Carreras Group Ltd v Stamp Commissioner
| Jurisdiction | Jamaica |
| Judge | ROY ANDERSON: J |
| Judgment Date | 14 November 2001 |
| Judgment citation (vLex) | [2001] 11 JJC 1402 |
| Docket Number | SUIT NO. 3 OF 1999 |
| Court | Supreme Court (Jamaica) |
| Date | 14 November 2001 |
IN THE SUPREME COURT OF JUDICATURE OF JAMAICA
IN THE REVENUE COURT
STATUTORY INTERPRETATION - Income Tax Act - Whether the transaction "exchange" fell within tax exemption
This matter involving an appeal from a decision of the Commissioner of Stamp Duties and Transfer Tax, handed down on the 21 st day of October, 1999, confirming an assessment of the Appellant to Transfer Tax under the Transfer Tax Act (the Act"), came on for hearing on the 16 th , 17 th and 18 th of July 2001. At the end of the hearing, I reserved judgment and promised to put that judgment in writing when it was to be handed down. I apologize for the fact that it has taken this long to produce this judgment, but am now pleased to deliver it.
The facts which give rise to this appeal are briefly, as follows: The Appellant up to 1999, owned all the ordinary issued share capital and most of the preference shares in Jamaica Biscuit Company Limited ("The shares" and "Jamaica Biscuit"). General Holdings Limited is a Trindadian company of which Caribbean Brands Limited was a wholly owned subsidiary. The Appellant entered into a transaction with Caribbean Brands pursuant to which in exchange for, essentially its entire shareholding in Jamaica Biscuit, the Appellant received a debenture worth US$37,700,000.00. Naturally, the debenture has been redeemed by the Appellant. The Appellant claimed the benefit of the purported exemption from transfer tax on the basis of paragraph 6(1) of Part 1 of the First Schedule. The Respondent denied that the transaction, the "exchange", fell within the provision claimed. The Appellant paid the tax under protest and subsequently filed an appeal against the decision of the Respondent referred to above.
The decision of the Stamp Commissioner was contained in a letter addressed to the attorney at law for the Appellant Company, and was in the following terms:
"I refer to my letter dated July 7, 1999 and subsequent reminders dated August 27, 1999 and September 22, 1999 in which you were requested to submit documentary proof to substantiate your claim that "Carreras Group Ltd. of 60 Knutsford, Kingston 5 (hereinafter referred to as the Transferors) in pursuance of a scheme of reconstruction/reorganization does hereby transfer ....its shares in Jamaica Biscuit Company Limited... "
To date no such evidence has been presented. The content of the Instrument has been construed in the ordinary way but the facts have not been established. From the documents examined through a field inspection carried out, the Share Capital of the Companies in question have not been reorganized/reconstructed or in any way changed by the transaction. The fact that you have not produced the evidence and the inspection failed to provide any additional or new evidence in support of your claim and the substance of the transaction remains a disposal and transfer of shares, I am unable to amend my assessment.
In the absence of this evidence, I have no alternative but to confirm my assessment.
If you disagree with my decision you may appeal to the Revenue Court within thirty (30) days of the date of receipt of this letter."
The letter confirmed the assessment which had previously been made by the Stamp Duty Department, and advised the taxpayer of its right to appeal to the Revenue Court within thirty (30) days of the date of the letter.
The Appellant filed its Notice of Appeal on November 12, 1999, and served the Notice on the same day.
The Notice of Appeal is set out below.
TAKE NOTICE that the Revenue Court will be moved so soon as the Appellant or its Attorneys-at-Law can be heard On Appeal from the whole of the decision herein of the Stamp Commissioner made on the 21 st day of October 1999 and received by the Appellant's Attorneys-at-Law, Clinton Hart & Co. on the 22 nd day of October 1999.
Whereby it was ordered that the decision of the Stamp Commissioner confirming her assessment made the 7 th day May, 1999 whereby she assessed the Appellant to pay Transfer Tax in the amount of $107,791,368.75 in respect of a transfer by the Appellant of all the Appellant's shares in Jamaica Biscuit Company Limited to Caribbean Brands Limited.
For an Order that the said Assessment be discharged, that the Respondent refund to the Appellant the amount of $107,791,368.75 with interest thereon and that the Respondent do pay to the Appellant the costs of and incident to this Appeal.
AND FURTHER TAKE NOTICE that the grounds of this Appeal are that the disposal of the shares in Jamaica Biscuit Company Limited by the Appellant to Caribbean Brands Limited was not a sale but a simple exchange of the said shares for debentures pursuant to paragraph 6(1) of the First Schedule to the Transfer Tax Act, and as such is treated as if it were a "reorganization" within the meaning of paragraph 4 of the First Schedule to the Transfer Tax Act, and therefore is not liable to Transfer Tax."
It will be noticed that the Ground of Appeal is that "the disposal of the shares in the Jamaica Biscuit Company Limited by the Appellant to Caribbean Brands Limited, was not a sale but a simple exchange of the said shares for debentures pursuant to paragraph 6(1) of the First Schedule to the Transfer Tax Act, and as such is treated as if it were a "reorganization" within the meaning of paragraph 4 of the First Schedule to the Transfer Tax Act, and is therefore not liable to Transfer Tax".
It is useful to set out the relevant parts of the Schedule to the statute referred to by the Appellant, and for completeness and ease of reference, I shall also set out paragraph 5 and paragraph 6(2) of the referenced paragraphs of the Schedule.
Reorganization of share capital, conversion of securities, etc.
4.
(1) This paragraph shall apply in relation to any reorganization or reduction of a company's share capital; and for the purposes of this paragraph-
(a) reference to reorganization of a company's share capital include-
(i) any case where persons are, whether for payment or not, allotted shares in or debentures of the company in respect of and in proportion to (or as nearly as may be in proportion to) their holdings of shares in the company or of any class of shares in the company; and
(ii) any case where there are more than one class of share and the rights attached to shares of any class are altered; and
(b) "original shares" means shares held before and concerned in the reorganization or reduction of capital, and "new holding" means, in relation to any original shares, the shares in and debentures of the company which, as a result of the reorganization or reduction of capital, represent the original shares (including such, if any, of the original shares as remain).
(2) Subject to the following sub-paragraphs, a reorganization or reduction of a company's share capital shall not be treated as involving any disposal of the original shares . (Emphasis mine)
(3) Where, on a reorganization or reduction of a company's share capital, a person receives (or, without prejudice to the generality of any provisions of this Act, is deemed to receive) or becomes entitled to receive any consideration, other than the new holding, for the disposal of an interest in the original shares, and in particular-
(a) where under paragraph 3 of this Schedule he is to be deemed to have, in consideration of a capital distribution, disposed of an interest in the original shares; or
(b) where he receives (or; without prejudice as aforesaid is deemed to receive) consideration from other shareholders in respect of a surrender of rights derived from the original shares, he shall be treated as having for that consideration transferred accordingly an interest in the original shares.
(4) Where on a reorganization of a company's share capital a person receives or becomes entitled to receive in respect of any shares a provisional allotment of shares in or debentures of the company, then, unless he neither accepts the allotment nor transfers his rights before or after the making of the allotment, those rights shall be treated in relation to him and in relation to any person acquiring them directly or indirectly from him as if they were the shares or debentures to which they relate and as if the consideration to be given for the shares or debentures were a liability attaching to the rights.
(5) References in the provisions of this paragraph to a reduction of share capital do not include the paying off of redeemable share capital, and where shares in a company are redeemed by the company otherwise than by the issue of shares or debentures, with or without consideration, and (without prejudice to any other provisions of this Act) otherwise than in liquidation, the shareholder shall be treated as transferring the shares to the company at the time of the redemption
5.
(1) Paragraph 4 shall apply with any necessary adaptations in relation to the conversion of securities as it applies in relation to the reorganization or reduction of a company's share capital.
(2) For the purposes of this paragraph-
(a) "conversion of securities' includes-
(i) a conversion of securities of a company into shares in the company:
(ii) a conversion at the option of the holder of the securities converted as an alternative to the redemption of those securities for cash;
(iii) any exchange of securities effected in pursuance of any enactment (including an enactment passed after this Act) which provides for the compulsory acquisition of any securities in exchange for other securities;
(b) "securities" does not include shares.
Company amalgamations
6.
(1) Subject as hereinafter provided, where a company issues shares or debentures to a person in exchange for shares in or...
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