Commissioner Of Income Tax, A. P. vs Motors And General Stores Private LTD.

Judicial Analysis Court Copy Headnote Facts Arguments Court observation

1967 Supreme(SC) 168

SUPREME COURT OF INDIA
J.C. SHAH, S.M. SIKRI AND V. RAMASWAMI, JJ.
Commissioner of Income-tax, A.P., Appellant
Versus
M/s. Motors and General Stores (P) Ltd., Respondent.
Civil Appeal No. 819 of 1966,
D/-2-5-1967.
Advocates Appeared
Mr. D. Narsaraju, Senior Advocate (Messrs T. A. Ramachandran and R. N. Sachthey, Advocates, with him), for Appellant; Mr. P. Ram Reddy, Senior Advocate, (Mr. A. V. V. Nair. Advocate, with him), for Respondent.

Advocates:
A.V.Velayudhan Nair, D.NARASARAJU, P.RAM REDDY, R.N.SACH, T.A.Ramachandran

Headnote:‘Price’ — meaning - Whether the transaction was in essence one of exchange or sale — consideration of the terms of deed or document - Construction of deed - Sale and exchange — distinction
       – as the money consideration for a sale of goods. The presence of money for consideration is, therefore, an essential element in a transaction of sale. If the consideration is not money but some other valuable consideration it may be an exchange or barter but not a sale. There is no definition of the word ‘price’ in the Sale of Goods Act. But it is well settled that the word ‘price’ is used in the same sense in Section 54 of the transfer of Property Act as in Section 4 of the Sale of Goods Act, as held in Commissioner ofIncome Tax v. M/s Motor and General Stores (P) Ltd, AIR 1968 SC 200.

       – see decision in CIT, Andhra Pradesh v. M/s Motors and General Stores (P) Ltd., AIR 1968 SC 200 = 1967(2) SCWR 869 = 66 ITR 692 = 1968(1) Mad LJ (SC) 26 = 1968(1) SCJ 96 = 1967(3) SCR 876. Also the decision in Smt. Bina Das Gupta v. Sachindra Mohan Das, AIR 1968 SC 39 and Boddu Venkatakrishna Rao v. Smt. Boddu Satyavathi, AIR 1968 SC 751 = 1968(1) SCWR 934 = 1968(2) scj 287 = 1968(2) SCR 14 = 1968 SCD 783 = 1978(2) Mad LJ (SC) 38. Similar are the discussions on the subject in the case of Gummanna Shetty v. Nagaveniamma, AIR 1967 SC 1595 = 1967(2) SCWR 734. See also decision in Ram Gopal v. Nand Lal, AIR 1951 SC 139 = 1950 SCJ 575 = 1950 SCR 766, where it was held that the fundamental rule is to ascertain the intention from the words use; the surrounding circumstances are to be considered but that is only for the purpose of finding out the intended meaning of the words which have actually been employed. As observed in the Union of India v. Kishorilal Gupta, AIR 1959 , 1362, when the words are clear and unambiguous, there is no scope for drawing upon hypothetical considerations or supposed intentions of the parties. See also decision in K.S. Nanji and Co. v. Jatashankar Dossa, AIR 1961 SC 1474 = 1961 BLJR 514. In Shappoor Freedom Mazda v. Durga Prasad Chamaria, AIR 1961 SC 1236, it was held that the effect of the words used in particular document must inevitably depend upon the context in which the words are used and would always be conditioned by the tenor of the said document, and so unless words used in a given document are identical with words used in a document judicially considered it would not serve any useful purpose to refer to judicial precedents in the matter. Similar in the decision in the case of Ramkishorelal v. Kamalnarayan, AIR 1963 SC 890 = 1963 MPLJ 396, where the rules of construction of a deed were elaborately discussed, following the decision in Mohd Kamgar Shah v. Jagdish Chandra Deo Dhabal Deo, AIR 1960 SC 9523 = 1960(3) SCR 604.

Judgement

RAMASWAMI, J. :- This appeal is brought, by special leave, on behalf of the Commissioner of Income-tax, Hyderabad from the judgment of the Andhra Pradesh High Court dated October 30, 1964 in a case Referred No. 6 of 1963.

2. The respondent (hereinafter referred to as the assessee-company ) is a private limited company owning a cinema house called "Sree Rama Talkies", at Bobbili. It was being taxed on the profits made by exhibition of films therein. At a meeting of its Board of Directors held on September 9, 1955, it was resolved that the Managing Director, the Raja of Bobbili may be authorised to negotiate with the Zamindar of Chikkavaram or his nominee for the sale of the entire concern with all its equipment and machinery, fittings etc., for a consideration of Rs. 1,20,000. An agreement was concluded to effect a sale 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 & 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 Rupees 60,000. For the assessment year 1958-57, 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 Rs. 5,000 as representing the cost of the goodwill. As directed by the High Court, the Appellate Tribunal stated a case under Section 66 (2) of the Income-tax Act, 1922 on the following questions of law :

"(1) Whether the transaction dated 21-2-l956 amounts to a sale within the purview of the second proviso to Section 10 (2) (vii) of the Indian Income-tax Act ?

alternatively,

(2) Whether the consideration for the sale is not the market value of the shares as on the date of the transaction, namely, Rs. 95 per share, but the face value of the shares."

After hearing the reference the High Court answered the question in favour of the assessee-company and against the Commissioner of Income-tax.

3. Section 10 (2) (vii) of the Income-tax Act 1922 provides as follows :

"10 Business. (2) Such profits or gains shall be computed after making the following allowances. namely:-

(vii) in respect of any such building, machinery or plant which has been sold or discarded or demolished or destroyed, the amount by which the written down value thereof exceeds the amount for which the building, machinery or plant, as the case may be, is actually sold or its scrap value :

Provided that such amount is actually written off in the books of the assessee :

Provided further that where the amount for which any such building, machinery or plant is sold, whether during the continuance of the business or after the cessation thereof, exceeds the written down value, so much of the excess as does not exceed the difference between the original cost and the written down value shall be deemed to be profits of the previous year in which the sale took place :

It is only if there is a sale of the cinema house and the other assets that the taxable profits and gains are to be computed in the present case under Section 10 (2) (vii) as the amount by which the written down value exceeds the amount for which the assets fare actually sold. The words "sale" or "sold" have not been defi

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