GAJENDRAGADKAR - (1.) THE following judgment of the court was delivered by
(2.) WHEN this appeal was argued before a division bench of this court on 23/10/1964, it was urged on behalf of the appellant, the Keshav Mills Co. Ltd., that in view of the present decisions of this court in The New Jehangir Vakil Mills Ltd. v. The Commissioner of Income-tax, Bombay North, Kutch and. Saurashtra(1), and The Petlad Turkey Red Dye Works Co. Ltd., Petlad v. The Commissioner of Income tax, Bombay, Ahmedabad (2), the appeal must be allowed and the case sent back to the Bombay High court for disposal in accordance with the principles laid down in the latter decision. At that stage, the learned Attorney-General for the respondent, the Commissioner of Income-tax, Bombay North, Ahmedabad, urged that he wanted this court to reconsider the said two decisions. He fairly conceded that if the said two decisions were to be followed, the appeal would have to be allowed and sent back as suggested by the appellant. The learned Judges constituting the division bench took the view that an opportunity should be given to the learned Attorney-General to press his contention, and so, they directed that the appeal be placed before a bench of five Judges. Thereafter, this appeal came on for hearing before the Constitution bench on 5/11/1964. On this occasion again, the same contentions were raised on behalf of the appellant and the respondent respectively Mr. Palkhilvala for the appellant urged that it would be inappropriate to reconsider the recent decisions on which he relied, and he argued that on the merits, the view taken by this court in the said two decisions was sound and correct. On the other hand, the learned Attorney-General contended that he wanted this court to reconsider the said two decisions, and he pointed out that the matter was of importance, and so, the appeal should be referred to a larger bench in view of the fact that the decision in the case of the Petlad Co. (2) was a unanimous decision of a bench consisting of five Judges of this court. It was under these circumstances that the court directed that the appeal should be placed before a Special bench of seven Judges. 'Mat is how it has come on for a final decision before a bench of seven Judges; and the only point which has been raised for the decision of the Special bench is whether the two decisions in question should be reviewed and revised. Let us begin by stating the relevant facts leading up to the main point of controversy between the parties. The appellant is a company registered in the Baroda State as it then was. The assessment year with which the proceedings giving rise to this appeal are concerned is 1942-43 (the accounting year being calendar year 1941). During the said year, the appellant was a 'non-resident'. It carried on business of manufacturing and selling textile goods in the Baroda State. The operations in relation to all sales of goods manufactured by the appellant's Mills were completed at the appellant's premises at Petlad on the footing of ex-Mill delivery in every case. It appears that on 22/03/1947, the Income-tax Officer, E.P.T. Circle, Ward B, Ahmedabad, passed an order under sections 23 (3) and 34 of the Indian Income-tax Act, 1. 922 (No. 11 of 1922) (hereinafter called 'the Act) and held that sale proceeds in respect of the sales aggregating each of the following three items were received by the appellant in British India. These items were : JUDGEMENT_1636_AIR(SC)_1965Html1.htm It is with this last item that the present appeal is concerned.
(3.) AGGRIEVED by the order thus passed by the Income-tax Officer, the appellant preferred an appeal before the Appellate Assistant Commissioner of Income-tax, Ahmedabad Range. The Appellate Authority held that the Income-tax Officer was in error in not excluding items (i) and (iii) respectively from computation of the taxable profits of the appellant. Thus, the appellant succeeded before the appellate authority in respect of the item in dispute. This decision of the appellate authority led to two cross-appeals, one by the Income-tax Officer and the other by the appellant before the Income-tax Appellate tribunal-hereafter called the tribunal. The tribunal dismissed the appellant's appeal in respect of Rs. 4,40,878.00 and allowed the Incometax Officer's appeal in part and held that the item of Rs. 12,68,460.00 had been wrongly excluded by the Appellate Authority. In respect of item (iii) relating to Rs. 6,71,735.00, the tribunal held that in the circumstances of the case the sale proceeds represented by the said item were not received in British India but in the State itself.;