Sale versus exchange in bus transfer held to attract balancing charge under the income-tax provision

A transfer of buses for agreed consideration was treated as a sale, not an exchange, because an earlier Division Bench had so held on a similar transaction and no distinguishing reason was shown. On that basis, the balancing charge provisions under the second proviso to section 10(2)(vii) of the Indian Income-tax Act, 1922 applied, and the Tribunal was wrong to delete the addition. The question referred was answered against the assessee.

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Issues: Whether the transaction dated 24 March 1955 was an exchange rather than a sale, and whether the addition of Rs. 68,821 made under the second proviso to section 10(2)(vii) of the Indian Income-tax Act, 1922 was rightly deleted.

Analysis: The Court noted that an earlier Division Bench decision on a similar transaction had held it to be a sale. No distinguishing reason was shown to depart from that view. Applying that decision, the transaction in question was held to be a sale and not an exchange, so the provisions governing the balancing charge under the second proviso to section 10(2)(vii) were attracted.

Conclusion: The Tribunal was not right in treating the transaction as an exchange and in deleting the addition of Rs. 68,821. The question referred was answered in the negative and against the assessee.

Ratio Decidendi: A transfer of buses for agreed consideration, in the circumstances of this case, constituted a sale and not an exchange, attracting the second proviso to section 10(2)(vii) of the Indian Income-tax Act, 1922.

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