Sree Akilandeswari Mills (P) Ltd. Vs. Commercial Tax Officer - Court Judgment

Excerpt:
1. petition on being called upon today hearing the both sides the tribunal ordered as follows : 2. all the above tax appeal cases can be disposed of by a common judgment, because they raise a common issue, namely, whether cotton received by the assessees are in reality purchases or loan transactions.3. earlier, for the assessment year 1986-87, final orders of assessment were made on march 3, 1988 assessing the total and taxable turnover as rs. 6,27,36,286 and rs. 3,58,569 respectively. this assessment year is concerned in tax appeal case no. 3191 of 1997 (t.c. no. 514 of 1995-hc). for the assessment year 1987-88, final orders were passed on january 3, 1989 determining the total and taxable turnovers as rs. 8,71,68,874 and rs. 5, 11,95,751 respectively and this assessment year is concerned in tax appeal case no. 3190 of 1997 (t.c. no. 513 of 1995-hc). for the assessment year 1989-90, final orders were passed on november 27, 1990 determining the total and taxable turnover as rs. 13,91,89,018 and rs. 7,42,71,302 respectively and this assessment year is concerned in tax appeal case no. 3192 of 1997 (t.c. no. 515 of 1995-hc). the place of business of the assessee was inspected by the enforcement wing officers on october 12, 1990. they found that cotton received on loan basis from two sister concerns were, in fact, purchases made from the sister concerns and therefore, liable to be taxed as last purchases of cotton by the assessee. accordingly, revisions wore undertaken for the three assessment years on december 31, 1991. the revision of assessment for the year 1986-87 was as follows :-last purchase of 300 bales of cotton rs. 5,95,784tax due at 3% rs. 17,874addl. sales tax at 1% on the taxable turnover rs. 5,958penalty :penalty at 150% of the tax and additional sales taxon the above wilful and deliberate purchasesuppression rs. 35,748total revenue involved rs. 59,580for the year 1987-88, the revision was made aslast purchase of 1706 bales of cotton rs. 87,63,784tax due at 3% rs. 2,62,914additional sales tax at 1% on the taxable turnover rs. 87,638penalty :the above wilful and deliberate purchase suppression rs. 5,25,828total revenue involved rs. 8,76,380for the year 1989-90, the revision was as follows :-last purchase of 465 bales of cotton rs. 16,81,011tax due at 3% rs. 50,430additional sales tax at 1% on the taxable turnover rs. 16,810penalty :penalty at 150% of the tax and additional sales taxon the above wilful and deliberate purchasesuppression rs. 1,00,860total revenue involved rs. 1,68,100 in all the three cases, the assessing authority considered the elaborate objections filed by the assessee that their receipt of cotton from sri visalakshi mills pvt. ltd., madurai and tvl. saraswathi mills ltd., in chengalpet district, were only, on loan basis and the quantity of cotton were being returned in the same assessment year or subsequent years. it was specifically contended that the transfer of cotton was not for any money consideration and the transactions were in the character of barter. it was, therefore, urged that there was no sale or purchase and the imposition of three per cent tax on the assessee as if they were last purchasers of cotton, was totally unsustainable. several decisions were also cited, before the assessing authority including some decisions now cited before us. the assessing authority rejected the arguments of the assessee on the following grounds : cotton is different from lot to lot and bale to bale. consequently, the value of cotton will change according to the variety in the case of the assessee. there was no attempt to show that the cotton received by the assessee and returned to the sister concerns were more or less equal and adjustable. there was no one to one correspondence between the cotton received and cotton returned by the assessee. the assessing authority also found that the cases cited before him were not on identical facts and therefore, the ratio could not be applied.4. three appeals were preferred before the appellate assistant commissioner and by a common order, the appeals were allowed on july 21, 1992. the appellate authority found that what the assessee received from sister concerns were only cotton and what they returned to them was only cotton. therefore, there was no money consideration involved in the transactions and they were in the nature of barter of cotton for cotton. he also found that the assessing authority had not established that there was any sale or purchase in respect of the goods within the meaning of section 2{n) of the tamil nadu general sales tax act, 1959.in particular, the appellate authority says that whatever may be the nature, value or variety of cotton which were received and returned, the fact remained that it was cotton for cotton. accordingly, the appeals were allowed and the penalty was deleted.5. the joint commissioner of commercial taxes initiated suo motu proceedings and after issuing a show cause notice and after considering the objections, passed a common order for all the three years on may 10, 1994 restoring the turnovers of rs. 5,95,784, rs. 87,63,784 and rs. 16,81,011 for the assessment years 1986-87, 1987-88 and 1989-90 respectively. for each assessment year, the joint commissioner had noticed the receipt of cotton, their value and considered whether they could be treated as barter transactions. in particular, he found the alleged loan and the value of cotton received were shown under the trading transactions of the assessee, disclosing a gross profit in respect of each year. this fact was taken from the assessment files.the joint commissioner also noticed that in respect of the cotton consumed in the manufacture of yarn, the assessees were liable to pay tax on the deemed local purchase of cotton within the state and the assessee had admitted purchases to the tune of rs. 29,78,567.59 for the year 1987-88, to the tune of rs. 19,32,923.37 for the year 1986-87 and to the tune of rs. 4,55,054.85 for the year 1989-90. the joint commissioner also went into the question whether entries in the books of accounts in respect of transfer of bales and whether payments including lorry freight were duly debited against the sister concerns, namely, sree visalakshi mills p. ltd., and saraswathi mills ltd., from the accounts as maintained by the assessee, the joint commissioner came to the conclusion that the transfer of cotton was only for a money consideration and not mere a barter transaction. in respect of the assessment year 1986-87, the joint commissioner specifically found that the receipt of cotton was shown under the purchase column and the return of cotton was shown under the sales column. the profit in the trading business had been arrived at in respect of the transactions.the joint commissioner also took into view the fact that the cotton received allegedly on loan basis were in fact consumed in the manufacture of yarn and therefore attracted liability to tax. further, there was no correlation between the cotton received and subsequently returned to the sister concerns. he then considered the reliance placed by the assessees on radhas printers v. state of kerala [1993] 90 stc 201 (ker) and commissioner of income-tax v. motors & general stores (p) ltd. [1967] 66 itr 692 (sc) ; air 1968 sc 200 to the effect that the difference between a sale and exchange depends upon the fact whether price is paid in money or it is paid in kind by way of goods. the joint commissioner realises the fact that the presence of money consideration was an essential requirement to conclude that the transaction was a sale. if the consideration was not money, but some other valuable consideration, the joint commissioner was alive to the situation that it could be either an exchange or barter. inspite of such consideration, the joint commissioner came to the conclusion that on the facts of the present case, it was quite evident that there was valuable consideration by way of money as disclosed in the profit and loss account. accordingly, he concluded that there was a sale transaction and the revisions were rightly undertaken. the joint commissioner also found that the assessee had given a money value for the cotton received and cotton returned in the profit and loss account.he found that money consideration was the predominant objective between the parties. he then proceeded to consider the question of penalty under section 16(2) of the tamil nadu general sales tax act, 1959. he found that the assessee could have been under a bona fide impression that the transactions were not liable to be taxed. therefore, there was no scope for invoking section 16(2) of the tamil nadu general sales tax act, 1959 and to this extent, he upheld the order of the appellate assistant commissioner.6. before us, mr. n. inbarajan, learned counsel for the appellant, has elaborately argued the cases by referring to section 2(n) of the tamil nadu general sales tax act, 1959. he also referred to the definition of "sale" and the definition of "price" in the sale of goods act. he then proceeds to the permanent edition of "words and phrases" relating to exchange and barter. reference is then made to benjamin's sale of goods. it is not necessary to quote here all the above meanings as found in the permanent edition and the tngst act and sale of goods act.however, we would like to refer to one aspect of the case, as found in benjamin's sale of goods. while dealing with the rights of a disappointed party, who parted with his goods without getting the expected return of goods, it is observed as follows : "it would seem, on principle, that he should be debarred from claiming a price even when the goods have been valued for the purpose of the bargain, unless the transaction can be construed as two reciprocal sales, or a sale with subsidiary agreement for payment in kind." 7. we have referred to the above passage only to indicate that a transaction which is claimed to be a barter or exchange, can, in stated circumstances, be construed as two reciprocal sales. mr. n. inbarajan points out that in the definition of "sale" under the tngst act, 1959, neither barter nor exchange is excluded. the only other question to be considered is whether the words "other valuable consideration" in section 2(n) of the tngst act, 1959 could be equated to goods in kind.it is on this aspect that there are number of decisions. it is not necessary to go into the question elaborately, because even the joint commissioner has rightly understood the scope of the provisions by saying that money consideration is an essential requirement for concluding that the transaction is a sale. but, unfortunately for the appellants, the joint commissioner has rendered a categorical finding that there was, in fact, money consideration. however for the sake of completion, we will refer to the decisions cited by mr. n. inbarajan.[1998] 111 stc 374 (m. jaihind v. state of kerala) has considered all the aspects of the case and all the earlier decisions of several courts. therefore, mr. n. inbarajan rightly say that it is not necessary to look into each and every one of the earlier decisions.however, he points out that the occasion for the full bench of the kerala high court to look into the matter, arose out of the judgment of the kerala high court in a case reported in radhas printers v. state of kerala [19931 90 stc 201, in radhas printers v. state of kerala [1993] 90 stc 201, the kerala high court held that the expression "valuable consideration" takes colour from the preceding expressions cash or deferred payment and therefore , the words, "other valuable consideration" must be interpreted to mean cheques, bill of exchange or any such negotiable instruments. for this purpose, they relied on devi dass gopal krishnan v. state of punjab [1967] 20 stc 430, a decision of the supreme court. however, ultimately, in the case before the kerala high court, they agreed with the tribunal that the transaction was a make belief arrangement and therefore, should be treated as a sale. in that case also, the assessee supplied goods to sister concern in consideration of the purchaser returning the goods with interest at fifteen per cent per annum. the only consequence of the judgment of the full bench reported in m. jaihind v. state of kerala [1998] 111 stc 374 (ker) is that they have specifically differed from three judgments of the madras high court. we are, therefore, constrained to look into the judgments of the madras high court. the first case is jayarama chettiar, in re [1948] 1 stc 168, where it was held that money alone need not necessarily be the consideration, but that was a case where the dealer in similar article, transferred to the purchaser the property in a finished similar article in exchange for an equivalent weight in silver along with a sum of money equal to the manufacturing charges. the next is v.p. vadivel achari v. madras sales tax appellate tribunal [1969] 23 stc 273 (mad.) wherein the court held that money is not necessarily relatable to coins or currency notes, but has a wider connotation. in that case, it was held that gold being in the nature of money, payment of gold was regarded as payment in the nature of cash or as money consideration. only the third case, premier electro mechanical fabricators v. state of tamil nadu [1984] 55 stc 371 (mad.) related to barter by the assessee by transferring equity shares in a company. the court held that the words "other valuable consideration" would include the transfer of equity shares. though devi dass gopal krishnan v. state of punjab [1967] 20 stc 430 (sc) was placed before the madras high court in this case, the madras high court distinguished the said decision.8. we are of the view that a clear distinction can be made in respect of silver and gold as being a consideration for the transfer of finished articles. it is always proper to hold that gold and silver are practically money, because currency is always based on the gold reserves of a country. however, in respect of other goods like, equity shares or goods in kind, we are of the clear opinion that the judgments of the supreme court in devi dass gopal krishnan v. state of punjab [1967] 20 stc 430 and commissioner of income-tax v. motors & general stores (p) ltd. [1967] 66 itr 692 ; air 1968 sc 200 cannot be ignored and if there is any other consideration, then it should be taken as a barter or exchange. this distinction had been clearly kept in mind by the joint commissioner while passing his order. what therefore now remains is to find out whether there was in fact a money consideration in the transactions of the assessee and his sister concerns. we have already referred to the detailed factual findings of the assessing authority and the joint commissioner. the reasoning of the appellate assistant commissioner is not useful, because he has merely relied on the fact that there was receipt of cotton and return of cotton and that was sufficient for holding that there was a barter arrangement. in our opinion, this approach of the first appellate authority is not correct.one has to look into the whole case from all angles and find out whether it was a make-belief arrangement or a real barter transaction.in this connection, it is worthwhile to notice the judgment of the supreme court in the case of commissioner of income-tax, gujarat-ii v.b.m. kharwar reported in [1969] 72 itr 603. the supreme court observes, "the taxing authority is entitled, and is indeed bound, to determine the true legal relation resulting from a transaction. if the parties have chosen to conceal by a device the legal relation, it is open to the taxing authorities to unravel the device and to determine the true character of the relationship. but the legal effect of a transaction cannot be displaced by probing into the 'substance of the transaction'.this principle applies alike to cases in which the legal relation is recorded in a formal document, and to cases where it has to be gathered from evidence-oral and documentary-and conduct of the parties to the transaction." we give below the following reasons for holding that the transaction was, in fact, a sale and not a barter arrangement.(1) there was a vast difference between the goods received and the goods returned both in the matter of variety and value.(2) there was also a vast difference between the quantity of goods received and the quantity of goods returned.(3) in our view, if there is an approximate correlation between the goods received and the goods returned, whether it is of the same kind or different, whether it is of the same value or different value, one can accept the argument of the assessee. but, in this case, the difference is so vast both in the matter of variety and value and quantity that no reasonable person would come to the conclusion that it was a barter.(4) the cotton received had been immediately used in the manufacture of yarn giving the impression that the assessee had purchased the cotton.his subsequent return of a different variety of a different quantity would not take away the concept of purchase of cotton and use in the manufacture of yarn.(5) the money value of the goods had been disclosed in the form xx declarations and in the accounts of the assessee.(6) the profit and loss account clearly disclosed the money consideration for the transactions.consequently, we hold that the orders of the joint commissioner for all the three years, do not call for any interference, because on facts it has been held that there was a money consideration for the transactions. therefore, any amount of law is not going to change or alter the character of the transactions. we confirm the order of the joint commissioner for all the three years and dismiss all the tax appeal cases.and this tribunal doth further order that this order on being produced be punctually observed and carried into execution by all concerned.issued under my hand and the seal of this tribunal on the first day of february 2001.

Judgment:
1. Petition on being called upon today hearing the both sides the Tribunal ordered as follows : 2. All the above tax appeal cases can be disposed of by a common judgment, because they raise a common issue, namely, whether cotton received by the assessees are in reality purchases or loan transactions.

3. Earlier, for the assessment year 1986-87, final orders of assessment were made on March 3, 1988 assessing the total and taxable turnover as Rs. 6,27,36,286 and Rs. 3,58,569 respectively. This assessment year is concerned in Tax Appeal Case No. 3191 of 1997 (T.C. No. 514 of 1995-HC). For the assessment year 1987-88, final orders were passed on January 3, 1989 determining the total and taxable turnovers as Rs. 8,71,68,874 and Rs. 5, 11,95,751 respectively and this assessment year is concerned in Tax Appeal Case No. 3190 of 1997 (T.C. No. 513 of 1995-HC). For the assessment year 1989-90, final orders were passed on November 27, 1990 determining the total and taxable turnover as Rs. 13,91,89,018 and Rs. 7,42,71,302 respectively and this assessment year is concerned in Tax Appeal Case No. 3192 of 1997 (T.C. No. 515 of 1995-HC). The place of business of the assessee was inspected by the Enforcement Wing Officers on October 12, 1990. They found that cotton received on loan basis from two sister concerns were, in fact, purchases made from the sister concerns and therefore, liable to be taxed as last purchases of cotton by the assessee. Accordingly, revisions wore undertaken for the three assessment years on December 31, 1991. The revision of assessment for the year 1986-87 was as follows :-Last purchase of 300 bales of Cotton Rs. 5,95,784Tax due at 3% Rs. 17,874Addl. Sales Tax at 1% on the taxable turnover Rs. 5,958Penalty :Penalty at 150% of the tax and additional sales taxon the above wilful and deliberate purchasesuppression Rs. 35,748Total revenue involved Rs. 59,580For the year 1987-88, the revision was made asLast purchase of 1706 bales of Cotton Rs. 87,63,784Tax due at 3% Rs. 2,62,914Additional Sales Tax at 1% on the taxable turnover Rs. 87,638Penalty :the above wilful and deliberate purchase suppression Rs. 5,25,828Total revenue involved Rs. 8,76,380For the year 1989-90, the revision was as follows :-Last purchase of 465 bales of cotton Rs. 16,81,011Tax due at 3% Rs. 50,430Additional Sales Tax at 1% on the taxable turnover Rs. 16,810Penalty :Penalty at 150% of the tax and additional sales taxon the above wilful and deliberate purchasesuppression Rs. 1,00,860Total revenue involved Rs. 1,68,100 In all the three cases, the assessing authority considered the elaborate objections filed by the assessee that their receipt of cotton from Sri Visalakshi Mills Pvt. Ltd., Madurai and Tvl. Saraswathi Mills Ltd., in Chengalpet District, were only, on loan basis and the quantity of cotton were being returned in the same assessment year or subsequent years. It was specifically contended that the transfer of cotton was not for any money consideration and the transactions were in the character of barter. It was, therefore, urged that there was no sale or purchase and the imposition of three per cent tax on the assessee as if they were last purchasers of cotton, was totally unsustainable. Several decisions were also cited, before the assessing authority including some decisions now cited before us. The assessing authority rejected the arguments of the assessee on the following grounds : Cotton is different from lot to lot and bale to bale. Consequently, the value of cotton will change according to the variety in the case of the assessee. There was no attempt to show that the cotton received by the assessee and returned to the sister concerns were more or less equal and adjustable. There was no one to one correspondence between the cotton received and cotton returned by the assessee. The assessing authority also found that the cases cited before him were not on identical facts and therefore, the ratio could not be applied.

4. Three appeals were preferred before the Appellate Assistant Commissioner and by a common order, the appeals were allowed on July 21, 1992. The appellate authority found that what the assessee received from sister concerns were only cotton and what they returned to them was only cotton. Therefore, there was no money consideration involved in the transactions and they were in the nature of barter of cotton for cotton. He also found that the assessing authority had not established that there was any sale or purchase in respect of the goods within the meaning of section 2{n) of the Tamil Nadu General Sales Tax Act, 1959.

In particular, the appellate authority says that whatever may be the nature, value or variety of cotton which were received and returned, the fact remained that it was cotton for cotton. Accordingly, the appeals were allowed and the penalty was deleted.

5. The Joint Commissioner of Commercial Taxes initiated suo motu proceedings and after issuing a show cause notice and after considering the objections, passed a common order for all the three years on May 10, 1994 restoring the turnovers of Rs. 5,95,784, Rs. 87,63,784 and Rs. 16,81,011 for the assessment years 1986-87, 1987-88 and 1989-90 respectively. For each assessment year, the Joint Commissioner had noticed the receipt of cotton, their value and considered whether they could be treated as barter transactions. In particular, he found the alleged loan and the value of cotton received were shown under the trading transactions of the assessee, disclosing a gross profit in respect of each year. This fact was taken from the assessment files.

The Joint Commissioner also noticed that in respect of the cotton consumed in the manufacture of yarn, the assessees were liable to pay tax on the deemed local purchase of cotton within the State and the assessee had admitted purchases to the tune of Rs. 29,78,567.59 for the year 1987-88, to the tune of Rs. 19,32,923.37 for the year 1986-87 and to the tune of Rs. 4,55,054.85 for the year 1989-90. The Joint Commissioner also went into the question whether entries in the books of accounts in respect of transfer of bales and whether payments including lorry freight were duly debited against the sister concerns, namely, Sree Visalakshi Mills P. Ltd., and Saraswathi Mills Ltd., from the accounts as maintained by the assessee, the Joint Commissioner came to the conclusion that the transfer of cotton was only for a money consideration and not mere a barter transaction. In respect of the assessment year 1986-87, the Joint Commissioner specifically found that the receipt of cotton was shown under the purchase column and the return of cotton was shown under the sales column. The profit in the trading business had been arrived at in respect of the transactions.

The Joint Commissioner also took into view the fact that the cotton received allegedly on loan basis were in fact consumed in the manufacture of yarn and therefore attracted liability to tax. Further, there was no correlation between the cotton received and subsequently returned to the sister concerns. He then considered the reliance placed by the assessees on Radhas Printers v. State of Kerala [1993] 90 STC 201 (Ker) and Commissioner of Income-tax v. Motors & General Stores (P) Ltd. [1967] 66 ITR 692 (SC) ; AIR 1968 SC 200 to the effect that the difference between a sale and exchange depends upon the fact whether price is paid in money or it is paid in kind by way of goods. The Joint Commissioner realises the fact that the presence of money consideration was an essential requirement to conclude that the transaction was a sale. If the consideration was not money, but some other valuable consideration, the Joint Commissioner was alive to the situation that it could be either an exchange or barter. Inspite of such consideration, the Joint Commissioner came to the conclusion that on the facts of the present case, it was quite evident that there was valuable consideration by way of money as disclosed in the Profit and Loss Account. Accordingly, he concluded that there was a sale transaction and the revisions were rightly undertaken. The Joint Commissioner also found that the assessee had given a money value for the cotton received and cotton returned in the Profit and Loss Account.

He found that money consideration was the predominant objective between the parties. He then proceeded to consider the question of penalty under section 16(2) of the Tamil Nadu General Sales Tax Act, 1959. He found that the assessee could have been under a bona fide impression that the transactions were not liable to be taxed. Therefore, there was no scope for invoking section 16(2) of the Tamil Nadu General Sales Tax Act, 1959 and to this extent, he upheld the order of the Appellate Assistant Commissioner.

6. Before us, Mr. N. Inbarajan, learned counsel for the appellant, has elaborately argued the cases by referring to section 2(n) of the Tamil Nadu General Sales Tax Act, 1959. He also referred to the definition of "sale" and the definition of "price" in the Sale of Goods Act. He then proceeds to the permanent edition of "Words and phrases" relating to exchange and barter. Reference is then made to Benjamin's Sale of Goods. It is not necessary to quote here all the above meanings as found in the permanent edition and the TNGST Act and Sale of Goods Act.

However, we would like to refer to one aspect of the case, as found in Benjamin's Sale of Goods. While dealing with the rights of a disappointed party, who parted with his goods without getting the expected return of goods, it is observed as follows : "It would seem, on principle, that he should be debarred from claiming a price even when the goods have been valued for the purpose of the bargain, unless the transaction can be construed as two reciprocal sales, or a sale with subsidiary agreement for payment in kind." 7. We have referred to the above passage only to indicate that a transaction which is claimed to be a barter or exchange, can, in stated circumstances, be construed as two reciprocal sales. Mr. N. Inbarajan points out that in the definition of "sale" under the TNGST Act, 1959, neither barter nor exchange is excluded. The only other question to be considered is whether the words "other valuable consideration" in section 2(n) of the TNGST Act, 1959 could be equated to goods in kind.

It is on this aspect that there are number of decisions. It is not necessary to go into the question elaborately, because even the Joint Commissioner has rightly understood the scope of the provisions by saying that money consideration is an essential requirement for concluding that the transaction is a sale. But, unfortunately for the appellants, the Joint Commissioner has rendered a categorical finding that there was, in fact, money consideration. However for the sake of completion, we will refer to the decisions cited by Mr. N. Inbarajan.

[1998] 111 STC 374 (M. Jaihind v. State of Kerala) has considered all the aspects of the case and all the earlier decisions of several Courts. Therefore, Mr. N. Inbarajan rightly say that it is not necessary to look into each and every one of the earlier decisions.

However, he points out that the occasion for the Full Bench of the Kerala High Court to look into the matter, arose out of the judgment of the Kerala High Court in a case reported in Radhas Printers v. State of Kerala [19931 90 STC 201, In Radhas Printers v. State of Kerala [1993] 90 STC 201, the Kerala High Court held that the expression "valuable consideration" takes colour from the preceding expressions cash or deferred payment and therefore , the words, "other valuable consideration" must be interpreted to mean cheques, bill of exchange or any such negotiable instruments. For this purpose, they relied on Devi Dass Gopal Krishnan v. State of Punjab [1967] 20 STC 430, a decision of the Supreme Court. However, ultimately, in the case before the Kerala High Court, they agreed with the Tribunal that the transaction was a make belief arrangement and therefore, should be treated as a sale. In that case also, the assessee supplied goods to sister concern in consideration of the purchaser returning the goods with interest at fifteen per cent per annum. The only consequence of the judgment of the Full Bench reported in M. Jaihind v. State of Kerala [1998] 111 STC 374 (Ker) is that they have specifically differed from three judgments of the Madras High Court. We are, therefore, constrained to look into the judgments of the Madras High Court. The first case is Jayarama Chettiar, In re [1948] 1 STC 168, where it was held that money alone need not necessarily be the consideration, but that was a case where the dealer in similar article, transferred to the purchaser the property in a finished similar article in exchange for an equivalent weight in silver along with a sum of money equal to the manufacturing charges. The next is V.P. Vadivel Achari v. Madras Sales Tax Appellate Tribunal [1969] 23 STC 273 (Mad.) wherein the court held that money is not necessarily relatable to coins or currency notes, but has a wider connotation. In that case, it was held that gold being in the nature of money, payment of gold was regarded as payment in the nature of cash or as money consideration. Only the third case, Premier Electro Mechanical Fabricators v. State of Tamil Nadu [1984] 55 STC 371 (Mad.) related to barter by the assessee by transferring equity shares in a company. The court held that the words "other valuable consideration" would include the transfer of equity shares. Though Devi Dass Gopal Krishnan v. State of Punjab [1967] 20 STC 430 (SC) was placed before the Madras High Court in this case, the Madras High Court distinguished the said decision.

8. We are of the view that a clear distinction can be made in respect of silver and gold as being a consideration for the transfer of finished articles. It is always proper to hold that gold and silver are practically money, because currency is always based on the gold reserves of a country. However, in respect of other goods like, equity shares or goods in kind, we are of the clear opinion that the judgments of the Supreme Court in Devi Dass Gopal Krishnan v. State of Punjab [1967] 20 STC 430 and Commissioner of Income-tax v. Motors & General Stores (P) Ltd. [1967] 66 ITR 692 ; AIR 1968 SC 200 cannot be ignored and if there is any other consideration, then it should be taken as a barter or exchange. This distinction had been clearly kept in mind by the joint Commissioner while passing his order. What therefore now remains is to find out whether there was in fact a money consideration in the transactions of the assessee and his sister concerns. We have already referred to the detailed factual findings of the assessing authority and the Joint Commissioner. The reasoning of the Appellate Assistant Commissioner is not useful, because he has merely relied on the fact that there was receipt of cotton and return of cotton and that was sufficient for holding that there was a barter arrangement. In our opinion, this approach of the first appellate authority is not correct.

One has to look into the whole case from all angles and find out whether it was a make-belief arrangement or a real barter transaction.

In this connection, it is worthwhile to notice the judgment of the Supreme Court in the case of Commissioner of Income-tax, Gujarat-II v.B.M. Kharwar reported in [1969] 72 ITR 603. The Supreme Court observes, "The taxing authority is entitled, and is indeed bound, to determine the true legal relation resulting from a transaction. If the parties have chosen to conceal by a device the legal relation, it is open to the taxing authorities to unravel the device and to determine the true character of the relationship. But the legal effect of a transaction cannot be displaced by probing into the 'substance of the transaction'.

This principle applies alike to cases in which the legal relation is recorded in a formal document, and to cases where it has to be gathered from evidence-oral and documentary-and conduct of the parties to the transaction." We give below the following reasons for holding that the transaction was, in fact, a sale and not a barter arrangement.

(1) There was a vast difference between the goods received and the goods returned both in the matter of variety and value.

(2) There was also a vast difference between the quantity of goods received and the quantity of goods returned.

(3) In our view, if there is an approximate correlation between the goods received and the goods returned, whether it is of the same kind or different, whether it is of the same value or different value, one can accept the argument of the assessee. But, in this case, the difference is so vast both in the matter of variety and value and quantity that no reasonable person would come to the conclusion that it was a barter.

(4) The cotton received had been immediately used in the manufacture of yarn giving the impression that the assessee had purchased the cotton.

His subsequent return of a different variety of a different quantity would not take away the concept of purchase of cotton and use in the manufacture of yarn.

(5) The money value of the goods had been disclosed in the form XX declarations and in the accounts of the assessee.

(6) The profit and loss account clearly disclosed the money consideration for the transactions.

Consequently, we hold that the orders of the Joint Commissioner for all the three years, do not call for any interference, because on facts it has been held that there was a money consideration for the transactions. Therefore, any amount of law is not going to change or alter the character of the transactions. We confirm the order of the Joint Commissioner for all the three years and dismiss all the tax appeal cases.

and this Tribunal doth further order that this order on being produced be punctually observed and carried into execution by all concerned.

Issued under my hand and the seal of this Tribunal on the first day of February 2001.