THE COURT of Appeal has ruled that the Stamp Commissioner is not to repay the $110 million which was collected from the Carreras Group Ltd. as transfer tax arising from its share transfer in the Jamaica Biscuit Company in 1999 to Caribbean Brands Ltd. for US$37.7 million.
Carreras had challenged the Commissioner's ruling on the ground that it was not entitled to pay transfer tax. The Court of Appeal described the transfer as a transaction to avoid tax liability.
On November 14, last year, the Revenue Court ruled in favour of Carreras and ordered the Stamp Commissioner to repay the money with interest.
The Stamp Commissioner who was represented by Michael Hylton, Q.C., Solicitor General, and Garfield Haisley, took the matter to the Court of Appeal.
By a majority decision, the Court of Appeal ruled yesterday that transfer tax was payable.
Carreras had transferred the shares to Caribbean Brands Ltd., a subsidiary of General Holdings Ltd. in exchange for a debenture. Caribbean Brand Ltd. issued a debenture in favour of Carreras for a total of US$37.7 million.
The lawyers representing the Stamp Commissioner argued that the Revenue Court Judge Roy Anderson erred in his finding because he failed to consider the evidence which was before him and to hold that the transaction was really a sale of shares disguised to look like a re-organisation and not a simple exchange of shares for a debenture.
In its majority decision the court said "it is indisputable that at the time of the agreement the parties contracted to and intended the passing of money in consideration for the shares by way of issuing an unsecured debenture in the first place and without interest, and thereafter redeeming it on a specified date in quick time." The court said that was sufficient to conclude that "this was a preordained scheme, as the parties contracted at the time to pass monetary consideration in respect of the transaction. This was a composite transaction with the insertion of a step involving the transfer of a debenture for shares, which had no business purpose other than the avoidance of tax liability."
The Court of Appeal comprising the Hon. Ian Forte, President of the Court of Appeal, Mr. Justice Seymour Panton and Mr. Justice Neville Clarke heard the appeal. Mr. Justice Panton dissented.
