Mulji Jetha Ltd v Commissioner of Income Tax [1966] 1 EA 259

Facts

In 1960 the appellant acquired land as a trustee which it developed over two years and sold to EmpireInvestments, Ltd., as a result of which sale the latter company owed the appellant a sum in excess ofShs. 200,000/-. On January 28, 1962, the appellant had made a formal declaration of trust for named beneficiaries in respect of the land in question. The Commissioner of Income Tax issued a notice to Empire Investments, Ltd., under s. 121 of the Eastern Africa Income Tax (Management) Act, 1958, requiring it to pay him the sum of Shs. 200,000/- from the moneys payable by it to the appellant. It was not disputed that the appellant in its personal capacity owed the respondent a sum greatly in

excess of this amount for arrears of tax, but it was contended that the notice was improper and illegal because the appellant was entitled to the money as trustee and not in its personal capacity. The Trust deed recited the transfer of the plot of land to the appellant and went on to recite that the purchaseprice of the land was provided by or on behalf of certain beneficiaries, who were for the most part directors and shareholders in the appellant company or persons related to them. The instrument also declared that the appellant held the land in trust for the beneficiaries and that on request it would transfer the land to them. It was contended on behalf of the respondent that the alleged declaration of trust was a mere sham, that the appellant’s purpose in making the declaration was to put a valuable property belonging to the appellant out of the reach of the respondent, and the trust was attacked on the grounds that (a) it was invalid since it contained an undertaking to transfer the property to the beneficiaries on request and under condition 10 of the grant any transfer was forbidden without prior consent of the Commissioner of Lands, (b) the appellant had not shown how or to what extent the purchase price of the land was provided by or on behalf of the beneficiaries, (c) the trust was ultra vires the directors and the company. At the trial the sole issue was whether the appellant was a trustee and it was further conceded that the onus of proof rested upon the appellant.

Held –

 (i) though transfer of the land was forbidden without prior consent of the Commissioner of Lands, there was nothing to prevent the appellant from applying for such consent if the request had been made and this was no ground for impugning the validity of the instrument.

 (ii) though the evidence on the question of how or to what extent the purchase price was provided was vague and unsatisfactory, the instrument spoke for itself.

 (iii) it was not incumbent on the appellant to establish by detailed evidence of the truth of any part of the recitals of the declaration of trust.

 (iv) once the appellant had produced the trust instrument, it was for the respondent to show grounds for treating it as invalid, and this he had failed to do.

Declaration that the appellant was a trustee and that the notice was illegal.