# COMMISSIONER OF INCOME TAX, HYDERABAD v. M/S. MOTOR AND GENERAL STORES (P.) LTD

- **Citation:** [1967] 3 S.C.R. 876
- **Court:** Supreme Court of India
- **Decided:** 1967-05-02
- **Case number:** Civil Appeal No. 819 of 1966
- **Bench:** J. C. Shah, S. M. Sikri, V. Ramaswami
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/commissioner-of-income-tax-hyderabad-v-m-s-motor-and-general-stores-p-ltd-4034
- **Pages:** 10

## Headnote

B
I,ncome-tox Act, 1922 s. 10(2) (vli)-Assessee selling 'cinenut attd
<Jther assets in exchange for shares in another Company-Whether transactum one of 'sale' or 'exchange'-Therefore whether
difference
be.
tween book-value of assets and exchange consideration taxable-Deter1nining
the substance
rather than form of
transaction
in
revenue
.n1atters-Conditions for.
The respondent private Limited Company owned a cinema house
and at a meeting of its Board of Directors on September 9, 1955,
it
was resolved that the Managing Director may be authorised to nego•
tiate with a buyer !or the sale of the entire concern with all its equipment and machinery etc. for a consideration of Rs. 1,20,000.
After
an agreement had been concluded to effect a sale and had been confirmed at an extraordinary general meeting of the company on October
4, 1955, an "exchange deed" was entered into on February 21, 1956
=d the consideration was received by the
assessee company in the
shape of transfer of certain shares of the face value of Rs. · 1,20,000
owned by the buyer in another company.
In the course of its assessment to tax for the year 1956-57,
the
Income-tax Officer computed the respondent's profits under s. 10(2) (vii)
hy including an amount of Rs. 43,568 on account of the excess amount
realised over the written down value of the assets sold. The order of
the Income-tax Officer was confirmed, in appeai by the Appellate Assistant Commissioner and substantially also by the
Tribunal. However,
upon a reference under s. 66(2) of the Act the High Court answered
the question in favour of the respondent.
In the appeal to this Court it was contended on behalf of the appe!·
iant that the money consideration for the assets was fixed at Rs. 1,20,000
and the mode of payment was by transfer of shares so that the tran·
.saction was really a sale and not transfer by way of exchange; that the
resolution of the Board of Directors and of the shareholders reproduc·
«! in the preamble of the exchange deed showed clearly that what was
authamed was the sale of the entire
concern; and that in
revenue
matters it was the substance of the transaction which must be looked
at and not the form in which the parties have chosen to clothe the
transaction.
HELD : The Income-tax authorities were not entitled to treat the
transaction as a sale and to apply the provisions of s. 10(2) (vii) of the
Income-tax Act, 1922. -In essence the ti-ansaction was one of exchange
and there was no sale of the properties described in the exhcange deed.
There was no price paid or promised to be paid for the transfer of the
properties but there was only a consideration in the shape of transfer
<>f shares in another company by the buyer. [883E-G)
It was clear from the operative part of the exchange deed that there
was an exchange of the prope·rties desoribed in it for the shares of a
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C.I,T. v. MOfOR & GENERAL STORES (Ramaswami, J.)
877
A
company. Neither the recital in the preamble nor the resolutions could
control the language of the operative portion of the deed or its legal
effect. [8830-El
B
c
D
E
F
G
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i\1adan1 Pilh;i v. Badrokali An1111al, I.L.R. 45 Madras 612, reft:rrcd
to.
The contention that in the present case it was the substance rather
than the form of the transaction which should be looked at must be rejected. There was no suggestion on behalf of the appellant of
bad
faith nor was it alleged that the particular form of the transaction was
adopted as a cloak to conceal a different transaction. In the absence
of any such suggestion the true principle is that the taxing statute has
to be applied in accordance with the legal rights of the parties to the
transaction. When the transaction
is embodied
in a document, the
liability to tax depends upon the meaning and content of the language
used in accordance with the ordinary rules of construction.
[883H;
884BJ
Bank of Cliettinad Ltd. v. C.l.T. Madras, 1940 I.T.R. 522; Duke of
1¥estminster's case,. 19 T.C. 490; and Conunissioner of Inland

## Text

COMMISSIONER OF INCOME TAX, HYDERABAD
A
v.
M/S. MOTOR AND GENERAL STORES (P.) LTD.
May 2, 1967
[J. C. SHAH, S. M. SIKRI AND V. RAMASWAMI, JJ.]
B
I,ncome-tox Act, 1922 s. 10(2) (vli)-Assessee selling 'cinenut attd
<Jther assets in exchange for shares in another Company-Whether transactum one of 'sale' or 'exchange'-Therefore whether
difference
be.
tween book-value of assets and exchange consideration taxable-Deter1nining
the substance
rather than form of
transaction
in
revenue
.n1atters-Conditions for.
The respondent private Limited Company owned a cinema house
and at a meeting of its Board of Directors on September 9, 1955,
it
was resolved that the Managing Director may be authorised to nego•
tiate with a buyer !or the sale of the entire concern with all its equipment and machinery etc. for a consideration of Rs. 1,20,000.
After
an agreement had been concluded to effect a sale and had been confirmed at an extraordinary general meeting of the company on October
4, 1955, an "exchange deed" was entered into on February 21, 1956
=d the consideration was received by the
assessee company in the
shape of transfer of certain shares of the face value of Rs. · 1,20,000
owned by the buyer in another company.
In the course of its assessment to tax for the year 1956-57,
the
Income-tax Officer computed the respondent's profits under s. 10(2) (vii)
hy including an amount of Rs. 43,568 on account of the excess amount
realised over the written down value of the assets sold. The order of
the Income-tax Officer was confirmed, in appeai by the Appellate Assistant Commissioner and substantially also by the
Tribunal. However,
upon a reference under s. 66(2) of the Act the High Court answered
the question in favour of the respondent.
In the appeal to this Court it was contended on behalf of the appe!·
iant that the money consideration for the assets was fixed at Rs. 1,20,000
and the mode of payment was by transfer of shares so that the tran·
.saction was really a sale and not transfer by way of exchange; that the
resolution of the Board of Directors and of the shareholders reproduc·
«! in the preamble of the exchange deed showed clearly that what was
authamed was the sale of the entire
concern; and that in
revenue
matters it was the substance of the transaction which must be looked
at and not the form in which the parties have chosen to clothe the
transaction.
HELD : The Income-tax authorities were not entitled to treat the
transaction as a sale and to apply the provisions of s. 10(2) (vii) of the
Income-tax Act, 1922. -In essence the ti-ansaction was one of exchange
and there was no sale of the properties described in the exhcange deed.
There was no price paid or promised to be paid for the transfer of the
properties but there was only a consideration in the shape of transfer
<>f shares in another company by the buyer. [883E-G)
It was clear from the operative part of the exchange deed that there
was an exchange of the prope·rties desoribed in it for the shares of a
c
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C.I,T. v. MOfOR & GENERAL STORES (Ramaswami, J.)
877
A
company. Neither the recital in the preamble nor the resolutions could
control the language of the operative portion of the deed or its legal
effect. [8830-El
B
c
D
E
F
G
H
i\1adan1 Pilh;i v. Badrokali An1111al, I.L.R. 45 Madras 612, reft:rrcd
to.
The contention that in the present case it was the substance rather
than the form of the transaction which should be looked at must be rejected. There was no suggestion on behalf of the appellant of
bad
faith nor was it alleged that the particular form of the transaction was
adopted as a cloak to conceal a different transaction. In the absence
of any such suggestion the true principle is that the taxing statute has
to be applied in accordance with the legal rights of the parties to the
transaction. When the transaction
is embodied
in a document, the
liability to tax depends upon the meaning and content of the language
used in accordance with the ordinary rules of construction.
[883H;
884BJ
Bank of Cliettinad Ltd. v. C.l.T. Madras, 1940 I.T.R. 522; Duke of
1¥estminster's case,. 19 T.C. 490; and Conunissioner of Inland Revenue
v. IVesloyan and General .11ssuranre Society, 30 T.C. 11, referred to.
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 819 of
1966.
Appeal by special leave from the judgment and order dated
October 30, 1964 of the Andhra Pradesh High Court in case
Referred No. 6 of 1963.
D. Narsaraju, T. A. Ramachandran and R. N. Sachthey for
the appellant.
P. Ram Reddy and A. V. V. Nair, for the respondent.
The Judgment of the Court was delivered by
Ramaswami, J.
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.
The respondent (hereinafter referred to as the
( 'assesseecompany') 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
nominr.e 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 extra-ordinary 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-
878
SUPREME COURT REPORTS
[1967] 3 S.C.R.
company in the shape of transfer of 5%
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 Rs. 60,000/·. For the assessment year
1956-57, 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 profil!l under s: 10(2) (vii) of the Income-tax Act,
1922 and included the amount in the taxable income of the
11ssessee-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 s.
66(2) of the Income-tax Act, 1922 on the following question of
law:
· "(1) Whether the transaction dated 21-2-1956
amounts io a sale within the purview of the second
proviso to section 10 ( 2) (vii) of the Indian Incometax Act; alternatively,
(2) Whether the consideration for the sale is not
'the market value of the shares as on the date of the
trans.action, namely, Rs. 95/- per share, but the face
value of the shares."
P.fter heaiing the reference the High Court answered the question
in favour of the a8sessee-company and against the Comnussioner
of Income-tax.
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 !ll1lOunt 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 aetually written off in
the books of the assessee :
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C.I.T. v. MOTOR,& GENERAL STORES (Ramaswami, J.)
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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 asset~
that the taxable profits and gains are to be computed in the
present case under s. 10(2)(vii) as the amount by which the
wr.ftten down value exceeds the amount for which the assets are
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
i~
well-settled that the word 'price' is used in the same sense in this
section as in s. 4 of the Sale of Goods Act, 1930 (Act III of
1930) (See the decision of a Full Bench ~f the Madras High
Court in Madam Pillai v. Badrakali Ammal)('). 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.
(:?) 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 sale, 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
tim.e elapses or the. conditions are fulfilled subject to
which the property m the goods is to be transferred."
(I) I.L.R. 45. Madras, 612.
880
SUPREME COURT REPORTS
[1967] 3 S.C.R.
S~tion 2(10) of the Sale of Goods Act defines "price" as meanmg the money. cons!der~tion for a sale of g.oods. The presence
<Jf money consideration 1s therefore an essential element in a tran-
-saction 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 of 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 things being money only, the transaction
is called an 'exchange'.
A transfer of property in completion of an exchange
can be made only in manner proVlded for the transfer of
such property by sale."
Section 119 provides :
"If any party to an exchange or any person
claiming through or under sucfi 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 claiJlling through or under him for
loss caused thereby, or at the option of ihe 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
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Act is not limited to immovable property but it extends also to
F
barter of goods. It is clear therefore that both under the Sale of
Goods Act and the Transfer of Property Act, 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 exG
change 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).
The question presented for determination in this case
is
whether the transaction of February 21, 1956 was a sale and
H
whether the Income-tax authorities were entitled to include the
amount of Rs. 43,568/- as profits under s. 10(2) (vii) . of
~he
Income-tax Act as representing the excess of the considerallon
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C.l.T. v. MOTOR & GENERAL STORES (Ramaswami, !.)
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realised by the assessee-company over the written down value of
the assets transferred. On behalf of the appellant it was contended that the money consideration was fixed at Rs. 1,20,000/-
and the mode of payment was by transfer of shares and the
transaction was really a sale and not transfer by way of exchange.
We are unable to accept this argument as correct In the first
place, the document is called "exchange deed". The preamble of
the document states :
"And whereas the party of the first part as at the
Directors meeting held on 3-2-1955
resolved
to exchange the property mentioned in Schedule for the property mentioned in Schedule II belonging to the party
of the second part and whereas in pursuance of the resolution of the Board of Directors the Managing Director
of the party of the first part had handed over possession
of the property described in Schedule I hereto on
9-9-1955 to the party of the second part and whereas
the general body of the first part at a meeting held on
4-10-1955 resolved to authorise the Managing Director
of the party of the first part to negotiate with the zarnindar and zamindarini of Chikkavaram the second part
herein and or their nominees for the sale of the party of
the entire concern known by the name of Sri Rama
Talkies, Bobbili now owned by the party of the first part,
with all its equipment machinery fittings spares accessories the old Projector the Jeej car bearing No. M.S.P.
92 8 purchased from its funds all the buildings and
out houses either newly constructed or mentioned in the
registered sale deed No. 1464/5-9-1949 and in this
exchange deed together with entire premises covered
thereby and the cash deposits lying with the various
distributors and commercial tax department of the
State Government more fully described in Schedule I
hereto and also the goodwill of the concern for a consideration of Rs. l,2~,~00/-
(R~pees one lakh twenty
thousand only) consisting of
unmovable
properties
worth Rs. 60,000/- and movable properties worth
Rs. _20,0~0/- (sic) total Rs. 1,20,000 which will be
re~e1ved m the shape of transfer of 5% tax-free cumulative preference shares of Messrs Sri Rama Sugars &
Industries
Ltd., Bobbili of the face value
of
Rs. 1,20,000/- (rupees one lakh twenty thousand only)
held by the zanundar and zamindarini of Chikkavaram
th~ pa~ of the second part herein and more fully described m Schedule II herein and to transfer receipt and
also hand over records relating to the title and management to enable them to carry on the business. of the
882
SUPREME COURT REPORTS
[1967] 3 s.c.R.
concern and whereas the general body of the part of the
A
first part at the meeting held on 11-2-1956 resolved
that the action of the managing director in handing
over possession of the property described in Schedule l
to the party of the second part on 9-9-1955 is approved and whereas the parties hereto have agreed to exchange the said properties described in the first and
B
second Schedule hereto in the manner hereinafter
appearing."
The operative part of the document reads as follows :
"Now this deed witnesseth as follows :
( 1) in pursuance of the said agreement and in consideration of the transfer by the party of the
second part of the property more fully described in the Schedule II hereto to the party of the
·first part, the party of the first part hereby grants
and transfers to the party of the second part II
all the property more fully described in Schedule I hereto to hold the same to the party of
the second part absolutely for ever.
( 2) In further pursuance of the said agreement and
in consideration of the transfer by the party of
the first part of the property in Schedule I hereto
to first part of the property in Schedule I hereto
to the party of the Second part, the party of the
second part, hereby grants and transfers to the
party of the first part of the shares more fully
described in Schedule II hereto to hold the same
to the party of the first part absolutely for ever.
(3) each of the parties hereby covenants (sic) with
the other first that the properties hereby transferred by him is free from encumbrance charge
or lieu of any kind whatsoever. Secondly that
the properties so transferred by each of them
shall be quitely entered upon held and enjoyed
by the other of them and the rents and profits
and dividends received by the other of them without any interruption of disturbance by the party
transferring the same or
any
one claiming
through or under them thirdly that each of the
parties hereto will at the request of and cost of
the other execute every such assurance and so
every such act or thinking as shall reasonably be
required by such other for further or more.
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(4) The party of the first part covenants and" assurances the party of the second part that all taxes
due to the Government or the local bodies and
all bills for the supply of electrical energy goods
and accessories all salaries due to the staff have
been paid upto 9-9-1955 the date of transfer
and that the party of the second part will ~. in
no way liable for any act done or com1TI1ss10n
made by the Rajah of Bobbili .......... "
On behalf of the appellant Mr. Narsaraju referred to tl!e
resolution of the Board of Directors dated September 9, 1955 in
which it was resolved that the Managing Director will negotiate
C
with the zamindar of Chikkavaram or his nominee for the sale of
the Sree Rama Talkies with all its equipment etc. for a consideration of Rs. 1,20,000/- Mr. Narsaraju also referred to the pre·
amble in which the resolution of the Board of Directors dated
September 9, 1955 is quoted and also the resolution of the meet·
ing of the general body of the assessee-company held on October
D
4, 1955 authorising the Managing Director to negotiate "for the
sale of the entire concern known by the name of Sree Rama
Talkies". But, in our opinion, neither the recital in the preamble
nor the resolution of the Board of Directors dated September 9,
1955 will control the language of the operative portion of the
document or its legal effect. There is no ambiguity in the con·
E
struction of the operative part. It is clear from the operative part
of the document that there was an exchange of the properties
described in Sch. I for 5% tax-free cumulative preference shares of
Sri Rama Sugars & Industries Ltd., Bobbili.
It is true that a
valuation of Rs. 1,20,000/- was fix.ed to consist of Rs. 60,000/-
for immovable properties and the goodwill and Rs. 60,000/- for
f
movable properties, but that is only for the
purpose of payment of stamp duty. In essence the transaction is one of
exchange and there was no sale of the properties described in
Sch. I for any money consideration. In other words, there was
no price paid or promised to be paid for the transfer of the cinema
house known as Sree Rama Talkies together with machinery and
equipment described in Sch. I to the deed dated February 21,
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1956 but there was a consideration in the shape of transfer of
5 % ta~-free cumulative preference shares of Sri Rama Sugar &
Industries Ltd. It follows therefore that the Income-tax authorities
were nm entitled to treat the transaction dated February 21,
1956 as a sale and to apply the provisions of s. 10(2) (vii) of the
Income-tax Act.
H
.
We pass on to ~onsider the argument of Mr. Narsaraju that
in revenue matters. it was the substance of the transaction which
must be looked at and not the form in which the parties
884
·SUPREME COURT REPORTS
(1967] 3 s.c.R.
have chosen to clothe the transaction. It was contended that, in
the present case, there was in substance a sale of Sree Rama Talkies
by the assessee-company for a
money consideration
of
Rs. 1,20,000/-, though the mode of payment was by transfer of
shares and the resolution of the Board of Directors dated September 9, 1955 clearly indicated that ,the intention of the assesseecompany was to sell Sree Rama Talkies along with its equipment
concerned for a consideration of Rs. 1,20,000/-. In the present
case, however, there is no suggestion on behalf of the appellant of
bad faith on the part of the assessee-company nor is it alleged that
the particular form of the transaction was adopted as a cloak to
conceal a different transaction. It is not disputed that the document in question was intended to be acted upon and there is no
suggestion of ma/a fides or that the document was never intended
to have any legal effect.
In the absence of any suggestion of
bad faith or fraud the true principle is that the trucing statute has
to be applied in accordance with the legal rights of the parties to
the transaction. When the transaction is embodied in a document
the liability to tax depends upon the meaning and content of the
language used in accorda.nce with the ordinary rules of construction.
In Bank of Chettinad Ltd. v. C.l.T. Madras('), it was
pointed out by the Judicial Committee that the doctrine that in
revenue cases the 'substance of the matter' may be regarded as
distinguished from the strict legal position, is erroneous. If a
person sought to be taxed comes within the letter of the law he
must be taxed, however great the hardship may appear to the
judicial mind to be. On the other hand, if the Crown seeking to
recover the tax cannot bring the subject within the letter of the
law, the subject is free, however apparently within the spirit of
the law the case migh'. otherwise appear to be. In the Duke of
Westminster's case(2 ) deeds of covenant had been executed by
the Duke in favour of employees in such amounts that the covenantees, if remaining in the Duke's service, would receive respectively sums equivalent to their wages and salaries. If they left the
service of the Duke the payments would still have been due, but
it was in nearly all instances explained to the employee that so
long as the service continued, wh11e the deed did not prevent his
claiming ordinary wages in addition, it was expected that he would
not do so. It was argued for the Crown that though in form a
<>rant of an annuity, the transaction was in substance merely one
~here by the annuitant was to continue to serve the Duke at his
existing salary, so that the annuity must be treated as salary.
Neither the Court of Appeal nor the House of Lords agreed WI!h
this contention. To regard the payments under the d_eed as m
effect payments of salary would be to treat a trans~ctton of one
legal character as if it were a transaction of a different legal
(!) 1940 l.T.R. 522.
(2) 19 T.C. 490.
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character.
With regard to the supposed contrast between the
fonn and substance of the arrangement, Lord Russell of Killowen
stated at page 524 as follows :
"If all that is meant by the doctrine is that having
once ascertained the legal rights of the parties you may
disregard mere nomenclature and decide the question of
taxability or non-taxability in accordance with the legal
rights, well and good. That is what this House did in
the case of Secretary of State in Council of India v.
Scoble, (1903) A.C. 299 (4 T.C. 618); that and no
more. If, on the other hand, the doctrine means that
you may brush aside deeds, disregard the legal rights
and liabilities arising under a contract between parties,
and decide the question of taxability or non-taxability
upon the footing of the rights and liabilities of the parties being different from what in law they are, then I
entirely dissent from such a doctrine.''
In a later case--Commissioners of Inland Revenue v. Wesleyan
and General Assurance Society ( 1) Viscount Simon expressed the
principle as follows :
"It may be well to repeat two propositions which
are well established in the application of the law relating
to Income Tax. First, the name given to a transaction
by the parties concerned does not necessarily decide the
nature of the transaction.
To call a payment a loan
if it is really an annuity does not assist the tax-payer,
any more than to call an item a capital payment would
prevent it from being regarded as an income payment if
that is its true nature. The question always is what is
the real character of the payment, not what the parties
call it.
Secondly, a transaction which, on its true construction, is of a kind that would escape tax, is not taxable
on the ground that the same result could be brought
about by a transaction in another form which would
attract tax."
Fo~ the reasons already _given we hold that the question has
been rightly answered by the High Court in the negative and in
fa_vour of the assessee-company and this appeal must be dismissed
with costs.
R.K.P.S.
Appeal dismissed.
(ll JaT.c.11.