Ramaswami, J. - (1.) 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 and 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 defined in the Income-tax Act, 1922. Consequently, these words have to be construed by reference to other enactments. Section 54 of the Transfer of Property Act defines "sale" as a transfer of ownership in exchange for a price paid or promised or part paid and part promised. Section 54 of the Transfer of Property Act reads as follows: "sale" is a transfer of ownership in exchange for a price paid or promised or part-paid and part-promised." There is no definition of the word 'price' in this Act. But it is well settled that the word 'price' is used in the same sense in this section as in Section 4 of the Sale of Goods Act, 1930 (Act III of 1930) :See the decision of a Full Bench of the Madras High Court in Madam Pillai vs. Badrakali Ammal, ILR 45 Mad 612. Section 4 of the Sale of Goods Act reads as follows: "(1) A contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a price. There may be a contract of sale between one part-owner and another. (2) A contract of sale may be absolute or conditional. (3) Where under a contract of sale the property in the goods is transferred from the seller to the buyer, the contract is called a safe but where the transfer of the property in the goods is to take place at a future time or subject to some condition thereafter to be fulfilled, the contract is called an agreement to sell. (4) An agreement to sell becomes a sale when the time elapses or the conditions are fulfilled subject to which the property in the goods is to be transferred." Section 2 (10) of the Sale of Goods Act defines "pace" as meaning the money consideration for a sale of goods. The presence of money 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. Section 118 al the Transfer of property Act defines 'exchange' as follows: "When two persons mutually transfer the ownership of one thing for the ownership of another, neither thing or both thing, being money only the transaction is called an 'exchange' A transfer of property in completion of an exchange can be made only in manner provided for the transfer of such property by sale" Section 119 provides: "If any party to an exchange or any person claming through or under such party is by reason of any defect in the title of the other party deprived of the thing or any part of the thing received by him in exchange, then, unless a contrary intention appears from the terms of the exchange, such other party is liable to him or any person claiming through or under him for loss caused thereby, or at the option of the person so deprived, for the return of the thing transferred, if still in the possession of such other party or his legal representative or a transferee from him without consideration." The definition of exchange in S. 118 of the Transfer of Property Act is not limited to immovable property but it extends also to barter of goods. It is clear therefore, that both under the Sale of Goods Act and the Transfer of Property sale is a transfer of property in the goods or of the ownership in immovable property for a money consideration. But in exchange there is a reciprocal transfer of interest in the immovable property, the corresponding transfer of interest in the movable property being denoted by the word 'barter'. "The difference between a sale and an exchange is this, that in the former the price is paid in money, whilst in the latter it is paid in goods by way of barter." (Chitty on Contracts, 22nd Edn., Vol. II page 582) .;