This is appeal by department against order of CIT (Appeals), Karnal dated 12-2-2003. only grievance of department relates to deletion of addition of Rs. 53,76,000 made by Assessing Officer on account of notional sale of rice-bran and phuck at market rate which was claimed to have been given to M/s. Balaji Rice & General Mills, Kaithal in exchange of milling of paddy work done and chilka burnt in boiler to prepare Sela rice. 2. facts of case in brief are that Assessing Officer, during course of assessment proceedings noticed that in trading account, assessee had not shown sales of by-products of paddy. When enquiries were made, it revealed that assessee had given away rice-bran and phuck to M/s. Balaji Rice & General Mills, Peoda Road, Kaithal in exchange for milling of paddy work done and chilka was burnt in boiler to prepare 'sela' rice. Assessing Officer opined that 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, net profit shall not be effected. He, accordingly, worked out quantity of rice-bran and phuck at 13,440 qtls. by taking yield at rate of 10 per cent of 1,34,405 qtls. paddy milled. He applied rate of Rs. 400 per quintal and calculated amount at Rs. 53,76,000 which was treated as domestic sales and consequently deduction under section 80HHC was reduced due to increase in domestic sales. 3. assessee carried matter to CIT (Appeals) and submitted that 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 property of miller as lease charges and that such type of agreements were quite common in this line of business. assessee also filed one copy of Model Agreement that Government, normally entered into with millers. Clause 8(iv ) of said agreement reads as under: 'The by-products viz., Broken rice, rice kani, phuck (rice husk) and rice- bran etc. obtained during manufacture of rice shall be property of miller and Government shall have no right or responsibility in this regard.' It was stated that rice by-products were retained by miller M/s. Balaji Rice Mills by terms of agreement as lease/milling charges. As such, property in those by-products never pass on to assessee. It was stated that such type of treatment automatically increased cost/purchase value which ultimately merged into valuation of closing stock. It was explained that sums paid in respect of such type of lease agreements were revenue expenditure which increased purchase cost. It was argued that Assessing Officer, instead of taking such milling/lease charges as part of cost of production, hypothetically treated it internal sales and consequently denied benefit of deduction under section 80HHC of Income-tax Act. It was further stated that such type of lease settlement did not fall within definition of sales as had been held by Hon'ble Supreme Court in case of CIT v. Motors & General Stores (P.) Ltd. [1967] 66 ITR 692. Reliance was also placed on judgment of Hon'ble Allahabad High Court in case of M.P. Sugar Mills v. CIT [1978] 115 ITR 534. 4. learned CIT (Appeals), after considering submissions of assessee observed that comments of Assessing Officer had been obtained on written submissions of assessee. However, he could not rebut ratio laid down by Hon'ble Supreme Court in case of Motors & General Stores (P.) Ltd. (supra) wherein it had been held that exchange or barter cannot be treated/included in sales. Accordingly, issue was decided in favour of assessee. Now, department is in appeal. 5. Before us, learned Sr. DR supported order of Assessing Officer and submitted that assessee adopted modus operandi to increase export profit by not adopting milling charges to manufacturing account, it not only claimed wrong deduction under section 80HHC but also tried to increase export profit and had suppressed local sales. He argued that learned CIT (Appeals) had not appreciated motive of assessee behind transaction which resulted in higher computation of deduction claimed under section 80HHC. He further stated that sales worked out by Assessing Officer should be treated as local sales for reason that in case by- products were not to be given to miller, then those were to be sold in market. He placed his reliance on 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, learned counsel for assessee reiterated submissions made before learned CIT (Appeals) and further submitted that assessee had not sold by-products. Those were given in exchange of milling charges and there was no contract of sales with miller, so it could not be treated as sales. He further submitted that there was no transfer of property and even no price was paid by miller, so it was not sale but exchange in lieu of paddy milled for assessee. reliance was placed on following case laws: (i ) Oil & Natural Gas Commission v. Addl. CIT [1999] 69 ITD 69 (Delhi) (ii ) M.P. Sugar Mills's case (supra) (iii ) CIT v. Bombay Burmah Trading Corpn. Ltd. [1986] 161 ITR 386 (SC) (iv ) State of Tamil Nadu v. Sri Srinivasa Sales Circulation [1996] 10 SSC 648 (v ) CIT v. Satya Nand Munjal [2002] 256 ITR 516 (P&H) (vi ) New India Sugar Mills Ltd. v. CST AIR 1963 S.C. 1207. 7. We have heard both parties and carefully gone through material available on record. In present case, only controversy revolves around paddy by-products given by assessee to miller in lieu of paddy milling charges. assessee, on one hand, had not paid milling charges to miller, on other hand, had given it rice-bran and phuck obtained after paddy milling. Assessing Officer considered value of rice, bran and phuck given to miller by assessee as local sales and, consequently, increased total turn over as well as local sales thus, reduced claim of assessee under section 80HHC. Now, relevant question to be decided is as to whether rice-bran and phuck given by assessee in lieu of milling charges can be considered as sale? essential component of sale is transfer of property in goods to buyer for price. Sub-section (1) of section 4 of Sale of Goods Act defines sale and agreement to sale which reads as under: '4 . Sale and agreement to sell. - (1) contract of sale of goods is contract whereby seller transfers or agrees to transfer property in goods to buyer for price. There may be contract of sale between one part-owner and another.' From above, it would be clear that to constitute valid sale, there should be purchaser and seller who agrees to transfer property i.e., goods are to be transferred from seller to buyer for consideration. However, in present case, there is no such relationship of purchaser and seller in between miller and assessee. miller had also not paid any price for by-products of paddy, i.e., rice-bran and phuck, so it cannot be said that sale has taken place. Hon'ble Supreme Court in case of Sri Srinivasa Sales Circulation (supra) has held as under: 'Under Sale of Goods Act, it is essential to establish that there is agreement between parties for transfer of title to goods and that such agreement should be supported by money consideration and as result of transaction goods, article or property must actually pass to purchaser. It is settled law that expression 'sale' under Sales Tax Act has to be understood with reference to definition of 'sale of goods' under Sale of Goods Act. But if title of goods passes without any contract between parties, express or implied, there is no sale. Similarly, if consideration of transfer is not money, but some other valuable consideration, it may amount to exchange or barter but not sale in strict sense of law for purposes of taxation.' From ratio laid down by Hon'ble Supreme Court in aforesaid referred to case, in instant case, transfer of title of goods, i.e., rice-bran and phuck from assessee to miller can be considered as exchange or barter but not sale because there was no consideration in form of money. 7.1 Hon'ble jurisdictional High Court in case of Satya Nand Munjal (supra) has held as under: 'If on account of lacuna in law or otherwise assessee is able to avoid payment of tax within letter of law, it cannot be said that action is void because it is intended to save payment of tax. So long as law exists in its present form, taxpayer is entitled to take advantage of it.' In instant case also, assessee although is able to avoid payment of tax within letter of law, but it cannot be held that action is void since it is intended to save payment of tax. In present case, although assessee, instead of selling rice by-products and then paying milling charges to miller, had given rice by-products itself to miller in exchange of milling charges, but this transaction cannot be considered as sale and consequently, turn-over as well as local sales of assessee and therefore, these cannot be increased on notional basis as was done by Assessing Officer. 7.2 Hon'ble Supreme Court in case of New India Sugar Mills Ltd. (supra) had held as under: 'In popular parlance 'sale' means transfer of property from one person to another in consideration of price paid or promised or other valuable consideration. But that is not meaning of 'sale' in Sale of Goods Act, 1930. Under section 4 of Sale of Goods Act, transaction is called sale only where for money consideration property in goods is transferred under contract of sale. contract of sale between parties is, therefore, pre-requisite to sale.' In instant case, it is noticed that there was no money consideration and also there was no contract of sale between assessee and miller, i.e., M/s. Balaji Rice & General Mills. So, transaction under consideration cannot be equated with sales. Therefore, Assessing Officer was not justified in treating this transaction as sale and in working out notional value of sales by assuming yield of rice-bran and phuck at rate of 10 per cent of paddy milled. 7.3 Hon'ble Allahabad High Court in case of M.P. Sugar Mills (supra) had differentiated sale from exchange by holding as under: 'That difference between sale and exchange is that in former t h e price is paid in money, whilst in latter it is paid in goods. Money consideration is essential element of sale.' In present case, since there was no money consideration, which is essential element of sale, so transaction cannot be considered as sale. 7.4 Hon'ble Supreme Court in case of Motors & General Stores (P.) Ltd. (supra) interpreted meaning of 'Sale' and differentiated between sale and exchange. Hon'ble Apex Court had held as under: 'Sale is transfer of property in goods or of ownership in immovable property for money consideration. But in exchange there is reciprocal transfer of interest in immovable property, corresponding transfer of interest in movable property being denoted by word 'barter'. difference between sale and exchange is this, that in former price is paid in money, whilst in latter it is paid in goods by way of barter. presence of money consideration is essential element in transaction of sale. If consideration is not money but some other valuable consideration it may be exchange or barter but not sale.' In present case also there was reciprocal transfer of interest because assessee on one hand was getting its paddy milled by miller, i.e., M/s. Balaji Rice & General Mills, Kaithal, on other hand, was giving rice by- product, i.e., rice-bran and phuck etc. to miller, so transaction can be stated as exchange, since there was reciprocal transfer, but not sale due to absence of essential element of sales, i.e., money consideration. 8. In light of aforesaid discussion and by analyzing various judicial pronouncements referred to in former part of this order, we are of confirmed view that learned CIT (Appeals) was justified in reversing action of Assessing Officer. We do not see any infirmity in impugned order. 9. As regards to case law relied by learned Sr. DR i.e., case of Orient Rice Trading Co. Ltd. (supra) is concerned, facts in that case are not similar to facts of present case because in said case, assessee was dealing in shares and had taken shares in new company in exchange for shares of first company. assessee had made realization of value of shares of first company and difference between price of shares of first company and new company on date of such exchange had to be treated as profit of assessee. However, in present case, there is no such transaction of shares. So, case relied by learned Sr. DR is distinguishable. Similarly, facts in case of B.Sathiar Singh (supra) relied by learned Sr.DR were different from facts of assessee's case because said case pertained to gift tax and issue involved was whether gift tax attracted on difference between fair market value and actual consideration. However, in present case, no such issue is involved. Therefore, ratio laid down by Hon'ble Madras High Court is not applicable to facts of assessee's case. 10. In view of aforesaid discussion, we are of confirmed view that learned CIT (Appeals) rightly directed Assessing Officer not to include notional value of rice by-products given by assessee to miller of paddy in lieu of paddy milling as local sales. 11. In result, appeal is dismissed. *** ASSISTANT COMMISSIONER OF INCOME TAX v. SHIV SHANKAR RICE MILLS