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 A Trust is defined in section 3 of the Trust Act, 1882 as " an

obligation annexed to the ownership of property and arising out of a confidence reposed
in and accepted by the owner, or declared and accepted by him, for the benefit of
another or of another and the owner. In simple words it is a transfer of property by the
owner to another for the benefit of a third person along with or is a transfer of property
by the owner to another for the benefit of a third person along with or without himself or
a declaration by the owner. The second most popular form of registration is as a Trust.
However, the statutory provisions, procedures and the laws relating to trusts are
confusing. Under Indian Laws, various kinds of public and private trusts can be formed.

The Indian Trust Act, 1882 is not applicable to Public Charitable Trust. There is no
specific act under which a Public Trust is to be registered, except in the State of Gujarat
and Maharastra. Public Trusts are formed under general law, with guidance drawn from
the Indian Trust Act, 1882. The other relevant acts are Religious Endowment Act, 1863,
Charitable & Religious Trust Act, 1920 and The Bombay Public Trust Act, 1950.

   
   
  



a. There must be an author or settler of the trust. The author or the settler refers to
the person who sets aside certain property for the benefit of the beneficiaries.

b. There must be a trustee. The trustees are the persons who manage this property
for the benefit of the beneficiaries as per the Trust Deed. The author himself may
or may not become a trustee.

c. There must be a beneficiary or beneficiaries.

The case in hand is  !cc ""c"#!$%&#"c! #"!'#( which

is a public charitable trust registered under the Indain Registration act 1908 in chennai.
The terms and conidtions of the said trust envisages that it can be dissolved,
amalgamated, merged with any other trust, organization or instituion having similar
objectives.

In case of amalgamation or merger, the trust deed envisages three-fourth majority of the
trustees are required to recommend the same with prior approval of the founder
trustee.While amalgamating or merging of a trust, all its assets and liabilities shall stand
transfer to the absorbing entity.

When a property is purchased by a legal entity it is required to pay the required stamp
duty on the sale deed which-ever is applicable in the state concerned. In the instant
case, it is recommended to purchase the property after amalgamation or merger to
avoid dual payment of stamp duty once at the time of purchasing and secondly at the
time of amalgamation or merger.

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)*

The issue of applicability of stamp duty to a scheme of arrangement (merger/

amalgamation, demerger, reconstruction or otherwise) effected with the sanction of the
High Court under sections 391 to 394 of the Companies Act, 1956 has always been a
vexed one. As regards stamp duty legislation more generally, several states have
enacted their own stamp duty laws while the remaining states are governed by the
Indian Stamp Act, 1899.

Stamp duty is usually levied on various instruments, including a ³conveyance´. Although

various states may define the expression differently, one example is contained in the
Indian Stamp Act, 1899, which defines ³conveyance´ in Section 2 Sub-section (10) as
including ³a conveyance on sale and every instrument by which property, whether
movable or immovable is transferred inter vivos´.

The definition of ³conveyance´ in stamp duty laws did not historically include the order of
a High Court under a scheme of arrangement in an express manner, and as a matter of
practice court orders sanctioning schemes of arrangement were never liable for
payment of stamp duty. In the last two decades, however, several states began
amending their stamp laws to expressly include orders of the court approving a scheme
of amalgamation under section 394 of the Companies Act within the definition of
³conveyance´. Consequently, at present, the seven states of Maharashtra, Gujarat,
Karnataka, Rajasthan, Chattisgarh, Madhya Pradesh and Andhra Pradesh have
included a High Court order (approving a scheme of amalgamation under section 394 of
the Companies Act) within the definition of ³conveyance´ in their stamp laws. As far as
these states are concerned, the position regarding liability of stamp duty on
arrangements is somewhat clear, c 

  
  
 


+ although the rates of stamp duty as well as the basis of computation differ even
among those states. To that extent, while there is little doubt regarding computation of
stamp duty on schemes of arrangement among companies within a single such state,
the issue can be somewhat compounded if the companies involved are registered in
different such states.

More recently, the Delhi High Court in Delhi Towers Ltd. v. G.N.C.T. of Delhi,
MANU/DE/3152/2009, The Delhi High Court adopted the previous reasoning of
Li Taka Pharmaceuticals Ltd. v. State of Maharashtra, AIR 1997 Bom 7 and,
Gemini Silk Limited v. Gemini Overseas Limited and in a comprehensive judgment
held that an order of the High Court approving a scheme of amalgamation would be
liable to stamp duty even in the absence of an express inclusion of such orders within
the definition of ³conveyance´. Moreover, the court also noted that stamp duty
should be computed on the basis of the consideration paid for the amalgamation,
which is reflected in the value of the shares allotted by the amalgamated company in
exchange for the amalgamation. Hence, the value of the individual properties being
transferred is immaterial to the computation of the stamp duty.

All of these go to demonstrate the lack of uniformity in the applicability of stamp duty on
schemes of arrangement in states where the Indian Stamp Act, 1899 operates. In order
to remedy this situation, the Union Ministry of Finance has decided to follow the path
adopted by the seven states and to amend Section 2(10) to include the following within
the definition of  ( ³ every order made by the High Court/Tribunal under
Section 394 of the Companies Act, 1956 in respect of the amalgamation or
reconstruction of companies; and every order made by the Reserve Bank of India under
section 44 A of the Banking Regulation Act, 1949 in respect of amalgamation or
reconstruction of Banking Companies;´