TaxTMI 
TaxTMI 
2006 (2) TMI 207
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....ddy work done and chilka was burnt in the boiler to prepare 'sela' rice. The Assessing Officer opined that the rice-bran and phuck given away in exchange for milling of paddy services was required to be accounted for as domestic sales and as milling expenses and by making this entry, the net profit shall not be f effected. He, accordingly, worked out the quantity of rice-bran and phuck at 13,440 qtls. by taking yield at the rate of 10 per cent of 1,34,405 qtls. Paddy milled. He applied the rate of Rs. 400 per quintal and calculated the amount at Rs. 53,76,000 which was treated as domestic sales and consequently the deduction under section 80HHC was reduced due to the increase in domestic sales. 3. The assessee carried the matter to the CIT (Appeals) and submitted that an agreement was entered into with M/s. Balaji Rice & General Mills, Kaithal for milling of rice. As per this agreement, phuck and bran (polish) etc. obtained during manufacturing of rice was to be the property of the miller as lease charges and that such type of agreements were quite common in this line of business. The assessee also filed one copy of the Model Agreement that Government, normally entered into with t....
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....ation of deduction claimed under section 80HHC. He further stated that the sales worked out by the Assessing Officer should be treated as local sales for the reason that in case the byproducts were not to be given to the miller, then those were to be sold in the market. He placed his reliance on the following case laws: (i) CGT v. B. Sathiar Singh [1975] 98 ITR 316 (Mad.) (ii) Orient Trading Co. Ltd. v. CIT [1997] 224 ITR 371 (SC) 6. In his rival submissions, the learned counsel for the assessee reiterated the submissions made before the learned CIT (Appeals) and further submitted that the assessee had not sold the by-products. Those were given in exchange of milling charges and there was no contract of sales with the miller, so it could not be treated as sales. He further submitted that there was no transfer of the property and even no price was paid by the miller, so it was not a sale but the exchange in lieu of the paddy milled for the assessee. The reliance was placed on the following case laws: (i) Oil & Natural Gas Commission v. Addl. CIT [1999] 69 ITD 69 (Delhi) (ii) M.P. Sugar Mills's case (iii) CIT v. Bombay Burmah Trading Corpn. Ltd. [1986] 161 ITR 386 (SC) (iv) St....
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....ettled law that the expression 'sale' under the Sales Tax Act has to be understood with reference to the definition of "sale of goods" under the Sale of Goods Act. But if the title of the goods passes without any contract between the parties, express or implied, there is no sale. Similarly, if the consideration of the transfer is not money, but some other valuable consideration, it may amount to exchange or barter but not a sale in the strict sense of the law for the purposes of taxation." From the ratio laid down by the Hon'ble Supreme Court in the aforesaid referred to case, in the instant case, the transfer of the title of the goods, i.e., the rice-bran and phuck from assessee to the miller can be considered as an exchange or barter but not a sale because there was no consideration in the form of money. 7.1 The Hon'ble jurisdictional High Court in the case of Satya Nand Munjal has held as under: "If on account of a lacuna in the law or otherwise the assessee is able to avoid payment of tax within the letter of law, it cannot be said that the action is void because it is intended to save payment of tax. So long as the law exists in its present form, the taxpayer is entitled to....
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.... "Sale is a transfer of property in goods or of the ownership in immovable property for a money consideration. But in exchange there is a reciprocal transfer of interest in immovable property, a corresponding transfer of interest in movable property being denoted by the word "barter". The difference between a sale and an exchange is this, that in the former the price is paid in money, whilst in the latter it is paid in goods by way of barter. The presence of money consideration is an essential element in a transaction of sale. If the consideration is not money but some other valuable consideration it may be an exchange or barter but not a sale." In the present case also there was a reciprocal transfer of interest because the assessee on one hand was getting its paddy milled by the miller, i.e., M/s. Balaji Rice & General Mills, Kaithal, on the other hand, was giving rice by-product, i.e., rice-bran and phuck etc. to the miller, so the transaction can be stated as an exchange, since there was reciprocal transfer, but not the sale due to the absence of essential element of sales, i.e., money consideration. 8. In the light of the aforesaid discussion and by analyzing the various jud....