Judgment :- RAMANUJAM, J. The assessee who was carrying on business as a bus operator, formed a (P) Ltd. company under the name of P.S.S. transport (P) Ltd. on 21st March, 1959. He transferred 20 buses belonging to him to the company on 1st July, 1959 for a total consideration of Rs. 2, 58, 604/- which was the written down value of these buses in the assessee's account's accounts. On 1st July, 1959 the amount of Rs. 2, 58, 604/- was credited to his account in the company's books and later on Rs. 90, 000/- out of the said amount was adjusted towards the shares allotted to him and the balance together with the value of the sundry assets sold by him aggregating to Rs. 1, 83, 133/-, continued to his credit in the company's accounts. 2. The assessee, his wife and two of his close relatives were shareholders in the company. The assessee held shares to the value of Rs. 90, 000/- while the paid-up capital of the company was Rs. 1, 00, 000/-. The ITO, in the IT assessment for the asst. yr. 1960-61 relevant to the accounting year ending 13th December, 1959, felt that the assessee was substantially interested in the company and applied the first proviso to s. 12B(2) of the Indian IT Act, 1922, hereinafter referred to as the Act, and determined the fair market value of the 20 buses transferred to the company, at Rs. 5, 28, 840/- and brought a sum of Rs. 2, 216, 703/- to tax as capital gains. This assessment was confirmed by the CIT under s. 33A(2) of the Act. 3. In the GT assessment for the asst. yr. 1960-61, the GTO held that the difference between the fair market value of Rs. 5, 28, 840/- and the actual amount received as consideration for the buses amounts to a gift under s. 4(2) r/w s. 6 of the GT Act. He therefore levied gift-tax on Rs. 2, 70, 236/-. The assessee preferred an appeal to the AAC of Gift-tax contending that as the had the controlling interest in the company, he retained the same value of the buses even after they were transferred to the company, that there was no element of gift in the transfer and that the fair market value fixed is also incorrect. 2, 70, 236/-. The assessee preferred an appeal to the AAC of Gift-tax contending that as the had the controlling interest in the company, he retained the same value of the buses even after they were transferred to the company, that there was no element of gift in the transfer and that the fair market value fixed is also incorrect. the AAC held that as the transferor and the transferee were no identical there was no justification to treat the transaction as anything other than a gift, and confirmed the order of the GTO. 4. There was a further appeal by the assessee to the Tribunal. The Tribunal held that the consideration for the transfer of 20 buses was the allotment of 900 fully paid-up shares of Rs. 100/- each in the company plus a sum of Rs. 1, 83, 133 credited to the assessee's current account with the company, that the real value of theses 900 shares cannot be taken to be their face value of Rs. 90, 000/-, that the real value of the shares should be taken as 90 per cent of the real value of the buses transferred, that if so taken, the transfer of the 20 buses by the assessee to the company would be for adequate consideration and that the assessee was not, therefore, liable to gift-tax. 5. At the instance of the Revenue the following question has been referred to this Court for opinion under s. 26 of the GT Act : "Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the transfer of 20 buses by the assessee to the company was for adequate consideration under s. 4(a) of the GT Act ?" * 6. The learned Counsel for the Revenue firstly contends that the Tribunal has made an erroneous approach to the question involved in the case and that the adequate consideration or not has to be decided strictly with reference to the form of the transaction entered into between the company and the assessee and not with reference to the substance or the ultimate effect of the transaction. According to Balasubramanyam for the Revenue the doctrine of substance cannot be imported or applied in tax matters and that how a transaction has been put through by parties is alone material in considering the taxability or otherwise of that transaction. According to Balasubramanyam for the Revenue the doctrine of substance cannot be imported or applied in tax matters and that how a transaction has been put through by parties is alone material in considering the taxability or otherwise of that transaction. It is pointed out that in this case there has been first a transfer of buses by the assessee to the company for a specific price and a subsequent allotment of 900 shares by the company to the assessee to the face value of 90, 000/- and that these transactions have been kept apart and treated as separate transacts by both the parties as would be clear from the entries in the accounts of the company. Secondly it is pointed out by the learned counsel that the allotment of shares can only be for cash consideration in this case and, therefore the Tribunal was in error in treating 900 shares of the company allotted to the assessee as a part of the consideration for the transfer of buses. Thirdly it contended that even if the transfer of buses and the allotment of shares are treated as forming part of a single transaction, the view of the Tribunal that the real value of 900 shares will be 90 per cent of the buses transferred cannot at all be sustained as the real value of the shares of the company has to be determined after providing for all debts due by the company and that in this case admittedly the company was due to the assessee in a sum of 1, 83, 133/-. 7. Before dealing with the above contentions it would be useful to refer to certain facts which are quite material. The written down value of the 20 buses transferred by the assessee to the company in his books on the date of the transfer was Rs. 2, 58, 604/-. The transfer is admitted to be for the same consideration as the written down value of 2, 58, 604/-. In the IT assessment the fair market value of theses buses was fixed at Rs. 5, 28, 840/-. The GTO treated the difference between the fair market value and the actual amount received by the assessee as consideration for the buses as a gift under the GT Act. In the IT assessment the fair market value of theses buses was fixed at Rs. 5, 28, 840/-. The GTO treated the difference between the fair market value and the actual amount received by the assessee as consideration for the buses as a gift under the GT Act. Though the assessee contended before the GTO and the AAC that as he had the controlling interest in the company it should be taken that the transferor and the transferee were identical and that, therefore, there was no element of gift involved in the transfer of buses by him to the company. But that contention was given up at the stage of the appeal to the Tribunal. Before the Tribunal was contended that the transfer f the buses by the assessee to the company was for adequate consideration, that the fair market value of the buses as determined by the GTO was arbitrary and excessive and that the fair market value adopted in the IT assessment on a notional basis cannot properly be adopted for gift-tax purposes. On the question as to whether the transfer of the buses by the assessee to the company was for adequate consideration, the Tribunal accepted the assessee's case that the consideration for the transfer of 20 buses consisted of an allotment of 900 fully paid-up shares of Rs. 100/- each and accredit entry for Rs. 1, 83, 133/-in his current account with the company and that, therefore, if the fair market value of the said 900 shares instead of their face value, is taken into account then the consideration for the transfer of the buses would be adequate. According to the Tribunal the fair market value of the 900 shares allotted was 90 per cent of Rs. 5, 28, 840/- i.e., Rs. 4, 75, 956/-. The said sum along with a cash credit of Rs. 1, 13, 133/- was Rs. 6, 59, 089/- which is more than Rs. 5, 28, 840/- the market value of the buses, as determined in the IT assessment. On the decision of the Tribunal two main questions arise namely (1) what is the consideration for transfer of 20 buses and (2) whether that consideration is adequate. 8. Firstly it has to be seen whether the Tribunal is right in treating the consideration for the transfer of buses as comprising 900 shares fully paid-up shares of the face value of Rs. 8. Firstly it has to be seen whether the Tribunal is right in treating the consideration for the transfer of buses as comprising 900 shares fully paid-up shares of the face value of Rs. 100/- each plus a cash consideration of Rs. 1, 83, 133/- or whether the transfer was for a cash consideration of 2, 58, 604/-. Secondly it has to be seen whether the consideration for the transfer, whatever it be, is adequate. 9. The statement of the case proceeds on the basis that there was a transfer of 20 buses by the assessee to the company for a total consideration of 2, 58, 604/- on 1st July, 1959 and in fact the said amount stood credited to the assessee in the company's books and it is later that the assessee's account had been debited with a sum of Rs. 90, 000/- being the value of the 900 shares allotted to the assessee by the company. If really the consideration for the buses comprised of the value of 900 fully paid-up shares plus a cash of Rs. 1, 83, 133/- as has been assumed by the Tribunal, one would have expected a credit entry in favour of the assessee in the company's accounts only for Rs. 1, 83, 133/-and not Rs. 2, 58, 604/-.The entries in the company's accounts wherein the total consideration of 2, 58, 604/-.has been credited in favour of the assessee and later he has been debited with a sum of Rs. 90, 000/- being the face value of the shares allotted to him, prima facie show that the transfer of the buses and the allotment of shares have been treated as two independent transactions. These entries indicate that the assessee received a consideration of Rs. 2, 58, 604 for 20 buses and later purchased 900 shares for a sum of Rs. 90, 000/- from and out of the sale pursers received by him on the sale of buses. Apart from the entries in the account of the company there is no other material to indicated that the transfer of buses and the allotment of shares formed part of a single transaction. 90, 000/- from and out of the sale pursers received by him on the sale of buses. Apart from the entries in the account of the company there is no other material to indicated that the transfer of buses and the allotment of shares formed part of a single transaction. The assessee's contention is that whatever be the form and manner in which the transaction has been put through it is only the substance of the transaction that has to be taken note of to find out whether there was sale of buses by the assessee first and then the purchase of the shares later, or whether they formed part of a single transaction which was one and entire. If the entries in the books of accounts of the company are taken, they would suggest the transaction of sale of buses and the transaction of purchase of shares are separate and independent, and that there was an carrier transfer of buses for a price and a subsequent allotment of shares also for a price. It is for this reason the assessee contended that the manner in which the transaction has been recorded in the accounts cannot be taken to be material and that it is the substance of the transaction that matters, and that contention was accepted by the Tribunal. The learned Counsel for the Revenue contends that it is the form in which the transaction is put through by the parties that is material in tax matters and that the doctrine of substance has no application. He refers to the following decided cases on the point. 10. In Duke of Westminister vs. CIT, Revenue 19 Tax(Cases) 490, an assessee had covenanted by a number of deeds to make payment to his employees. The deeds were not all in the same form but were substantially the same. In most of the cases the deed of covenant provided for payment of a certain weekly sum to an employee in recognition of his past services during their joint lives or for a period of seven years. The deeds were not all in the same form but were substantially the same. In most of the cases the deed of covenant provided for payment of a certain weekly sum to an employee in recognition of his past services during their joint lives or for a period of seven years. These deeds were followed up by a letter where in the employer had explained that the deed did not prevent the employee from receiving any future work that he may perform for the employer but that he was expected to content with the provision made for him by the deed, with the addition of such if any as might to be necessary to bring the total periodical payments while he was still in the service of the employer upto the amount of the salary or wages which he had lately been receiving. The employees acknowledged the said latter. It was found that the employees were in fact getting the amounts which they respectively would have received as wages or salaries if they lived during the period and continued in their employment. The question, arose as to whether the payments of made to his employees under the deeds could be said to be payments salary or wages or whether they were annual payments from which the income-tax was deductible and as such admissible deductions in computing the assessee's income for Sur-tax purposes. It was contended for the Revenue that in addition to the deed there is another collateral contract between him and the employees to the effect that the employees would still serve him in consideration of a salary or wage equal to the salary or wage he was receiving before the deed was executed and that he will accept what the receives under the deeds in part satisfaction of his salary or wage and that therefore, the annuity so long as the employee remains in the employer's service is of a changed nature and is no longer a payment which the employee is entitled to deduct from his income for Sur-tax purposes. It was contended for the employer that the payments were annual payments which he was entitled to deduct. The crucial question in that case therefore was whether the annual payments made were for remuneration for service or not. If it was the former, the employer was chargeable, otherwise he was not. It was contended for the employer that the payments were annual payments which he was entitled to deduct. The crucial question in that case therefore was whether the annual payments made were for remuneration for service or not. If it was the former, the employer was chargeable, otherwise he was not. Lord Tomlin dealing with the contention of the Revenue based on the doctrine of substance, that there was another collateral contract in addition to the deeds executed by the employer in the form of the latter which changed the character of the transaction covered by the deeds stated : "Apart however, from the question of contract with which I have dealt it is said that in Revenue Cases there is a doctrine that the Court may ignore the legal position and regard what is called "The substance of the matter" and that here the substance of the matter is that the annuitant was serving the Duke for something equal to his former salary or wages and that, therefore, while he is so serving, the annuity must be treated as salary or wages. This supposed doctrine (upon which the CIT apparently acted) seems to rest for its support upon a misunderstanding of language used in some earlier cases. The sooner this misunderstanding is dispelled and the supposed doctrine given a quietus the better it will be for all concerned, for the doctrine seems to involve substituting "the uncertain and crooked cord of discretion" for "the golden and straight mete wand of the law."...................... Every man is entitled if he can to order his affairs so that the tax attaching under the appropriate Acts is less than it otherwise would be. If he succeeds in ordering them so as to secure this result, then, however, unappreciative the CIT of Inland Revenue or his fellow tax payers may be of his ingenuity, he cannot be compelled to pay the increased tax. If he succeeds in ordering them so as to secure this result, then, however, unappreciative the CIT of Inland Revenue or his fellow tax payers may be of his ingenuity, he cannot be compelled to pay the increased tax. This so-called doctrine of "the substance" seems to me to be nothing more than an attempt to make a man pay notwithstanding that he has so ordered his affairs that the amount of tax ought from him is not legally climbable." * In Potts Executors vs. CIT, Revenue, 32 Tax(Cases) 211 Lord Normand pointed out that : "the Court is not entitled to say that for the purpose of taxation the actual transaction is to be disregarded as 'machinery' and that the substance or equivalent financial results are the relevant consideration. It may indeed be said that if theses loose principles of construction had been liberally applied, they would in many instances have been adequate to deal with tax evasion and there would have been less frequent cause for the intervention of Parliament." * In CIT, Revenue vs. Fleming & Co. (Machinery) Ltd., 33 Tax(Cases) 57 a company carrying on business as manufacturers' agents were sole selling agents for certain products of a manufacturer from 1903. But the sole selling agency was terminated by an agreement in 1948 under which the company received inter alia a payment as compensation for the cars of the agency. The question arose as to whether the said compensation was a capital receipt or a trading receipt. Lord President (Cooper) felt that if the attention is concentrated upon the substance of the transaction, the payment should be treated as capital payment whereas if attention is concentrated on the form of the payment, the transaction should be treated as a trading payment and proceeded to say : "........... it is not legitimate to look behind form and strict legal effect of a transaction to its so-called "substance" in order to impose upon a tax payer a liability not other-wise enforceable against him; and the converse of this proposition must be equally valid. it is not legitimate to look behind form and strict legal effect of a transaction to its so-called "substance" in order to impose upon a tax payer a liability not other-wise enforceable against him; and the converse of this proposition must be equally valid. The Company have only themselves to blame if we taken them at their word, for the transaction could have been carried through a manner which would have obviated the present difficult." * Lord Russell also stated in that case that it is not permissible to ignore the legal aspect of a document construed in its surrounding circumstances and to have regard merely on what is called the substance of the matter. In Bank of Chettinad vs. CIT, the Judicial Committee has also considered the applicability of the doctrine of substance to Revenue matters and stated : "Their Lordships think it necessary once more to protest against the suggestion that in revenue cases "the substance of the matter" may be regarded as distinguished from the strict legal position." * In CIT vs. Keshavlal Lallubhai Patel the Supreme Court, while dealing with the contention based on the "doctrine of substance" urged by the Revenue has cited with approval the observations of Lord Normand in Potts Executors vs. CIT, Revenue, 32 Tax(Cases) 211 referred to above. 11. The above decisions clearly lay down that in that in tax matters one cannot go behind the form and only look at the substance and that rights and liabilities cannot be disregarded and a different legal right and liability substituted in its place by the application of the doctrine of substance and that the Courts normally view with disfavour such a doctrine. If the doctrine of substance merely means that having once ascertained the legal rights of parties one can disregard the mere nomenclature and decide the question of taxability in accordance with the legal rights, no exception can be taken to that doctrine, but if on the other hand this doctrine means that one can brush aside and disregard the legal rights and liabilities arising under the contract between the parties, and decide the question of taxability or otherwise on the foot that the rights and liabilities of the parties being different from what in law they are, then the Courts must dissent from such a doctrine. 12. 12. The learned counsel for the assessee, however, does not question the general principle laid down in the above decisions. But what he contends is that the transaction between the assessee and the company not having been reduced to writing, its nature has to be gathered from the surrounding circumstances, that the Revenue is not justified in relying only on the entries in the accounts of the company ignoring the true nature of the transaction, that the mere entries in the accounts of the company will not prove an earlier sale of the buses by the assessee to the company and then a later allotment of the shares by the company to the assessee, that both the transfer of buses and the allotment of shares form part of the same transaction, that the allotment of shards by the company to the assessee cannot be dissociated with the transfer of buses, and that the bargain between the company and the assessee was that in lieu of the transfer of buses by the assessee he will get from the company 900 shares as also a cash consideration of Rs. 1, 83, 133/-. It is also contended for the assessee that the Tribunal having given a finding that the transfer of buses to the company and the allotment of shares to the assessee formed part of a single transaction, that finding of fact has to be accepted and that it is not possible for this Court to interfere with that finding. But as already pointed out on the transfer of the buses by the assessee to the company the assessee has been credited with a sum of Rs. 2, 58, 604/- being the sale consideration for the buses transferred. It is only later the assessee's accounts had been debited with a sum of Rs. 90, 000/- being the value of the 900 shares allotted by the company to the assessee. From these entries it is clear that the transfer of buses by the assessee and the allotment of shares by the company were for cash consideration. The Tribunal has taken the view that the substance of the transaction is that the assessee got 900 shares from the company plus Rs. 1, 83, 133/- as consideration for the 20 buses transferred and therefore the transfer of buses should be taken to be partly for cash and partly for shares. The Tribunal has taken the view that the substance of the transaction is that the assessee got 900 shares from the company plus Rs. 1, 83, 133/- as consideration for the 20 buses transferred and therefore the transfer of buses should be taken to be partly for cash and partly for shares. This view of the Tribunal proceeds on the basis that the allotment of shares was in exchange for some of the buses. Apart from the fact that the entries in the accounts do not show that the buses were transferred partly for cash and partly for shares, the question is whether the company could have allotted its shares for anything other than cash under the provisions of the Indian Companies Act. sec. Apart from the fact that the entries in the accounts do not show that the buses were transferred partly for cash and partly for shares, the question is whether the company could have allotted its shares for anything other than cash under the provisions of the Indian Companies Act. sec. 75(1) of the Company Act before its amendment in 1965 so far as it is relevant was as follows : "Whenever a company having a shares capital makes any allotment of its shares, the company shall, within thirty days thereafter :- (a) file with the Registrar a return of the allotments, stating the number and nominal amount of the shares comprised in the allotment, the names, addresses and occupations of the allotted, and the amount, if any, paid or due and payable on each share : (b) in the case of shares (not being bonus shares) allotted as fully or partly paid up otherwise than in cash, produce for the inspection and examination of the Registrar a contract in writing constituting the title of the allotted to the allotment together with any contract of sale, or a contract for service or other consideration in respect of which that allotment was made, such contracts being duly stamped, and file with the Registrar copies verified in the prescribed manner of all such contracts and a return stating the number and nominal amount of shares so allotted, the extent to which they are to be treated as paid up, and the consideration for which they have been allotted; ........." * The following proviso was added to s. 75(1) by the Companies (Amendment) Act, 1965 : "Provided that the company shall not show in such return any shares as having been allotted for cash if cash has not actually been received in respect of such allotment." * This proviso specifically imposes a duty on the promoters and Directors of a company to ensure that the shares capital reflects cash or other valuable assets and is not supported by merely book adjustments. sec. 75(1)(b) enjoins the promoters or the directors of a company in the case of shares allotted otherwise than for cash to produce before the Registrar of companies the Contract in writing setting out the consideration other than cash in respect of which the allotment was made. sec. 75(1)(b) enjoins the promoters or the directors of a company in the case of shares allotted otherwise than for cash to produce before the Registrar of companies the Contract in writing setting out the consideration other than cash in respect of which the allotment was made. Admittedly in this case there is no contract between the company and the assessee under which the company had undertaken to allot shares to the assessee in lieu of the transfer of his buses to the company. It is not the case of the assessee that s. 75(1)(b) had been complied with. Of course the provision to s. 75(1) (a) which came to be introduced in the year 1965 cannot apply to the assessment year in question. It is also not in dispute that the account books of the company show the shares as having been allotted for cash. If really the shares have been allotted for consideration other than cash, one would have expected the company to follow the procedure under s. 75(1)(b) and part from the statement made by the assessee, on material has been produced to show that the allotment of shares was in lieu of the buses taken over from the assessee and not for cash as has been entered in the accounts of the company. 13. In Palmer's Company Law, Twenty-first edition at page 190 dealing with the allotment of shares by a company the author says :- "The consideration for the allotment may be money, or with the consent of the company, money's worth e.g., the transfer to the company of property or the rendering to it of services ............... If a valid contract is made for the acceptance by the company of specified property or services of substantial value in payment or part payment of shares, the Court will not, whilst the contract stands, inquire into the value of the consideration even at the instance of the liquidator. A contract to pay for shares can therefore be discharged by accord and satisfaction but it is not open to a company to agree with the holder or proposed holder of its shares to replace the statutory liability by a special contract sounding in damages only, e.g., for future services. Whether a company owes a creditor a debt presently due. A contract to pay for shares can therefore be discharged by accord and satisfaction but it is not open to a company to agree with the holder or proposed holder of its shares to replace the statutory liability by a special contract sounding in damages only, e.g., for future services. Whether a company owes a creditor a debt presently due. that debt may be used as consideration against an allotment of shares to the creditor and such arrangement is proof of payment for the shares (the allotment being treated as for cash), but if shares are allotted to a creditor by way of accord and satisfaction, the allotment is not for cash and a contract has to be filed under s. 52(2)."Gower in his treaties on" Modern Company Law" * Second Edition at page 100 has pointed out in the foot note as follows :- "Under s. 52 (of the English Companies Act) (corresponding to s. 75 of the Indian Companies Act) the documents on the company's file must show that shares have been issued for a consideration other than cash and must contain a contract evidencing the consideration. These requirements are often evaded by an arrangement whereby the vendor purports to sell for cash and to subscribe the corresponding shares for cash, he and the company exchanging cheques, or relying on a set-off without the formality of an exchange on cheques. That this amounted to an issue for cash was established by Spargo's case 1873 8 Ch. App. 407." * 14. In Spargo's case 1873 8 Ch. App. 407 a company at its first meeting resolved that a certain sum be credited to one Spargo for the lease of a mine and that the sum be paid out of the share capital of the company by issuing to him certain shares for which he had subscribed the memorandum of association as fully paid up. But on the date of the resolution Spargo had only a verbal agreement with the parties who were equitably entitled to the lease of the mine, which was afterwards put into writing. The company subsequently made agreement with Sprgo and the other parties on the footing of that agreement. But in consequence of some difficulties as to the form of the lease it was never executed. The company subsequently made agreement with Sprgo and the other parties on the footing of that agreement. But in consequence of some difficulties as to the form of the lease it was never executed. Upon the winding up of the company it was contended that the transaction between the company and Spargo was equivalent to an exchange of cheques and therefore a cash payment by him and consequently it was not a contract required to be made valid by registration under s. 25 of the Companies Act and that the company having had full knowledge of the nature and the title of Spargo and having acted upon it, cannot later allege that the consideration proceeding from Spargo had failed and that even if the consideration is taken to have failed, the original payment was none the less a cash payment though the failure of the consideration might be subject to an action for damages. James, L.J. accepted the said contention saying : "It appears to me, it did appear to me in Fothergill's case, and does appear to me now that this Act of parliament did not make it necessary that the formality should be gone through of the money being handed by one and taken back from other by the same person. If it came to that, that is to say, that there was a debt in money payable immediately, and another debt in money payable also immediately, and that the one was accepted in full payment of the other on both sides, the company could have pleaded payment in bar to an action brought against them, and the shareholders could have pleaded payment in cash in corresponding action brought by the company against him for calls. That is of course where the transaction is an honest transaction, and where there is no fraud of any kind. It would be a payment in cash; that is to say, it might be prove as payment upon a plea of payment in cash, if those were the words of the contract, or it was a promissory note. That is of course where the transaction is an honest transaction, and where there is no fraud of any kind. It would be a payment in cash; that is to say, it might be prove as payment upon a plea of payment in cash, if those were the words of the contract, or it was a promissory note. It would be sufficient evidence so that in a Court of Law; and it appears to me that it is sufficient for the Court sitting up in a winding-up matter".The other learned Judge, Mellish, L.J. said :- " It is a general rule of law that in every case where a transaction resolves itself into paying money by A to B and then handing it back again by B to A., if the parties meet together and agree and set one demand against the other, they need not go through the form and ceremony of handing the money backwards and forwards" * 15. This decision came to be approved by the Privy Council in Larocque vs. Beauchemin 1897 AC 358 (PC). In that case the shares of promoters of a company had been credited as paid in full under an arrangement by which half the amount there of was paid by cash and half by receipts on account of the purchase price of the property acquired by the company. The question arose as to whether the shares were rightly credited as paid in full under the provisions of Art. 4722 of the Revised Statute of Quebee. The Privy Council found on the evidence that there was an agreement on the part of the promoters to take so many shares presently payable in cash, and an independent agreement by he company to purchase the property for so much money down and that the facts attracted the principle of Spargo's Case and stated :- "Their Lordships are not prepared to dissent from the decision in Spargo's case. It is a decision of the highest authority. It was pronounced by James and Mellish L. JJ., and the view which those eminent judges expressed had, as appears from their judgments, the approval of Selborne L.C." * 16. In Thodapuzha Rubber Co. It is a decision of the highest authority. It was pronounced by James and Mellish L. JJ., and the view which those eminent judges expressed had, as appears from their judgments, the approval of Selborne L.C." * 16. In Thodapuzha Rubber Co. vs. Joint Stock Co., (Mad) 33 MLJ 474 a Division Bench of this Court had to consider the scope of the expression "as fully paid up otherwise than in cash" occurring in s. 104(1)(b) of the Indian Companies Act, 1913. In that case there was an allotment of a fully paid up share to debenture holder in exchange of his debenture pursuant to a condition in the debenture deed. The question arose whether such an allotment was or was not an allotment of share "as fully paid up otherwise than in cash." The Bench expressed the view that the share allotted under those circumstances was allotted "as fully paid up otherwise than in cash" and therefore came within the provisions of s. 104(1)(b) of the Act. The Court distinguished Spargo's case on the ground that the money was actually due by the Company to Spargo to whom the share was allotted, whereas in the case before it the debenture has not yet become payable to the allottee and therefore, there was nothing which can be made the subject of asset-off and that unless a debt is actually due and owing by the company, the doctrine of Spargo's case cannot be applied. 17. The question whether the allotment of shares was for cash or for any consideration other than cash has to depend on the facts of each case. Lord Justice Mellish laid down a test which he had formerly elaborated in Forthergill's case 8 Chancery Appeals (270) that the shares must be treated as paid for in cash if what had been done would give rise to a good plea of payment as distinct from a plea of accord and satisfaction. The expression "share fully paid up in cash" would seem to import a handing over the money, including, of course, negotiable instruments, in return for the shares. In Spargo's case in the books of the company the allotment of shares was partly for case and partly for a leasehold right. The expression "share fully paid up in cash" would seem to import a handing over the money, including, of course, negotiable instruments, in return for the shares. In Spargo's case in the books of the company the allotment of shares was partly for case and partly for a leasehold right. It was held that the allotment of shares was for cash for the reason that as there were debts presently due either side, it was unnecessary to go through the form of cash on one transaction and return it immediately on the other. But the question in each case is to find out whether there was a single transaction or whether there is a conflation of two transactions. 18. In CIT vs. Motors & General Store (P) Ltd. a company had transferred to another all the assets of its cinema house for a consideration of Rs. 1, 20, 000/- in the shape of certain preference shares in a sugar company of the face value of Rs. 1, 20, 000/-. The question was whether the transaction was a sale so as to attract s. 10(2)(vii) of the IT Act. The Supreme Court held that in essence the transaction between the parties was one of exchange and there was no sale of the assets of the cinema house for any money consideration and therefore the provisions of s. 10(2)(vii) cannot be applied. The Court also observed that the presence of money consideration is an essential element in a transaction of sale and that if the consideration is not a money but some of the valuable consideration it may be an exchange or barter but not a sale. But on the facts of this case the transaction between the company and the assessee cannot be treated as an exchange or a barter, for the company cannot own or sell its shares. In the above two cases the Supreme Court treated the transactions as either an exchange or a barter in view of the fact that the assets were exchanged for shares. But in this case the assessee had transferred buses for money consideration, which had been paid partly in cash and partly in shape of shares, and the accounts of the company show that the parties themselves treated the transfer of shares as one for price and the allotment of shares by the company also for cash. But in this case the assessee had transferred buses for money consideration, which had been paid partly in cash and partly in shape of shares, and the accounts of the company show that the parties themselves treated the transfer of shares as one for price and the allotment of shares by the company also for cash. As per the principle in Spargo's case the allotment of shares was for discharging the company's liability for payment of the consideration for the buses. That means the company should be deemed to have allotted the shares for cash and the value of the shares due from the assessee has been set off against his dues from the company. If the transfer of buses and allotment of shares are tented as two separate transactions, then it is not possible to assume that the arrangement between the parties is one of exchange or a barter. We are of the view that having regard to the entries in the accounts of the company the transfer of buses by the assessee should be taken to be by way of sale and the allotment of shares by the company to the assessee was independent though it might have been contemplated even at the time of the transfer. Once there is a sale the question arises as to whether the sale was for inadequate consideration so as to attract the charge under s. 4 of the GT Act. 19. As already stated, in the IT assessment the fair market value of the buses has been determined at Rs. 5, 28, 840/- and the actual amount credited to the assessee in the company's book was Rs. 2, 58.604 which has be paid partly in cash and partly in the shares. Therefore, the transfer of the 20 buses by the assessee to the company was prima facie for inadequate consideration. This leads to the further question urged by the assessee as to whether the face value of the shares allotted to the assessee or its real value should be taken into account. The Tribunal has taken the view that after the acquisition of buses, real shares value should be considerably more than its face value, and that therefore, the value of 900 shares allotted to the assessee should be taken as 90 per cent of Rs. 5, 28, 840/-, the fair market value of the buses. The Tribunal has taken the view that after the acquisition of buses, real shares value should be considerably more than its face value, and that therefore, the value of 900 shares allotted to the assessee should be taken as 90 per cent of Rs. 5, 28, 840/-, the fair market value of the buses. It is true that the fair market value cannot be taken to be the face value of the shares on the facts of this case, but in the calculation of the real value of shares the Tribunal has not only overlooked the debt of Rs. 1, 83, 133/- due by the company to the assessee as part of the consideration for the buses as also other liabilities and assets of the company. The real value of the shares has to be worked out if need be by applying break-up method. As we are, however, holding that the transactions of transfer of buses and allotment of shares are two independent transactions, it is not necessary to go into the question as to what is the real value of the shares. That will be relevant only if the transaction is treated as one of exchange ignoring the form in which the transaction has been put thorough in the accounts of the company. 20. We have to, therefore, answer the question in the negative and against the assessee, and we answer accordingly. The Revenue will be entitled to its costs from the assessee. Counsel's fee Rs. 250/-.