By Barbara Gayle, Staff ReporterThe dispute between the Government and the Carreras Group Ltd. over the $110 million transfer tax is heading for the United Kingdom Privy Council.
After Carreras transferred its shares in the Jamaica Biscuit Company in 1999 to Caribbean Brands, the Stamp Commissioner ruled that Carreras should pay transfer tax.
Last week Monday, the Court of Appeal granted Carreras' application for leave to have the matter decided by the Privy Council.
Carreras is challenging the Commissioner's ruling on the ground that it is not entitled to pay transfer tax.
The legal battle between the parties was first decided by the Revenue Court which ruled on November 14, in Carreras' favour and ordered the Stamp Commissioner to repay the $110 million with interest.
The Stamp Com-missioner, who is being 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 in July 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.
