VEERASWAMI J.

The question in this reference relating to the assessment year 1960-61 is whether a sum of Rs. 12, 442 was liable to be assessed to tax under section 10(2)(vii) of the Income-tax Act, 1922. Till the year ended March 31, 1959, the assessee was carrying on business in forest contracts. For purposes of that business, he owned three lorries which were valued in its books, as on March 31, 1959, at Rs. 15, 925. The written down value of the lorries as on that date, as per the assessment records, was Rs. 2, 558. By a deed of partnership dated August 5, 1959, the proprietary business of the assessee was converted into a, firm of partnership consisting of himself and another by name V. Abdul Kayoom. The partnership as agreed between the two was to commence as and from April 1, 1959, and it was to be one at will, determinable by either party by notice of a specified period. The net profits and losses of the partnership were to be divided or borne by the partners in the proportion of 9 annas and 7 annas in the rupee as between the assessee and the other partner respectively. Each partner was to contribute a sum of Rs. 4, 000 towards initial capital of the firm. Any additional capital needed for the purposes of the partnership business was to be contributed equally by the parties. The three lorries were brought into the assets of the firm and the clause in the partnership deed relating to it reads

"The capital account of the party of the first part shall be credited with a further sum of Rs. 15, 000 being the agreed value of the three lorries handed over to the partnership business by the party of the first part on the 1st day of April, 1959." *

In the accounts of the firm, the assessee's capital account was credited with a sum of Rs. 15, 000 and the lorry purchase account was debited with a similar amount. It will be seen that there was thus a difference of Rs. 12, 442 between the value at which the lorries have been taken over by the firm and their written down value. This sum of Rs. 12, 442 was treated as profit made by the assessee and brought to tax under section 10(2)(vii). The Appellate Assistant Commissioner of Income-tax declined to interfere, but, on a further appeal, the Tribunal held that, in the circumstances, there was no sale of the lorries and so no profit made by the assessee. This reference comes before us under section 66(1) at the instance of the Commissioner of Income-taxWe are of the view that the Tribunal was right in its conclusion. The revenue places strong reliance on the entries in the firm's account books and contends that the debit of Rs. 15, 000 in the firm's lorry purchase account with the corresponding credit given to the assessee's capital account clearly pointed to a transfer by the assessee of the lorries to the firm for consideration, the transaction amounting thus to a sale of goods within the meaning of the Sale of Goods Act, 1930, and that the bringing in of the lorries into the firm's, business was not merely a re-adjustment made by the partners so as to carry on the business in one form rather than in another, as was viewed by the Tribunal. If the entries in the account books stood by themselves, there may be some force in the contention for the revenue. But even there, we doubt whether on the basis of the entries alone we can hold that there was a sale by the assessee to, and purchase by the firm, of the lorries. For section 10(2)(vii) to apply there must be a sale of goods. Though the concept is not defined in the Income-tax Act, it is now established by Liquidators of Pursa Ltd. v. Commissioner of Income-tax and Commissioner of Income-tax v. Dewas Cine Corporation that the word "sale" has been used in section 10(2)(vii) in the sense of sale of goods as defined in the Indian Sale of Goods Act, 1930. Whether there is a sale of goods will depend upon the facts in each case and the mere entry in the account books, when its effect is in dispute, is not conclusive of the matte