- (1.) This appeal, by certificate granted under S. 66A (2) of the Indian Income-tax Act, 1922, hereinafter referred to as the Act, read with S. 261 of the Indian Income-tax Act, 1961, is directed against the judgment of the Rajasthan High Court in a consolidated reference made to it by the Income-tax Appellate Tribunal, Delhi Branch, under S. 66 (1) of the Act. This appeal relates to the assessment year 1943-44 and the relevant question with which we are concerned is as follows: "whether the profit on the amounts received by the assessee's bankers in British India as price of goods sold by the assessee on railway receipts in the names of the consignees or as price of goods delivered ex-godown Bhilwara was liable to tax under the Indian Income-tax Act - This question was referred at the instance of the appellant and the item in dispute now before us is the item amounting to Rupees 2,73,488, which was held not liable to taxation by the Appellate Tribunal. The question which arises in this appeal is whether the Tribunal was right. The first submission, however, of Mr. A. V. Vishwanatha Sastri, the learned counsel for the appellant, is that the High Court has not deal with this question in so far as it relates to this sum. Mr. Desai, on the other hand, contends that the appellant has not appealed as far as this item is concerned; and, therefore, before we attempt to answer the question we must first see whether the appellant's appeal covers this item.
(2.) Mr. Desai refers us to the petition for leave to appeal to Supreme Court, filed in the High Court, and says that there is no express mention of the item of Rupees 2,73,488. He is right as far as this is concerned, but the appellant apparently felt it was not necessary to mention expressly this item. Mr. Sastri points to Paras. 12 and 13 of the petition which read as follows : "12. That on account of applying the principle of accrual basis and allowing apportionment of profit between the manufacturing and selling processes in the ratio of 75 per cent : 25 per cent the revenue that would be lost to the Department would be approximately Rs. 36,000. 13. That the point of law decided by this Hon'ble Court while returning the answer the question No. 2, namely, whether the liability to pay tax can be fastened on the assessee on receipt basis or accrual basis is a substantial question of law and is of great public and private importance and would form important precedent governing the numerous other cases. The tax effect is also of considerable value. Further, Mr. Sastri points out that the first seven paras of the petition which deal with the facts and the proceedings before the Income-tax Authorities are general and cover the said item of Rs. 2,73,488; also the grounds of appeal, Nos. 1 and 2, are very general and cover the item in dispute. It is true, as pointed out by Mr. Desai, that the High Court in granting leave to appeal to the Supreme Court did not expressly deal with this item at all, but then the High Court was dealing with the question of law as such and was not adverting to the facts in detail.Be that as it may, the appellant has filed an appeal in respect of the assessment year 1943-44 and the only possible question that can arise in this appeal is regarding the disputed item of Rs. 2,73,488, and we do not feel justified in accepting this technical objection and debarring the appellant from urging that this item is taxable.
(3.) Now, coming to the merits of the submission of Mr. Sastri, we find that the Rajasthan High Court has omitted to consider the question of the taxability of this item. This item was exempted by the Appellate Tribunal. In this connection the Appellant Tribunal observed as follows : " but the assessee would not be liable to tax in respect of goods sold by the assessee to the purchasers on railway receipts in the names of consignees. In respect of these goods, the delivery of the goods was in Bhilwara, the goods were appropriated there and not in British India and the title in the goods had passed in the Indian State and not in British India. The assessee cannot, therefore, be assessed on the amounts received by the assessee from consignees on railway receipts in the names of the consignees. It is true that the consignees did pay the price of the goods to the assessee's banker's in British India but thereby the bankers in British India had become the agents of the consignees and not the agents of the assessee. In this view of the matter the inclusion of the receipts on railway receipts addressed to the consignees cannot be justified. In the assessment years 1944-45 and 1945-66 none of the railway receipts was in the name of the consignees. The sales were on railway receipts in the name of self or were in cash. It was only in the assessment year 1943-44 that the railway receipts were in the name of the consignees and they were to the tune of Rs. 2,73,488. The amount will, therefore, be excluded form the total receipts of Rs. 12,62,911." The High Court noticed exclusion of Rs. 2,73,488 in these words : "The Tribunal also found that it was only in the assessment years 1944-45 and 1945-46 that sales were effected by assessee on railway receipts in the names of the consignees and that such sales amounted to Rs. 2,73,488. The Tribunal accordingly deleted from the aggregate amount sales of Rs. 12,72,911 and Rs. 2,73,488 obviously treating the amounts deleted as not liable to tax." Apparently the mention of 1944-45 and 1945-46 is a clerical mistake and we should read it as 1943-44. Apart from the above words, we do not find any reference to the figure of Rs. 2,73,488 in the rest of the judgment. Further, the main reasoning of the High Court concerns the item of Rupees 1,14,687 in the year 1945-56 and Rupees 1,14,289 during the year 1946-47. These amounts had been received by the assessee by discounting hundies with the Bharat Bank, Bhilwara, and the Rajasthan High Court held that the assessee was liable to tax in respect of these items not on receipt basis but on accrual basis. The item of Rs. 2,73,488 was not realised in Bhilwara by discounting of hundies but in other circumstances.;