with the administrator and management thereof, to the National Missionary Society of India, having its registered office at 207 Peters Road, Royapetta, Chennai, as enshrined in the Constitution and in fulfilling the Will and pleasure of the founding fathers as well as the present Sevaks and Trustees. 10. When the conditions in the trust deed clearly says that neither the trustees nor the organizations are empowered to sell the properties of the Trust and appropriate the sale consideration, the only way for the Christukula Ashram to continue their charitable object is to amalgamate the Christukula Ashram with National Missionary Society of India as mandated by the deed of trust. Further, as contemplated by the trust deed of the Ashram, which is merged with another trust, it does not mean that a declaration of Trust or merger of trusts would attract duty under Article 58 of the Stamp Act. Further, a trustee or trustees is/are only empowered to manage the trust property by virtue of a legal fiction vesting the property in the trustee. Therefore, a trustee is not the owner of the property, but merely holds and manages the property for the benefit of the beneficiaries as contemplated in the deed. Hence, I find there is no transfer of ownership, but only handing over of the management of the property to another trust having similar objectives. This is a basic and fundamental element in a trust and that the ownership does not vest with the trustees, more so, a transfer of trusteeship cannot attract duty under conveyance or settlement, but only would fall under Article 62(e) of the Stamp Act. Therefore, the decision of the respondent demanding a huge amount towards deficit stamp duty is unsustainable in law. 11. Further, if the Registering Authority knowing pretty well that the handing over of the trust by transferor trust, namely, Christukula Ashram, to the transferee trust, namely, the petitioner herein, having the similar objectives to carry out the charitable work in running the Ashram, the respondent should have seen that the public charity should not suffer. But ignoring this aspect, demanded a huge amount of Rs.24,02,694/- , treating this deed of trustee of the transferor as a gift settlement under Section 2(24) of the Registration Act, is amounting to prevent the running of Ashram by https://hcservices.ecourts.gov.in/hcservices/ another trust having the similar objectives. 12. In this context, it is useful to refer the Full Bench Judgment of this Court in the case of the Chief Controlling Revenue Authority, Board of Revenue Vs. P.A.Muthukumar (AIR 1979 MADRAS 5), wherein it was clearly held that while interpreting the word 'settlement' in Section 2(24) of the Indian Stamp Act, the emphasis should be on the intention of the author of the trust to distribute the property among members of his family or to those who are near and dear to him. Since a trust is an expression of the desire by the author of the trust to vest the property in a body may be singular in its feature, for that body to administer it for convenience and for an equitable distribution of that estate of the author as per the direction contained in the deed itself. By executing a trust the property need not be distributed by the author of the trust. But in cases, as in the instant case, the declaration of a trust may be made only for purposes of equitable administration of the same, so as to preserve it without being wasted as apprehended by the testator himself. This distinction therefore has to be borne in mind while interpreting an instrument for purposes of imposition of stamp duty. On that basis, it was held that the instrument in question should not be understood as a deed of settlement within the meaning of Section 2 (24)(b) of the Indian Stamp Act attracting stamp duty under Article 58 of Schedule I of the Indian Stamp Act. 13. In the present case also, when the property of the one trust is transferred to another trust without any consideration for the benefit of the beneficiaries as mandated by the testator, such an instrument cannot be treated as settlement and as per the sole intention of the author, namely, the testator, the instrument in question cannot be understood as deed of settlement within the meaning Section 2(24)(b) of the Indian Stamp Act attracting stamp duty under Article 58 of Schedule I of the Indian Stamp Act. 14. In yet another Full Bench judgment of the Madhya Pradesh High Court in the case of Shri Digambar Jain and others Vs. Sub Registrar, Stamps, Indore(AIR 1970 MP 23) it is held thus:- "7. We are unable to agree with the Revenue-authority on the interpretation of the document in question. From the recitals appearing therein, the instrument is one declaring the pre-existence of a trust coupled with transfer of management from one set of trustees to another.........." "8....... From the recitals in the document, it appears that the Panchas were only making a declaration of a pre-existing trust and were not transferring their ownership in any specific trust property because they had none. Nor were they creating a trust by executing the deed in favour of the trustees. https://hcservices.ecourts.gov.in/hcservices/ 9. It, accordingly, follows that the deed in question does not fall within the definition of the term 'conveyance', as defined in Section 2(9) of the Act, because there was no 'transfer' of any property by the Panchas to the trustees as envisaged in that section. What had been transferred was only the management of the trust. On a plain reading of the recitals, no other construction is possible than that the instrument merely declares the existence of trust coupled with the transfer of its management. Such a document can, by no stretch of reasoning, be treated as a conveyance. Even otherwise, the definition of the term 'conveyance' as contained in the Section excludes such a document from its purview, because, even as a transfer, if any, it is 'otherwise specially provided for' by Schedule I to the Act, viz., by Article 47-A as 'Declaration of Trust' and was, therefore, not liable to be stamped as 'conveyance' under Article 17. 10.In that view, our answer to the first question is that the deed dated 11th September 1957, executed by the Panchas of Shri Digambar Jain Terapanthis was a 'Declaration of Trust' and not a 'Conveyance' within the meaning of Section 2(9) of the Act. The answer to the first question answers the second. The stamp duty leviable thereon will, therefore, be governed by Article 47-A of Schedule I to the Indore Stamp Act, 1907, and not under Article 17 thereof. The trust will be entitled to its costs of these proceedings. Hearing fee Rs.150.00, if certified. Reference answered accordingly." 15. Further, when the transferor Ashram comes forward to merge with another trust having the similar object in the larger interest to continue the charitable trust, for the reason that the original founders are no more and subsequently, the other living trustees are also in advanced age which does not permit them to actively manage the affairs of the Ashram and when they acted only as per the terms and conditions prescribed in Section X of the Trust Deed and if for any reason, the Ashram fails to meet the payment of deficit stamp duty of Rs.24,02,694/-, it may end up in defeating the object and the purpose for which the original Ashram was established and this will unnecessarily cause great prejudice to the students and the beneficiaries of the hospitals, that will, in turn, have a cascading painful effect on the object of the Trust. 16. Therefore, as per the ratio decided by the above mentioned two Full Bench judgments, when the intention of the author of the original trust of the Ashram is looked at carefully, the document No.4240 of 2002, which is merely declaring the existence of trust coupled with transfer of its management, does not fall within definition of term "conveyance", in as much as there is no https://hcservices.ecourts.gov.in/hcservices/ consideration either precedes the transfer or follows after such transfer, hence, to my mind, the intention of the author of the original trust of the Ashram if carried out through transfer of management as per the letter and sprit of the terms and conditions prescribed in Section X of the Trust Deed, such transfer without consideration does clearly reflect the quintessence of the definition of the word 'settlement'