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Calico Dyeing And Printing Works vs Commissioner Of Income-Tax, Bombay ... on 25 February, 1965 cites

Ram Badan Lal And Ors. vs Kunwar Singh And Ors. on 13 December, 1937

8. In the agreement it has been in terms provided that the allotment of shares was in lieu of payment of the purchase money, the assessee-firm having agreed to accept these shares as part of the payment of sale price to the extent of Rs. 4 lakhs. The decisions to which Mr. Mehta has drawn out attention arise out of pre-emption suits, and they are distinguishable on facts, the decisions having turned on the terms of the contract between the parties in each case. The position, however, has been made clear in Ram Badan Lal v. Kunwar Singh by the learned judges that "no hard and fast rule can be laid down as to when two transactions amount to a sale or to an exchange." Each case will have to be decided on its own facts ascertaining what the real nature of the transaction between the parties had been. The real nature of the transaction between the parties has to be decided having regard to the agreement between the parties and not on the mode in which the consideration under the contract has been paid. As we have already stated, the decision in those cases turned on the contracts in those cases. It is not necessary to refer in detail to those cases.
Allahabad High Court Cites 1 - Cited by 4 - Full Document

Randhir Singh And Anr. vs Randhir Singh And Ors. on 1 February, 1937

In support of his contention, Mr. Mehta has referred us to the three decisions in Ismail Shah v. Saleh Muhammad Shah, Randhir Singh v. Randhir Singh and Ram Badan Lal v. Kunwar Singh. It is not possible for us to accept the contentions raised by Mr. Mehta. It is indeed true that the shares would be goods within the meaning of the definition clause of the Sale of Goods Act. Sub-section (1) of section 4 of that Act defines a contract in following terms : "A contract of sale of goods is a contract whereby a seller transfers or agrees to transfer property in the goods to the buyer for a price." Price has been defined in sub-section (1) of section 4 : "'Price' means money consideration for the sale of goods." Reading the meaning of the word "price" in section 4, the material part would read : "A contract of sale of goods is a contract whereby a seller transfers or agrees to transfer property in goods to the buyer for money consideration (price)." In our opinion, the definition of "sale of goods" to which Mr. Mehta referred us is hardly of any assistance to him. The emphasis in section 4 is not on the mode in which the parties agree to pay the price. The emphasis is on the nature of the contract. If the contract is to transfer property in goods for a money consideration, the parties may agree to pay or receive it in any manner they like; that would not affect the nature of the contract. The contract between the parties in the instant case has been exactly the same. The assessee-company (vendors) had agreed to sell their business to the private limited company for a money consideration of Rs. 8,22,001. The contract between the parties, in our opinion, squarely falls within the definition of section 4. Section 54 of the Transfer of Property Act, which defines a "sale" means "a sale is a transfer of ownership in exchange for price paid or promised or part paid and part promised". Price has not been defined. But the expression "price" has been understood in the same sense as it is understood in the Sale of Goods Act, i.e., money consideration. In our opinion, this definition also is hardly of any assistance to the assessee in the present case. The position again is more or less the same as under section 4 of the Sale of Goods Act. The emphasis is not on the mode agreed between the parties to pay the price, but the emphasis is on the nature of transfer. If the transfer of ownership is for money consideration, it is a sale. We have already referred to the material parts of the agreement. Section 118 of the Transfer of Property Act defines "exchange" as "when two persons mutually transfer ownership of one thing for the ownership of another, neither any or both things being money only, the transaction is called an exchange. A transfer of property in completion of exchange can be made only in the manner provided for transfer of such property by sale. It has to be seen whether the transaction in the instant case falls under the aforesaid definition of "exchange". Now, for a transaction to be an exchange, there has to be a mutual transfer of ownership of respective properties of each to the other. In other words, the form of the transaction must be - A transferring to B his property X, and in exchange, B transferring his property Y to A. The difference, is any, may be adjusted by payment of money. But the essential thing is mutual transfer. There is nothing in the deed of agreement showing that the private limited company was transferring the shares to the assessee-firm in exchange of the assessee-company transferring its ownership in the business to the private limited company. The material part, namely, sub-clause (a) of clause 4A is in the following terms :
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