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TMI Blog1986 (7) TMI 71X X X X Extracts X X X X X X X X Extracts X X X X ..... e nature of an exchange only ? " The assessee is a partnership firm which carried on transport business. During the previous year relevant to the assessment year 1955-56, the assessee entered into an agreement dated March 24, 1955, with the Combined Transport Service, Bilaspur, a private limited company, according to which all the 17 passenger buses owned by the assessee-firm were transferred to the company for a total consideration of Rs. 1,51,565 against the written down value of these vehicles amounting to Rs. 31,024. The Income-tax Officer rejected the assessee's contention and held that the transaction was one of sale by the assessee-firm to the company and, therefore, the amount of Rs. 1,19,541 earned by it in excess of the written ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of this agreement was made available at the hearing by Shri Y. S. Dharmadhikari, learned counsel for the assessee, and the same also forms part of the reference in Misc. Civil Case No. 273 of 1973, decided on August 25, 1975, an earlier reference in the same case. A perusal of the agreement shows that it evidences a sale by the assessee-firm to the company of the movable properties specified in the annexed schedule, which include these motor vehicles. The schedule of the agreement gives the particulars of each motor vehicle and mentions its price against it. The total sale price of Rs. 1,51,565 is calculated on the basis of particulars specified against each of these motor vehicles in the said schedule. Thereafter,the agreement says that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed counsel for the assessee, Shri Y. S. Dharmadhikari, however, contended that the transaction was not a " sale " but merely conversion of the assets of the partnership firm (transferor) to that of the company (transferee) and the partners were to be made shareholders of the company by holding the shares in lieu of the sale price of the motor vehicles. It is on this basis that Shri Y. S. Dharmadhikari placed reliance on the decision in CIT v. Motors and General Stores (P.) Ltd. [1967] 66 ITR 692 (SC). In our opinion, the contention of learned counsel for the Revenue must be accepted. The argument of learned counsel for the assessee that the transaction was merely one of conversion of the assets of the partnership firm into that of the pri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e liability to pay the price. The court further observed that section 10(2)(vii), proviso (ii), on the plain terms used therein, is attracted if there be a sale of the building, machinery or plant and the amount for which the sale takes place exceeds the written down value of the assets transferred. If there be no sale, the Proviso has no application. " In our opinion, the transaction in the present case is of the kind indicated in the latter part of the above test or, in other words, there were two transactions one a transaction of " sale " of motor vehicles and the other of a contract under which the shares were allotted in satisfaction of the liability to pay the price. The first transaction of sale of motor vehicles clearly attracts s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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