TaxTMI 
TaxTMI 
1977 (1) TMI 172
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....duty is payable on the debenture under Article 27(a) and on the Deed of Trust and Mortgage under Article 40(c) is tenable or not? The High Court directed the Board of Revenue to refer three additional questions, but ultimately took the view that the Additional questions did not really arise in the case. It answered the first question in favour of the Revenue and the second question against the Madras Refineries Limited, hereinafter referred to as the Company. The Company feels aggrieved and has come up in appeal to this Court. It will be enough to state those facts which bear on the controversy before us. 2. The Company was incorporated under the Indian Companies Act, 1956, as a public limited company. An agreement known as the Loan and Note purchase Agreement was executed between the Company and the First National City Bank and six others on December 20, 1966, by which the Company agreed to authorise the creation and issuance of GBP 14,880,000 (U. S.) principal amount of its 5 1/2 % secured notes series 'A' and s 7,440,300, (U. S.) principal amount of its 5 1/2 % secured notes Series 'B', and the sale of, or the borrowing to be evidenced by such Notes in acco....
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.... Capital Duty, sixth edition, page 6,- Leading and principal object.- With reference to the stamp duty upon instruments generally, it is a well settled rule of law that an instrument must be stamped for its leading and principal object, and the stamp covers everything necessary to that object. In Limiter Asphalt Paving co. I. R. C. (1872) LR7 Ex. 211 it was stated: In order to determine whether any, and if any, what stamp duty is chargeable upon an instrument the legal rule is that the real and true meaning of the instrument is to be as certained ; that the description of its given in the instrument itself by the parties is immaterial, even although they may have believed that its effect and operation was to create a security mentioned in the Stamp Act, and they so declare. This appears to be a correct statement of the law. We have therefore to determine the real and true meaning of the Guarantee Agreement and to decide whether it could be said to be the principal and primary security. 5. The Loan and Note Purchase Agreement was executed on December 20, 1966, between the Company and the First National City Bank and others. Under that agreement, the Compan....
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....dy given hereunder or under the Mortgage or any of the other collateral or now or hereafter existing at a law or in equity or by statute". 8. Mr. Ram Reddy has relied heavily on these averments in the Guarantee Agreement, but they cannot detract from the basic fact that the Deed of Trust and Mortgage was executed first in point of time and was the principal or primary security for the loan according to the terms and condition of the agreement between the parties. It was that document which constituted the First National City Bank as the Trustee, and enabled it to enter into the Guarantee Agreement with the President, and the President guaranteed the due performance of the obligations undertaken by the Company thereunder. 9. The Deed of Trust and Mortgage, which was executed between the Company and the First National City Bank as a national banking association incorporated and existing under the laws of United States of America, stated that as the Company was in the process of constructing a refinery for the refining of crude oil and deemed it necessary to borrow money from time to time to finance such construction and to issue its notes therefore and to "mortgage and charge i....
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....he reason why counsel for the appellant strenuously argued that we should hold it to be the principal instrument, for he has next argued that the case falls within the purview of Section 4(1) of the Act and the "principal instrument" only would be chargeable with the duty prescribed in Schedule I, and deed of any trust and mortgage would be chargeable with a duty of Rs. 4.50 p. instead of the duty prescribed for it in that Schedule. We find however that there is nut merit in this argument also. Sub-section (i) of Section 4 of the Act reads as follows- 4 Several instrument used in single transaction of sale, mortgage or settlement.-(1) Where, in the case of any sale, mortgage or settlement, several instruments are employed for completing the transaction, the principal instrument only shall be chargeable with the duty prescribed in Schedule I, for the conveyance, mortgage or settlement, and each of the other instruments shall be chargeable with a duty of four rupees fifty naye paise instead of the duty (if any) prescribed for it in that Schedule It is nobody's case that the Guarantee Agreement was an instrument of sale for it did not transfer the ownership of any thin....