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. 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. 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 the assessment year 1959-60. The ITO did not accept the plea that the transaction was of April 30, 1958.
(3.) 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. Aggrieved, both sides went up in appeal to the Tribunal but failed. The view of the AAC was upheld by the Tribunal.;