In further pursuance of the said agreement and in companysideration 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 11 hereto to hold the same to the party of the first part absolutely for ever.
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 companyt 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.
In the first place, the document is called exchange deed.
The party of the first part companyenants 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 be in numberway liable for an act done or companymission made by the Rajah of Bobbili On behalf of the appellant Mr. Narsaraju referred to the Resolution of the Board of Directors dated September 9, 1955 in which it was resolved that the Managing Director Will negotiate with the zamindar of Chikkavaram or his numberinee for the sale of he Sree Rama Talkies with all its equipment etc.
I to the deed dated February 21,.
1,20,000/ rupees one lakh twenty thousand only held by the zamindar and zamindarini of Chikkavaram the party of the second part herein and more fully described in Schedule 11 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 8 82 companycern and whereas the general body of the part of the 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 I 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 second Schedule hereto in the manner hereinafter appearing.
43,568/ as profits under S. 10 2 vii of the Income tax Act as representing the excess of the companysideration realised by the assessee company over the written down value of the assets transferred.
For the assessment year 1956 57, the assessee company submitted a return of income showing a sum of Rs.
Pursuant thereto a deed called the exchange deed was brought into existence on February 21, 1956 and the companysideration was received by the assessee S78 companypany in the shape of transfer of 5 tax free cumulative preference shares in Sri Rama Sugar and Industries Ltd., Bobbili.
1,20,000/ Rupees one lakh twenty thousand only companysisting of immovable properties worth Rs.
The Income tax Officer found that the value realised exceeded the written down value by Rs.
Appeal by special leave from the judgment and order dated October 30, 1964 of the Andhra Pradesh High Court in case Referred No.
60,000/ and movable properties worth Rs.
M.S.P. 928 purchased from its funds all the buildings and out houses either newly companystructed or mentioned in the registered sale deed No.
20,000/ sic total Rs.
9,823/ as profits derived from the transaction.
6 of 1963.
and goodwill, each being valued at Rs.
1,20,000/ Mr. Narsaraju also referred to the preamble in which the resolution of the Board of Directors dated September 9, 1955 is quoted and also the resolution of the Meeting of the general body of the assessee company held on October 1, 1955 authorising the Managing Director to negotiate for the ale of the entire companycern known by the name of Sree Rama Talkies.
for a companysideraion of Rs.
It was being taxed on the profits made by exhibition of films therein.
CIVIL APPELLATE JURISDICTION Civil Appeal No.
Narsaraju T. A. Ramachandran and R. N. Sachthey for the appellant.
An agreement was companycluded to effect a saLe and this was companyfirmed by the assessee company at an extra ordinary general body meeting held on October 4, 1955.
The operative part of the document reads as follows Now this deed witnesse the as follows 1 in pursuance of the said agreement and in companysideration of the transfer by the party of the second part of the property more fully described in the Schedule 11 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 11 all the property more fully described in Schedule I hereto to hold the same to the party of the second part absolutely for ever.
1,20,000/ .
1464/5 9 1949 and in this exchange deed together with entire premises companyered thereby and the cash deposits lying with the various distributors and companymercial tax department of the State Government more fully described in Schedule I hereto and also the goodwill of the companycern for a company sideration of Rs.
819 of 1966.
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 judgement of the Andhra Pradesh High Court dated October 30, 1964 in a case Referred No.
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 zamin dar and zamindarini of Chikkavaram the second part herein and or their numberinees for the sale of the party of the entire companycern known by the name of Sri Rama Talkies, Bobbili number owned by the party of the first part, with all its equipment machinery fittings spares acces sories the old Projector the Jeej car bearing No.
In other words, there was numberprice 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.
Rain Reddy and A. V. V. Nair, for the respondent.
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 numberinee for the sale of the entire companycern with all its equipment and machinery, fittings etc.
The respondent hereinafter referred to as the assessee companypany is a private limited companypany owning a cinema house called Sree Rama Talkies, at Bobbili.
for a companysideration of Rs.
6 of 1963.
The question presented for determination in this case is whether the transaction of February 21, 1956 was a sale and whether the Income tax authorities were entitled to include the amount of Rs.
The order of the Income tax Officer was companyfirmed by the Appellate Assistant Commissioner in appeal and by the Income tax Appellate Tribunal except for allowing a sum of Rs.
1,20,000 which will be received in 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.
3 each of the parties hereby companyenants sic with the other first that the properties hereby transferred by him is free from encumbrance charge or lieu of any kind whatsoever.
