Question

Principle: Where there is a transfer of ownership of one thing for the ownership of some other thing it is called an exchange, while the transfer of ownership for consideration of money is called a sale, whereas without consideration it becomes a gift.

Facts: 'A' transfers his house worth `50 lakh to 'B' for a shopping building worth the same amount, as consideration from 'B'.

Options

• The transaction is a gift

• The transaction is a sate

• The transaction is an exchange

• The transaction is a mortgage

Answer 1

The transaction is an exchange

Explanation:

Section 118 of the Transfer of Property Act, states that when two persons mutually transfer the ownership of one thing for the ownership of another, neither thing or both things being money only, the transaction is called an ‘exchange’.  In the given situation, A transfers his house worth ₹ 50 Lakh to B for a shopping building worth the same amount, as consideration from B. So, it is an exchange as there is no monetary consideration.