Satish Chandra, C.J.
1. Messrs. Moti Lal Padampat Sugar Mills Co. (Private) Ltd. Kanpur, the assessee, entered into a transaction with Messrs. Kamlapat Motilal, a partnership firm, at Kanpur. The assessee agreed to transier a sugar mill owned by it at Bhatni, while Messrs. Kamlapat Motilal agreed to transfer an oil mill and a cold storage at Kanpur to the assessee-company. The stocks, stores, spares, machinery not embedded to earth, furniture and fittings, tools and implements, laboratory equipments, typewriters, book debts, advances and cash balances of each were valued separately. After adjustment of liabilities, the assessee-company agreed to pay a sum of Rs. 19,59,289.26 as price of the oil mills and the cold storage belonging to Messrs. Kamlapat Motilal. This valuation was done as on April 30, 1958, and the assessee-company agreed to pay this amount by its letter dated September 10, 1958.
2. On the same day, Messrs. Kamlapat Motilal addressed a letter to the assessee agreeing to pay Rs. 12,80,945 for the movable assets minus liabilities of the Bhatni sugar mills owned by the assessee-company. In these letters, both concerns mentioned an arrangement between them for exchange of the sugar mills with the oil mills and the cold storage belonging to the other.
3. On September 30, 1958, the board of directors of the assessee-company passed a resolution affirming the transaction of transfer of the Bhatni factory in lieu of the oil mills and the cold storage and also in respect of the movable and immovable assets thereof. Subsequently, on November 10, 1958, the parties executed a deed of exchange in relation to the immovable properties of the sugar factory as well as the oil mills and the cold storage.
4. For the assessment year 1959-60, the assessee-company claimed a loss of Rs. 4,51,043, as arising out of the transaction of sale of its Bhatni sugar factory. The claim was, however, disallowed on the ground that the actual transaction did not take place within the accounting period relevant to theassessment year 1959-60. The ITO did not accept the plea that the transaction was of April 30, 1958.
5. The assessee repeated its claim for the subsequent year 1960-61. In this year, the ITO took the view that the transaction was an out and out exchange and not a sale and, therefore, the loss accruing on it was not an allowable deduction. On appeal, the AAC held that the transaction in so far as it related to immovable properties was, in law, an exchange while the transfer of movable assets was a transaction of sale. The ITO was directed to act accordingly.
6. Aggrieved, both sides went up in appeal to the Tribunal but failed. The view of the AAC was upheld by the Tribunal.
7. At the instance of the parties, the Tribunal has referred, for our opinion, the following three questions of law :
'1. Whether, on the facts and in the circumstances of the case, the transaction was one whole or it involved two transactions, one pertaining to movable assets and the other pertaining to the immovable property ?
2. Whether the Tribunal was justified in holding that the transaction with regard to movable assets was a sale within the meaning of Section 10(2)(vii) of the I.T. Act, 1922?
3. Whether the Tribunal was justified in holding that the transaction pertaining to immovable property was an exchange and not sale within the meaning of Section 10(2)(vii) of the I.T. Act, 1922 ?'
8. The question is whether the transaction was a single one or it could validly be held to be an amalgam of two independent transactions, one relating to immovable and the other relating to movable assets. The letter dated September 10, 1958, referred to the arrangement for mutual transfer of the sugar factory with the oil mills and the cold storage. It went on to indicate in detail the value of the movable assets of the undertaking owned by each of the parties. In this letter, the stress was on transfer of the undertaking as a going concern but with the movable assets valued in detail and separately. The Tribunal has, on a review of the facts and circumstances of the case, come to the conclusion that, in fact, the intention of the parties was to enter into distinct transactions, one relating to immovable and the other to movable assets. It found that each party wanted to sell the movable assets belonging to itself. The assessee valued its movables at Rs. 12,80,945 while the firm, Messrs. Motilal Kamlapat, valued its own movable assets for Rs. 19,59,289.26. The assessee agreed to pay the difference of Rs. 6,78,344 to the other firm. The conduct of the parties showed that each party valued each asset in detail as mentioned in the list annexed to the letter dated September 10, 1958, and had, in fact, intended to pay and receive the price of these movable assets. There were thus two transactions of sale, inter parties, both relating to movable assets.
9. The immovable properties belonging to each party were subjected to a different treatment. The board of directors of the assessee-company passed the following resolution :
'1. That the company do exchange the assets and liabilities of the Bhatni factory belonging to the company for the assets and liabilities of the oil mills and cold storage belonging to Messrs. Kamlapat Motilal.
2. That the company do accept a liability of Rs. 6,78,343.50 on account of the reciprocal values of the movable assets of the two concerns, proposed to be exchanged.
3. That the company do accept the exchange of immovables for a net amount of Rs. 54,000 receivable by the company on the execution of the deed of exchange.....'
10. It will be seen that in respect of immovables the expressed intention was to exchange them on payment of the difference of value and that the transaction was to be completed on execution of a deed. No such written document was considered necessary for the transactions relating to movables. The parties executed the requisite deed of exchange on November 10, 1958. This document stated that in consideration of the premises and the 'transfer by the first party of the oil mills and the cold storage and the payment of Rs. 54,000 to the second party, the latter hereby convey and transfer the sugar factory at Bhatni.' The document expressly stated that the transaction was one of exchange. The facts also lead to the same conclusion. The exchange was of oil mills and cold storage plus a sum of Rs. 54,000 with the sugar factory at Bhatni. The sum of Rs. 54,000 was clearly by way of equalizing the value of the oil mills and the cold storage with that of the sugar factory. On the other hand, the transaction of movables brings out the distinction. In one case, the properties were exchanged with a small owelty, while in the other the price of each asset was paid by one to the other.
11. The law on the point is well-settled. In CIT v. Motors and General Stores(Pvt.) Ltd. : 66ITR692(SC) the Supreme Court held (per Head Note):
'.....The difference between a sale and an exchange is this, that inthe former the price'' is paid in money, whilst in the latter it is paid in goods..... The presence of money consideration is an essential elementin a transaction of sale. If the consideration is not money but some other valuable consideration it may be an exchange.....but not a sale.'
12. Here, so far as the immovable properties are concerned, considerationwas the immovable property belonging to the other while in the transactionrelating to movables the predominent intention was to get and receive theprice. It is evident that the one transaction was of sale while the otherwas of an exchange.
13. We, therefore, answer the questions referred to as follows :
1. The transactions were two, one pertaining to movables and the other pertaining to immovables.
2. In the affirmative in favour of the assessee and against the department.
3. In the affirmative in favour of the department and against the assessee.
14. In view of the divided success, we make no order as to costs.