TULZAPURKAR, J. - (1.) IN this reference which has been made to us by the Tribunal at the instance of the assessee in all three questions of law have been posed for our consideration and answer thereto and those questions are : '(1) Whether the contentions of the assessee with regard to the assessment years 1947 -48, 1948 -49 and 1949 -50 are competent, in view of the decision of the High Court with regard to the assessment year 1946 -47 ? If yes, (2) Whether, on the facts and the circumstances of the case, the Tribunal was right in holding that the sale proceeds of cement manufactured by the assessee and sold by the Cement Marketing Co. of India Ltd., the Dalmia Cement Ltd. or Dalmia Cement and Paper Marketing Co. Ltd., as the case may be, to the public or to the Government in the accounting years 1946, 1947, 1948 were received by the said companies on behalf of the assessee in the taxable territories ? (3) Whether the Tribunal was right in rejecting the claim of the applicant company, namely, that so far as the goods were sold in the State of Bikaner through the sub -agents of the Cement Marketing Co. of India Ltd., the sale proceeds thereof were not received in British India and as such it was not assessable under section 4(1)(a) of the Indian Income -tax Act, 1922, to that extent ?'
(2.) IT may be mentioned that the first two questions were referred by the Tribunal to this court under section 66(1) of the Act whereas the third question has been referred to this court by the Tribunal under section 66(2) of the Act and so far as the first two questions are concerned Mr. Mehta appearing for the assessee has fairly stated before us that he is not pressing the reference and as such those two questions need not is answered by this court. Since the reference on those two questions is not pressed, we agree with Mr. Mehta that the questions need not be answered. The only question that falls for our determination is the third question mentioned above and that question arises in these circumstances. The assessee -company was a company incorporated in the former Indian State of Jind and has been having a cement manufacturing factory at Dadri in that State. The relevant assessment years in respect of which the question arise in 1947 -48, 1948 -49 and 1949 -50, with the accounting years being the calendar years 1946, 1947 and 1948, respectively, and the main question which arose before the taxing authorities and Tribunal was whether the sale proceeds of the cement manufactured by the assessee were received or were deemed to have been received in the taxable territories in the years concerned by or on behalf of the assessee within the meaning of section 4(1)(a) of the Indian Income -tax Act, 1922. Under an arrangement which was effective from January 1, 1941, evidenced by an agreement executed on June 4, 1942, the entire cement production of the assessee -company in the aforesaid accounting years was marketed or sold to the public or Government, (a) in 1946, 1947 and up to February 28, 1948, by the Cement Marketing Co. of India Ltd., (b) from March 1, 1948, to July 31, 1948, by Dalmia Cement Ltd., and (c) from August 1, 1948, to December 31, 1948, by Dalmia Cement and Paper Marketing Co. Ltd. All these three companies had been incorporated in what was then called British India and the sale proceeds in respect of the cement manufactured by the assessee and marketed by them were admittedly received by the said three companies in the taxable territories. The main contention of the assessee before the taxing authorities and the Tribunal was that its entire production was sold to one Dadri Marketing Ltd. which was also a company incorporated in the State of Jind and that the assessee received its sale proceeds directly from that company in the State of Jind and outside the taxable territories and according to the assessee, it had no contractual relation with any of the three companies which ultimately sold its production to the public or to the Government and that the receipt of sale proceeds by the said three companies could not be on behalf of the assessee and in support of this contention the assessee -company relied upon an agreement dated October 8, 1941, that was made between the assessee on the one hand and Dadri Marketing Ltd. on the other. In reply the department contended that this agreement of October 8, 1941, was a dummy agreement or a mere paper transaction and that the entire production of the assessee -company was marketed or sold by the aforesaid three companies during the relevant accounting periods and as such the sale proceeds that were received by those three companies were received by them on behalf of the assessee -company in the taxable territories and as such the income derived from such sales was taxable under section 4(1)(a) of the Act. On this principal question, relying upon the earlier decision of this court with regard to the assessment year 1946 -47, given on 11th September, 1951, in I. T. Reference No. 20 of 1951 and after examining the relevant material that was produced before them, the taxing authorities as well as the Tribunal came to the conclusion that the sale proceeds of the cement manufactured by the assessee and sold by the Cement Marketing Co. of India Ltd., the Dalmia Cement Ltd. and the Dalmia Cement and Paper Marketing Co. Ltd., as the case may be, were received by the said companies on behalf of the assessee -company in the taxable territories and as the assessee failed before the taxing authorities and the Tribunal on this principal question, at the instance of the assessee, the Tribunal referred the first two questions mentioned above to this court for its opinion. However, as we have stated earlier. Mr. Mehta did not press this reference so far as those two questions were concerned and, therefore, it is clear that those two questions need not be answered by us. In other words, Mr. Mehta accepted the Tribunal's view that the agreement dated October 8, 1941, was a dummy transaction or was a mere paper transaction and the entire cement manufactured by the assessee -company had been sold to the public or the Government by the aforesaid three companies and that the sale proceeds received by those three companies had been received by them on behalf of the assessee -company in the taxable territories.
(3.) IT may be stated that when the appeal pertaining to the assessment year 1947 -48 was argued before the Appellate Assistant Commissioner a contention was raised on behalf of the assessee that a part of the sales which had been effected by the Cement Marketing Co. of India Ltd. had been effected in the State of Bikaner through M/s. Daga Bros., the sub -agents of M/s. Cement Marketing Co. of India Ltd., and that the sale proceeds thereof were not received in British India and that the profit arising under those sales was therefore not assessable under section 4(1)(a) of the Act. The Appellate Assistant Commissioner rejected the contention and took the view that even the sale proceeds that were received in respect of sales that were effected in the State of Bikaner by the Cement Marketing Co. of India Ltd. through its sub -agents had been received by the Cement Marketing Co. of India in Bombay, that is, in the taxable territories and that the profit in respect of these sales also was liable to tax under section 4(1)(a) of the Act. The contention of the assessee was disposed of by the Appellate Assistant Commissioner in paragraph 82 of his order in the following terms : 'The representative, however, points out that the agents at Bikaner also sold some cement and, therefore, it cannot be assessed at least on this portion. It has to be pointed out that the sale agreement was with C. M. I. (Cement Marketing Co. of India) who in turn got the orders executed through the sub -agent at Bikaner. The agent at Bikaner was only a sub -agent of C. M. I. and the sale proceeds were received by C. M. I. In any case it is C. M. I. who was responsible and it is they who received the sale proceeds. Therefore, the receipt is in India even in respect of those transaction.';