Report No. 67
49.11. Conveyance and trust.-
The same query arises in relation to a conveyance and a trust. A dispositive instrument, not for a purpose or on an occasion specified in section 2(24), would amount to a conveyance. Should it make a difference that the instrument employs the machinery of trust, and not a direct transfer?
49.12. Scheme proposed.-
It is to resolve all these queries that we propose a scheme, of which the salient features are (1) A trust amounting to settlement should be made so chargeable, by an express amendment of Article 64 (An Explanation could be added). At present, there is a misconception on the subject.1
(2) A trust amounting to conveyance should be made so chargeable, by an express amendment of Article 64. (Another Explanation could be added). Reasons for this amendment may be listed as under:-
(a) Ambiguity of the expression "declaration of trust".
(b) Words "not otherwise provided for" occurring in the definition of "conveyance".
(c) The anomaly that arises if a contrary view is taken.
A trust for a single person not in need (i.e., who is not to be "provided for"), and who is not dependant, would (on the contrary view), be chargeable only with a fixed duty (Article 64), while a trust for a minor son would be chargeable with duty as on a bond as it would amount to a settlement (Article 58). Really, the first mentioned trust should be chargeable as a conveyance.
(3) Trusts not falling under (1) and (2) above, fall under Article 64.
Our recommendation is that the scope of Article 64 should be defined as above, and the meaning of "Declaration of Trust" indicated more clearly, in view of the ambiguity of the expression "declaration of trust" and the overlapping with settlement and conveyance.
1. Board of Revenue v. Sreedhar, AIR 1964 All 137.
The scheme recommended is based on the following propositions:-
(i) The article relating to 'trust'1 is confined to non-dispositive trusts (non-testamentary); (i.e. where the author is himself to be the trustee and there is no dispositive clause). The duty is as on a bond, subject to a maximum of fifteen rupees.
(ii) That article (Trust) seems to apply also in relation to public trusts, where the author is the trustee and there is no dispositive clause. This can be deduced from the fact that the definition of "settlement" does not apply where there is no "disposition".
(iii) Private dispositive trusts bear duty as on a conveyance2, unless they are settlements.
Private dispositive trusts which are for religious purposes, or are in consideration of marriage or for the members of the family, etc., i.e., those falling under section 2(24)-bear duty as on a bond.3 Formally, these are charged as settlements, but the duty on a settlement is the same as that on a bond.
(iv) Public dispositive trusts also bear duty as on a bond4 if the trust is for religious or charitable purposes, because they fall within section 2(24), (Definition of "settlement"). This is the scheme recommended by us, as put in the form of propositions. For case of understanding the propositions as set out disregard minor points of detail and also employ rough descriptions of instruments.
1. Article 64.
2. See Article 23, regarding conveyance.
3. See sections 2(24), (a) & (b) and Article 58 (Settlements in consideration of marriage or for the benefit of dependants, etc.).
4. See section 2(24)(c) and Article 58 (Settlements for religious or charitable purposes.).
49.14. To put the matter in the form of a chart showing how trusts will be taxed:
We may state that such a restructuring has been favoured by most replies to our Questionaire.2
1. The categories 2(a) and 2(b) bear the same duty but are shown as separate categories for maintenance of symmetry with 1(a) and 1(b).
2. Question relating to section 2(24)-"Settlement".
49.15. Recommendation.- We recommend that Article 64 should be amended to implement the above scheme.
49.16. Article 65-Warrant for goods.-
Article 65 relates to warrant for goods A warrant for goods is given by the bailee of goods, and acknowledge the title of the transferee to the goods as between the transferee and the bailee, who is the warehouseman.1
There is no difficulty caused by this Article, and it requires no change.
1. See Stroud's Judicial Dictionary, 3rd Edn, Vol. 4, p. 3258.