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TMI Blog2001 (2) TMI 1011X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment year 1989-90, final orders were passed on November 27, 1990 determining the total and taxable turnover as Rs. 13,91,89,018 and Rs. 7,42,71,302 respectively and this assessment year is concerned in Tax Appeal Case No. 3192 of 1997 (T.C. No. 515 of 1995-HC). The place of business of the assessee was inspected by the Enforcement Wing Officers on October 12, 1990. They found that cotton received on loan basis from two sister concerns were, in fact, purchases made from the sister concerns and therefore, liable to be taxed as last purchases of cotton by the assessee. Accordingly, revisions were undertaken for the three assessment years on December 31, 1991. The revision of assessment for the year 1986-87 was as follows: Last purchase of 300 bales of Cotton Rs. 5,95,784 Tax due at 3% Rs. 17,874 Addl. Sales Tax at 1% on the taxable turnover Rs. 5,958 Penalty: Penalty at 150% of the tax and additional sales tax on the above wilful and deliberate purchase suppression Rs. 35,748 Total revenue involved Rs. 59,580 For the year 1987-88, the revision was made as under: Last purchase of 1706 bales of Cotton Rs. 87,63,784 Tax due at 3% Rs. 2,62,914 Additional Sales Ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e was no money consideration involved in the transactions and they were in the nature of barter of cotton for cotton. He also found that the assessing authority had not established that there was any sale or purchase in respect of the goods within the meaning of section 2(n) of the Tamil Nadu General Sales Tax Act, 1959. In particular, the appellate authority says that whatever may be the nature, value or variety of cotton which were received and returned, the fact remained that it was cotton for cotton. Accordingly, the appeals were allowed and the penalty was deleted. 5.. The Joint Commissioner of Commercial Taxes initiated suo motu proceedings and after issuing a show cause notice and after considering the objections, passed a common order for all the three years on May 10, 1994 restoring the turnovers of Rs. 5,95,784, Rs. 87,63,784 and Rs. 16,81,011 for the assessment years 1986-87, 1987-88 and 1989-90 respectively. For each assessment year, the Joint Commissioner had noticed the receipt of cotton, their value and considered whether they could be treated as barter transactions. In particular, he found the alleged loan and the value of cotton received were shown under the tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts of the present case, it was quite evident that there was valuable consideration by way of money as disclosed in the Profit and Loss Account. Accordingly, he concluded that there was a sale transaction and the revisions were rightly undertaken. The Joint Commissioner also found that the assessee had given a money value for the cotton received and cotton returned in the Profit and Loss Account. He found that money consideration was the predominant objective between the parties. He then proceeded to consider the question of penalty under section 16(2) of the Tamil Nadu General Sales Tax Act, 1959. He found that the assessee could have been under a bona fide impression that the transactions were not liable to be taxed. Therefore, there was no scope for invoking section 16(2) of the Tamil Nadu General Sales Tax Act, 1959 and to this extent, he upheld the order of the Appellate Assistant Commissioner. 6.. Before us, Mr. N. Inbarajan, learned counsel for the appellant, has elaborately argued the cases by referring to section 2(n) of the Tamil Nadu General Sales Tax Act, 1959. He also referred to the definition of "sale" and the definition of "price" in the Sale of Goods Act. He t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Kerala High Court held that the expression "valuable consideration" takes colour from the preceding expressions cash or deferred payment and therefore , the words, "other valuable consideration" must be interpreted to mean cheques, bill of exchange or any such negotiable instruments. For this purpose, they relied on Devi Dass Gopal Krishnan v. State of Punjab [1967] 20 STC 430, a decision of the Supreme Court. However, ultimately, in the case before the Kerala High Court, they agreed with the Tribunal that the transaction was a make belief arrangement and therefore, should be treated as a sale. In that case also, the assessee supplied goods to sister concern in consideration of the purchaser returning the goods with interest at fifteen per cent per annum. The only consequence of the judgment of the Full Bench reported in M. Jaihind v. State of Kerala [1998] 111 STC 374 (Ker) is that they have specifically differed from three judgments of the Madras High Court. We are, therefore, constrained to look into the judgments of the Madras High Court. The first case is Jayarama Chettiar, In re [1948] 1 STC 168, where it was held that money alone need not necessarily be the consideratio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... our opinion, this approach of the first appellate authority is not correct. One has to look into the whole case from all angles and find out whether it was a make-belief arrangement or a real barter transaction. In this connection, it is worthwhile to notice the judgment of the Supreme Court in the case of Commissioner of Income-tax, Gujarat-II v. B.M. Kharwar reported in [1969] 72 ITR 603. The Supreme Court observes, "The taxing authority is entitled, and is indeed bound, to determine the true legal relation resulting from a transaction. If the parties have chosen to conceal by a device the legal relation, it is open to the taxing authorities to unravel the device and to determine the true character of the relationship. But the legal effect of a transaction cannot be displaced by probing into the 'substance of the transaction'. This principle applies alike to cases in which the legal relation is recorded in a formal document, and to cases where it has to be gathered from evidence-oral and documentary-and conduct of the parties to the transaction." We give below the following reasons for holding that the transaction was, in fact, a sale and not a barter arrangement. (1) There wa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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