- (1.) The following question was referred to the High Court of Calcutta by the Income-tax Appellate Tribunal (hereinafter called the "Tribunal") under S. 66 (1) of the Income-tax Act, 1922: "Whereas on the facts and in the circumstances of the case and on a proper construction of the terms of the relevant contracts the sales covered by the bills of lading in the name of the buyers in five cases took place outside India and therefore the profits derived from the said sales arose outside India - The High Court answered the question in the negative and against the assessee against which this appeal is by special leave.
(2.) The aforesaid question related to the assessment year 1952-53 of which the accounting year is 1951-52 ending 31st December 1951. The assessee company deals in sale and purchase of jute in Pakistan as well as in India. During the year of account relevant for the assessment year it sold jute of the value of Rs. 23,93,767/- out of which Rupees 10,06,772 were sales in foreign countries and Rs. 2,44,015/- in India. The balance of sales worth Rs. 11,42,979/- according to the assessee were effected in Pakistan. The Income-tax Officer overruled the contention of the assessee and found that the quondam sales in India amounted to Rs. 13,86,995 which included Rs. 11,42,979 alleged to have been sold in Pakistan and assessed the appellant accordingly. It appears from the statement of the case that the sales were made under a contract executed in Calcutta between the buyer and the seller. The terms of the contract included delivery free to the buyer's mill-siding or at the ghat in India. It further contained provisions for weighment and assay of goods for their short weight and quality claimed at the destination in Calcutta. It was also a term of the contract that before the goods were actually shipped the buyers were required to open an irrevocable letter of credit with a bank in Calcutta and accordingly the buyers opened letters of credit with the Imperial Bank of India, the Chartered Bank of Australia and China and Hind Bank Ltd., Calcutta. All these banks had their branches in Pakistan, at Chittagong and at Narayangunj. The fact that letters of credit had been opened was communicated by the respective banks to their branches in Pakistan and the banks in Pakistan in their turn informed the assessee that they were prepared to negotiate the draft as per terms of the contract. On receiving information from the bank in Pakistan that they were prepared to negotiate the draft drawn as per the terms of the contract, the assessee placed the contracted goods on board the steamer at Ashurganj in Pakistan. Immediately the loading on the ship had commenced the seller had further to advice the buyers about the quality, assortment and the weight of goods in maunds. The assessee had to then obtain a complete set of shipping documents and present them to the bank for payment of invoices' value in terms of the contract in the equivalent Pakistan currency at the exchange rate prevailing on the presentation of the documents at the bank less freight and insurance which were payable in India by the buyers on account of the sellers. The manner in which this was done was that as soon as the goods were placed on board the steamer the seller obtained the bills of lading in the name of the buyers in five cases and in two cases in the name of Mahabir Trading Co. Ltd., an agent of the assessee company. The assessee then prepared invoices for contracted bills on the basis of the bills of lading and drew bills of exchange on the buyers' bank where the letters of credit had been opened. The bill of exchange together with the bill of lading and the invoices were negotiated with the bank and the bank forwarded the documents to their offices in Calcutta which in their turn sent the document to the purchaser.
(3.) According to the Income-tax officer these transactions disclosed that the property in the goods had passed to the assessee (sic) in India and on this basis he assessed the appellant.;