Sale for valuable consideration: transfer of machinery against fully-paid shares was treated as a taxable sale, not barter or exchange.

Transfer of machinery to a private company in return for allotment of fully-paid shares was treated as a sale under section 2(n) of the Tamil Nadu General Sales Tax Act, 1959. The arrangement was not a barter or exchange because the parties did not make mutual cross-transfers of property; allotment of shares merely satisfied the company's liability to pay the agreed price. The transaction was viewed as a sale for valuable consideration even though no cash passed, since the consideration consisted of discharge of reciprocal obligations. The contrary authority relied on by the assessee was held not to exclude such transactions from the concept of valuable consideration.

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Issues: Whether transfer of machinery to a private company in return for allotment of fully-paid shares constituted a sale within section 2(n) of the Tamil Nadu General Sales Tax Act, 1959, and whether such consideration could be treated as barter or exchange instead of valuable consideration.

Analysis: The transferor and the company did not make mutual cross-transfers of property. Allotment of fully-paid shares is not itself a transfer of the company's property or assets, but only an admission of the allottee as a member with the rights and obligations attaching to that status. The transaction was also structured as two distinct steps: first, a completed sale of machinery at a stated price, and secondly, discharge of the company's liability for the price by allotment of its own shares. The books of account showed the consideration as the cancellation of reciprocal obligations, which made the consideration akin to cash. The legal position accepted that such a transaction remains a sale even though no cash passes, and the earlier authority relied on by the petitioner did not exclude such a case from the concept of valuable consideration.

Conclusion: The transfer of machinery in consideration of fully-paid shares was a sale and not a mere barter or exchange. The issue was decided against the petitioner and in favour of the Revenue.

Final Conclusion: The revision petition had no merit and stood dismissed with costs.

Ratio Decidendi: Where goods are transferred for a stated price and the purchaser discharges that price by allotting its own fully-paid shares, the arrangement involves a sale for valuable consideration and not a barter or exchange.

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