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TMI Blog1964 (10) TMI 106X X X X Extracts X X X X X X X X Extracts X X X X ..... ement of the case is that the assessee is a private limited company, a cinema house from which it was deriving income by exhibiting films. In a meeting of the Board of Directors held on 9-9-1955, it was resolved that the Managing Director, the Raja of Bobbili, may be authorized to negotiate with the Zamindar and the Zamindarini of negotiate with the Zamindar and the Zamindarini of Chikkavaram and or their nominees for sale of the entire concern known by the name of Sri Rama Talkies, Bobbili, with all its equipment, machinery, fittings spares, accessories, the old projector, the jeep car bearing No. MSP 928 purchased from its funds, all the buildings and out-houses, wither newly constructed or mentioned in the registered sale deed No. 1464/ 5-9-1949 together with the entire premises covered thereby and the cash deposits lying with the various distributors and the Commercial Tax Department of the State Government and also the good will of the concern for a consideration of ₹ 1,20,000/-, which amount was to be received in the shape of transfer of 5% tax free cumulative Preference shares of M/S. Sri Rama Sugars and Industries Ltd., Bobbili, of the face of ₹ 1,20,000/- held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the profits, allowance should be made on account of the good will which was the subject matter of the transfer. The claim of the assessee that while computing the profits the market value of the shares should be taken into consideration was also rejected by him as according to him, what was purported to be the consideration was the value of ₹ 1,20,000/- of the assets in lieu of which the assessee agreed to accept shares worth ₹ 1,20,000/- as such, the consideration amounted to ₹ 1,20,000/- the assessee thereafter appealed to the Tribunal, which rejected similar pleas taken before it by the assessee except for allowing a sum of ₹ 5000/- as representing the cost of the good will. (3) It is trite law that the nature of an instrument should be regarded not so much by the description of the document given therein by the parties but on what the real nature of the transaction is. In other words, the real and true meaning of an instrument should be ascertained irrespective of the description given to it in the instrument by the parties, even though the parties may have believed that its effect and operation was something quite different to what in effect the doc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... price. A part from this, under S. 118 of the Transfer of Property Act, the word exchange has been defined as follows : When two persons mutually transfer the ownership of one thing for the ownership of another, neither thing or both things being money only, the transaction is called an exchange. This definition of exchange is not limited to Immovable property, Exchange is therefore not only exchange of land put also barter of goods. If one of the items transferred is money, the transaction is not an exchange but a sale. It is a clear, therefore, that both for the purposes of the sale of Goods Act as well as the Transfer of Property Act, dealing with moveable and Immovable properties sale is a transfer of property in the goods or in the ownership in property, as the case may be for money. Mr. Kondaiah for the Department referred us to Stroud's Judicial Dictionary, vol. 3, P 2288, for the meaning of the word 'price' as the sum of money or its equivalent at which a thing is valued . This is what the Oxford Dictionary also gives, i.e., money or other equivalent by which anything is bought or sold'. But we are not concerned here with the meaning given by courts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that in the former the price paid in money, whilst in the latter it is paid in goods by way of barter . (Chitty on Contracts, 12th Edition Page 430) The distinction has been observed by the Legislature in this country, a s will appear on a reference to sections relating to sales in the Transfer of property Act. The subordinate Judge's view is also supported by the decisions of the Madras High Court in queen Empress v. Appavu ILR 9 Mad 141 and Volkart Brother v. Vettivelu ILR 11 Mad 459. Later however, in madam Pillai v. Badrakali Ammal. ILR 45 Mad 612 : AIR 1922 MAD 311 a Full bench of the Madras High court had to consider the observations of Sadasiva Ayyar, J. in Ariyaputhira v. Muthukumaraswami ILR 37 Mad 423 : AIR 1914 Mad 489 in relation to the decisions in ILR 9 Mad 141 and ILR 11 Mad 459 Sadasiva Ayyar, J. in ILR 37 Mad 423 : AIR 1914 Mad 489 had stated: 'If two persons mutually fix the value of the exchange things in current coin and then exchange them as of equal value, they might be held to effect sales and to pay prices (the word not being apparently interpolated in the Report) and not merely to effect an exchange. It is with respect to these observati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the arguments that a trained English lawyer never use the word price unless it be to connote something other than perfectly familiar phrase valuable consideration , which would naturally occur to his mind; and it seems to me that the whole of Mr. Krishnaswami Ayyar's ingenious argument comes to this; that the we are to construe price as meaning the familiar term valuable consideration' I think that the word price was put ;into the section to connote something different and something more limited, that is, money . Mr. Kondaiah's entire argument, if we may say so, was in terms of the observations of Sadasiva Ayyar, J., in ILR 37 Mad 423 : AIR 19194 Mad 489 He contended that the parties intended that there should be a sale because in the resolution they specifically authorised the managing agent to negotiate with the Zamindar and the Zamindarini of Chikkavaram or their nominees for the sale of the entire concern for a consideration of Rs, 1,20,000/- ignoring the essential requisite that it should be received in the shape of transfer of 5% cumulative preference shares of M/s. Sri Rama Sugars and industries Ltd. he further refers to the use of words buyers and seller ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... annot be taxed merely with a view to swelling the revenues, ignoring the legal position by regarding the substances of the transaction . As we stated, unless the document is impeached, which is not the cause here, it is not permissible to go beyond the legal effect of the document constructed in accordance with ordinary rules, or to consider the substance of the matter. The so-called doctrine that in revenue cases the substance of the matter may be regarded as distinguished from the strict legal position, was emphatically demurred to in may English cases of highest authority and finally set at rest by the House of Lords in Duke of Westminster v. Inland Revenue Commrs (1935) 19 Tax Cas 490 and by the privy council in Bank of Chettinad v. Commr of Income Tax Madras In the former case, Lord Tomlin Lord Russell of Killowen and Lord Wright expressed strong disapproval of the suggestion of the existence of such a doctrine. Lord Tomlin dealing with the contention that in revenue cases there is a doctrine that the Court may ignore the legal position and regard what is called the substances of the matter . stated at page 520. This supposed doctrine seems to rest for its support upon a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... passage of Lord Russell of Killowen in (1935) 19 Tax Cas 490 with approval. (7) It is therefore, obvious that it is not open to the Income Tax authorities to deduce the nature of the document from the purported intention by going behind the document or to consider the substance of the matter or to accept it in part and reject it in part or to re-write the document merely to suit the purposes of Revenue. Inasmuch as the consideration for the transfer was not money but only transfer in question is not a sale but an exchange. (8) In view of what has been held on the first question, the alternative question does not arise. But having regard to the arguments addressed before us by both sides and the submission of the learned advocate for the Department that we should express our view on this question also, we do so, the contention of the assessee's advocate is that when the Income Tax Officer is computing the profits and reducing the value of the property by writing down its value, he must likewise take the market rate and not the face value of the shares while Mr. Kondaih on the other hand, relies on the specific reference to the values fixed by the parties, viz., that the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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