(1.)THIS appeal, with special leave, has been filed against the judgment of the Nagpur High Court in a reference under S. 66(1) of the Indian Income-tax Act, 1922 by which the High Court answered the following question in the negative:
"Whether the proportionate profits on the goods of the value of Rs. 4,10,785 were received or were deemed to be received in British India, in the year of account, by or on behalf of the assessee Company within the meaning of S. 4(1)(a) of the Indian Income-tax Act, 1922."
(2.)THE Commissioner of Income-tax, Madhya Pradesh and Bhopal is the appellant, and the Bhopal Textiles Ltd., Bhopal, is the respondent. For the assessment year 1944-45, the Company which was non-resident was treated as 'resident and ordinarily resident' under S. 4(1)(c) of the Income-tax Act. In the year of account, it had supplied its manufactured articles either to the Government of India or its nominees at Agra, Allahabad and Delhi. Under the orders of the Government, the goods were sent direct to the persons nominated, who made the payment against the goods. THE goods were all sent f.o.r. Bhopal, and the railway freight and other charges were to be borne by the buyers to whom the railway receipts made out in the name of the consignees were sent by the Company through the Imperial Bank at Bhopal. THE Bhopal Branch sent the railway receipts to branches of the Bank at Agra, Allahabad and Delhi, which collected the amounts due from the buyers, and transmitted them to the Imperial Bank, Bhopal, to the credit of the Company. On these facts, a total sum of Rs. 4, 40,373 was held by the Department to have been received in British India. Of that sum, an amount of Rs. 29,588 which represented the receipts for supplies direct to Government is no longer in dispute. THE balance represents the sum, which was the subject-matter of the reference.
The usual appeal followed, and the contention of the Company that the money was not received in British India was not accepted by the Tribunal. The Tribunal did not decide about the place of accrual. A reference was then made by the Tribunal of the question quoted above. The High Court in deciding the reference went into the question of passing of property under the Indian Sale of Goods Act, 1930, and came to the conclusion that since the property in the goods had passed to the buyers, the Imperial Bank of India, Bhopal, must be 'deemed to have received the railway receipts as agents of the buyers'. Continuing the reason, the learned Judges observed:
"So also the branches of the Bank at Agra, Allahabad and Delhi acted as the agents of the buyers when they collected the money from them and transmitted it to the Bhopal branch. In this view, the profits cannot be said to be received by the assessee Company in British India. It received the money only when it reached the Bhopal branch as a credit to its own account and that was not in British India at the material time."
(3.)THE case was not decided by the Tribunal on the basis of accrual of the income, profits or gains to the Company. It was decided on the fact of actual receipt, whether it was in British India or in Bhopal, which was then outside the taxable territories. We need not, therefore, concern ourselves with the problem whether property in the goods could be said to have passed absolutely to the buyers without any right of disposal being reserved by the Company. It is a matter of some doubt whether the goods were absolutely at the disposal of the buyers after the railway receipts were handed over to the Bank. It is in evidence - and has been adverted to by the Income-tax Officer - that the Company, when it handed over the railway receipt to the Imperial Bank at Bhopal, did so along with a covering letter in which it asked the Bank to deliver the railway receipt and the bill to the buyers against payment of the bill amount plus collection charges. In this view of the matter, though we do not express any final opinion, we doubt whether the right of disposal was parted with by the Company.