Barter versus sale: by-products given against milling charges could not be treated as notional local turnover.

A transaction is not a sale unless property in goods passes under a contract for money consideration; where milling charges were adjusted by delivery of rice bran and phuck, the arrangement was barter or exchange, not local sales. The notional market value of the by-products therefore could not be treated as domestic turnover for deduction under section 80HHC, because no money passed and no sale contract existed between the parties. Authorities cited by the department were distinguished on their facts, and the assessee succeeded on this issue.

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Issues: Whether the notional value of rice bran and phuck given to a miller in lieu of paddy milling charges could be treated as local sales and included in turnover for the purpose of deduction under section 80HHC.

Analysis: A sale requires a contract for transfer of property in goods for a price, with money consideration as an essential element. The transaction in question involved reciprocal adjustment of milling charges against delivery of by-products, with no money passing from the miller to the assessee and no contract of sale between them. On that footing, the arrangement was an exchange or barter and not a sale. Therefore, the value of the by-products could not be treated as domestic sales on a notional basis merely because the assessee could otherwise have sold them in the market. The authorities relied upon by the department were found distinguishable on their facts.

Conclusion: The notional value of the by-products could not be included as local sales, and the assessee was entitled to succeed on this issue.

Ratio Decidendi: A transaction is not a sale unless property in goods is transferred for money consideration under a contract of sale; where goods are given in exchange for services without money consideration, the transaction is barter or exchange and cannot be assessed as sales or turnover on a notional basis.

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