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TMI Blog1967 (5) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... and this was confirmed by the assessee-company at an extraordinary general body meeting held on October 4, 1955. Pursuant thereto, a deed called the "exchange deed" was brought into existence on February 21, 1956, and the consideration was received by the assessee-company in the shape of transfer of 5 per cent. tax free cumulative preference shares in Sri Rama Sugar and Industries Ltd., Bobbili, of the face value of Rs. 1,20,000 held by the Zamindar and Zamindarini of Chikkavaram. Separate valuation was given for the immovable property and for the movables, etc., and goodwill, each being valued at Rs. 60,000. For the assessment year 1956-57, the assessee-company submitted a return of income showing a sum of Rs.9,823 as profits derived from the transaction. The Income-tax Officer found that the value realised exceeded the written down value by Rs. 43,568 and accordingly computed the profits under section 10(2)(vii) of the Income-tax Act, 1922, and included the amount in the taxable income of the assessee-company. The order of the Income-tax Officer was confirmed by the Appellate Assistant Commissioner in appeal and by the Income-tax Appellate Tribunal except for allowing a sum of R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... price paid or promised or part-paid and part-promised." There is no definition of the word " price " in this Act. But it is well-settled that the word "price" is used in the same sense in this section as in section 4 of the Sale of Goods Act, 1930 (Act III of 1930) (see the decision of a Full Bench of the Madras High Court in Madam Pillai v. Badrakali Ammal). Section 4 of the Sale of Goods Act reads as follows : " (1) A contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a price. There may be a contract of sale between one part-owner and another. (2) A contract of sale may be absolute or conditional. (3) Where under a contract of sale the property in the goods is transferred from the seller to the buyer, the contract is called a sale, but where the transfer of the property in the goods is to take place at a future time or subject to some condition thereafter to be fulfilled, the contract is called an agreement to sell. (4) An agreement to sell becomes a sale, when the time elapses or the conditions are fulfilled subject to which the property in the goods is to be transferred." Section 2(10) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sideration realised by the assessee-company over the written down value of the assets transferred. On behalf of the appellant it was contended that the money consideration was fixed at Rs. 1,20,000 and the mode of payment was by transfer of shares and the transaction was really a sale and not transfer by way of exchange. We are unable to accept this argument as correct. In the first place, the document is called " exchange deed ". The preamble of the document states: " And whereas the party of the first part as at the directors meeting held on February 3, 1955, resolved to exchange the property mentioned in Schedule I for the property mentioned in Schedule II belonging to the party of the second part and whereas in pursuance of the resolution of the board of directors the managing director of the party of the first part had handed over possession of the property described in Schedule I hereto on September 9, 1955, to the party of the second part and whereas the general body of the first part at a meeting held on October 4, 1955, resolved to authorise the managing director of the party of the first part to negotiate with the zamindar and zamindarini of Chikkavaram the second party ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement and in consideration of the transfer by the party of the first part of the property in Schedule I hereto to the party of the second part, the party of the second part hereby grants and transfers to the party of the first part of the shares more fully described in Schedule II hereto to hold the same to the party of the first part absolutely for ever. (3) Each of the parties hereby covenants with the other first that the properties hereby transferred by him is free from encumbrance charge or lien of any kind whatsoever ; secondly, that the properties so transferred by each of them shall be quietly entered upon held and enjoyed by the other of them and the rents and profits and dividends received by the other of them without any interruption or disturbance by the party transferring the same or any one claiming through or under them; thirdly that each of the parties hereto will at the request of and cost of the other execute every such assurance and do every such act or thing as shall reasonably be required by such other for further or more ....... (4) The party of the first part covenants and assurances the party of the second part that all taxes due to the Government or the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of section 10(2)(vii) of the Income-tax Act. We pass on to consider the argument of Mr. Narasaraju that in revenue matters it was the substance of the transaction which must be looked at and not the form in which the parties have chosen to clothe the transaction. It was contended that, in the present case, there was in substance a sale of Sree Rama Talkies by the assessee-company for a money consideration of Rs. 1,20,000, though the mode of payment was by transfer of shares and the resolution of the board of directors dated September 9, 1955, clearly indicated that the intention of the assessee-company was to sell Sree Rama Talkies along with its equipment concerned for a consideration of Rs. 1,20,000. In the present case, however, there is no suggestion on behalf of the appellant of bad faith on the part of the assessee-company nor is it alleged that the particular form of the transaction was adopted as a cloak to conceal a different transaction. It is not disputed that the document in question was intended to be acted upon and there is no suggestion of mala fides or that the document was never intended to have any legal effect. In the absence of any suggestion of bad faith or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t this House did in the case of Secretary of State in Council of India v. Scoble; that and no more. If, on the other hand, the doctrine means that you may brush aside deeds, disregard the legal rights and liabilities arising under a contract between parties, and decide the question of taxability or non-taxability upon the footing or the right and liabilities of the parties being different from what in law they are, then I entirely dissent from such a doctrine." In a later case-Commissioners of Inland Revenue v. Wesleyan and General Assurance Society---Viscount Simon expressed the principle as follows : " It may be well to repeat two propositions which are well established in the application of the law relating to income-tax. First, the name given to a transaction by the parties concerned does not necessarily decide the nature of the transaction. To call a payment a loan if it is really an annuity does not assist the taxpayer, any more than to call an item a capital payment would prevent it from being regarded as an income payment if that is its true nature. The question always is what is the real character of the payment, not what the parties call it. Secondly, a transaction, w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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