Settlement versus declaration of trust: transfer of society property to a new trust attracts stamp duty as a settlement.

An instrument by which a registered society purports to convert itself into a trust and transfer its assets, liabilities and institutions is treated as a settlement, not a mere declaration of trust, because it effects a disposition and transfer of property to a newly created trust. The Karnataka Societies Registration Act recognises society property as belonging to the society or its governing body and contains no provision for conversion into a trust. Article 52(d) of the Karnataka Stamp Act does not apply, because it is confined to transfers of existing trust property between trustees or from a trustee to a beneficiary, not to property moved from a society into a new trust.

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Issues: (i) Whether an instrument by which a registered society purports to convert itself into a trust and transfer all assets and liabilities to the new trust is a declaration of trust chargeable under article 54A of the Schedule to the Karnataka Stamp Act, 1957, or a settlement chargeable under article 48 read with section 2(1)(q)(iii); (ii) whether article 52(d) of the Schedule to the Karnataka Stamp Act, 1957 applies to such a transaction.

Issue (i): Whether an instrument by which a registered society purports to convert itself into a trust and transfer all assets and liabilities to the new trust is a declaration of trust chargeable under article 54A of the Schedule to the Karnataka Stamp Act, 1957, or a settlement chargeable under article 48 read with section 2(1)(q)(iii).

Analysis: The recitals showed more than a mere declaration of an existing trust. The societies did not simply change management or record an already existing trust; they resolved to convert themselves into trusts and to transfer their movable and immovable properties, liabilities, and institutions to the newly created trusts. Section 14 of the Karnataka Societies Registration Act, 1960 recognised that property of a society belongs to it and, if not vested in trustees, vests in the governing body, while the Act contained no provision for converting a society into a trust. On these facts, the instruments effected a disposition and transfer of property, bringing them within the statutory definition of settlement.

Conclusion: The instruments are not declarations of trust under article 54A and are chargeable as settlements under article 48 read with section 2(1)(q)(iii), in favour of Revenue.

Issue (ii): Whether article 52(d) of the Schedule to the Karnataka Stamp Act, 1957 applies to such a transaction.

Analysis: Article 52(d) applies to transfer of trust property from one trustee to another trustee or from a trustee to a beneficiary. The instruments in question involved transfer of property belonging to registered societies into newly created trusts, not a transfer of existing trust property between trustees. The transaction therefore did not answer the description of article 52(d).

Conclusion: Article 52(d) is inapplicable, in favour of Revenue.

Final Conclusion: The common instruments were treated as settlements for stamp duty purposes, and the requested opinions were answered against the claim that they were merely declarations of trust.

Ratio Decidendi: Where a registered society, as owner or holder of property under the Societies Registration Act, purports to convert itself into a trust and transfer its assets and liabilities to the new trust, the instrument effects a disposition of property amounting to a settlement rather than a mere declaration of trust.

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