N.H. Bhagwati, J. - (1.) The Appellant, a non-resident company, was assessed to income-tax for the assessment year 1942-43 in respect 'inter alia of the profits earned on the Sales of textile. goods of the value of Rs. 4,21,873 supplied to the Government of India and of the value of Rs. 6,02,911 supplied to merchants in British India on orders secured through "Reporters". The assessment was upheld on appeal and on further appeal by the Tribunal. Eventually three questions of law were referred by the Tribunal to the High Court, viz. 1. Whether the profits on the sale of goods to the Government of India accrued or arose in British India. 2. Whether the profits on the sale of goods through the Company's paid employees British India accrued or arose in British India. 3. Whether the sale proceeds amounting to Rs. 1,37,469-13-9 which necessarily included profits were received in British India by or on behalf of the assesee company.
(2.) The third question was not pressed before the High Court. But in regard to Questions 1 and 2 the High Court found that the statement of the case by the Tribunal was most unsatisfactory, that the relevant correspondence and documents were scattered over the statement of the case and the annexures and that it was difficult to make out what was the connection between the two. It therefore considered it necessary to send the matter back to the Tribunal. While so doing however the High Court asked the Tribunal not to submit to it a further statement of the case but gave certain directions and asked the Tribunal to decide the matter in accordance with those directions. Even though with regard to the sum of Rs. 6,02,911 the question referred was whether the profits on the sales of these goods accrued or arose in British India, the High Court founding on what according to it appeared from the assessment order, viz, that Rs. 5,80,069 were actually received in British India gave a further direction that the Tribunal should consider whether that sum was received in British India and if they found that that was so, the question of accrual or arising of profits would have to be determined only with regard to the balance, viz., Rs. 6,02,911 less Rs. 5,80,069. The High Court refused leave to appeal to this Court and the Appellant therefore applied for special leave which was granted by an order of this Court dated 23-12-1952.
(3.) The facts relevant to the determination of the questions 1 and 2 shortly stated were as follows: (a) In about November 1940 an invitation to tender was sent out by the Government of India asking for a tender for the supply of stores detailed in the schedule attached there, to. On 14-11-1940 the Appellant sent a tender form offering to supply. 1,51,007 sheets 'in strict accordance with the conditions of contract printed below" and at the price quoted in the schedule the time and rate of delivery being as stated therein. On 17-12-1940 the Government of India wrote to the Appellant purporting to accept the tender to the extent of 51;304 sheets, but subject to the conditions as contained in I.S.D. l2(S) to the extent of the quantity and on the terms as to delivery specified therein. (Ex. "C"). The Appellant wrote a letter to the Government of India confirming the purported acceptance of the tender by the latter and stating that it would execute the order within the due period. The order was duly executed by the Appellant. The goods were railed f.o.r. Indore and were before consignment inspected and approved and certified by the Inspector of the Government. The railway receipt and the Inspector's certificate were sent by the Appellant to the Government and the payment for the goods was made by the Government at Indore. (b) The Appellant had engaged "Reporters" to secure orders from British India. They used to communicate to the Appellant in Indore offers received from the purchasers in British India. The Appellant informed the Reporters either accepting the said offers or quoting higher rates in which event the purchasers accepted the higher rates and the Reporters intimated to the Appellant that they had sold the goods at those higher rates. This communication was confirmed by the Appellant informing the Reporters that they had confirmed the sale. A formal document confirming the offer was then drawn up and was executed by the purchasers asking the Appellant to supply the goods therein mentioned. This offer was subject to a written acceptance by the Appellant in part or in full within 15 days of the date of the said document failing which it was to be considered as cancelled.;