BANERJEE, J. - (1.) THIS reference, under s. 661(1) of the Indian IT Act, has been made in circumstances hereinafter related.
(2.) THE year of assessment is 1952-53 and the period of accounting is the calendar year ending on December 31, 1951. The assessee-company is a dealer in jute in East Pakistan as well as in India. The head office of the assessee is in Calcutta but there are branch offices at Ashugunj, Serajgunj and Gaibandha, all in East Pakistan. During the period of account, relevant for the asst. yr. 1952-53, the assessee sold jute of the value of Rs. 23,93,767, out of which sales worth Rs. 13,06,772, were made in foreign countries and sales worth Rs. 2,44,015 in India. The balance of sales, worth Rs. 11,42,979, according to the assessee, was made in Pakistan. The ITO overruled the contention of the assessee that jute worth Rs. 11,42,979 was sold in Pakistan. He found that the quantum of sale in India amounted to Rs. 13,86,995 and assessed accordingly.
(3.) THE appeal by the assessee to the AAC was dismissed with the following observation : "It is contended that the ITO of Pakistan held that the sum of Rs. 18,06,772 represented the sales effected in Pakistan because of the fact that the delivery of the goods had been made on the common carrier and the consideration money was also paid in Pakistan through the State Bank of Pakistan. THE ITO of Pakistan held that the purchaser took constructive delivery in Pakistan and as such sales were legally made in Pakistan. THE appellant's representative contends that the finding of the Pakistan ITO was correct and when the sales were effected in Pakistan the ITO was not justified in including this sum of Rs. 18,06,772 as the sale proceeds of goods in India. I find from the contract papers that, apart from the fact that all the contracts for sale were made in India, the procedure adopted was that the Indian mills opened letter of credit in Hind Bank Ltd., and the bill of lading in respect of jute was made over by the assessee to the bank's branch at Narayangunj, who sent the same to its office in Calcutta where the bill of lading was made over to the buyer. THE contract memos, I find also clearly stated that the buyers should open irrevocable confirmed letter of credit for payment against goods in India and the buyer would hand over to the seller the import licence for goods in India. THE bills also showed that the goods were not directly despatched to the Indian Mills but the bills were made out in the name of the assessee's agents, M/s Mahabir Trading Co. Ltd. and they were despatched c. i. f. to Calcutta. In the circumstances I do not think that there is any reason to hold that the sale was effected in Pakistan because the goods were placed on a common carrier and the consideration money was received there." The assessee appealed before the Tribunal and, by an affidavit, disputed the findings of fact by the ITO and AAC. The Tribunal, thereupon, remanded the case before the ITO, with direction to him to enquire and send a report on facts disputed by assessee. The ITO did so. On receipt of the report, the Tribunal arrived at the following finding of fact : "The sales were made under contract executed in Calcutta. The terms of the contract included the delivery free to buyers' mill siding or at the ghat in India. Provision was also made for weighment and assay of goods for shortweight and quality claimed at the destination in Calcutta. According to the terms of the contract, before the goods were actually shipped the buyers were required to open an irrevocable letter of credit with a bank in Calcutta. In the present case, the buyers opened letters of credit with the Imperial Bank of India, the Chartered Bank of India, Australia and China and the Hind Bank Ltd., Calcutta. All these banks had their branches in Pakistan at Chittagang 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 that they were prepared to negotiate the draft drawn as per terms of the contract. On receiving this information, the assessee placed the contracted goods on board the steamer at Ashuganj in Pakistan and obtained the bill of lading in the name of the buyers in five cases whereas in two cases, in the name of Mahabir Trading Co. Ltd., an agent of the assessee-company. The assessee then made invoices or bills on the basis of bill of lading and contract price and drew bill of exchange on the buyers' bank where the letter of credit had been opened. The bill of exchange together with the bill of lading and the invoices were then negotiated with the bank and the bank forwarded the documents to their offices in Calcutta which in their turn sent the documents to the purchasers. There were certain amendments to the contract form and the relevant amendments were as follows : (1) Transit insurance was to be cared for by the buyers at contract value plus 10per cent under their open cover and premium to be paid for by sellers in India. The sellers had to advise the buyers the quantity and assortment in maunds to be shipped immediately loading was commenced. (2) Buyers were to open letter of credit with the Pakistan bank in favour of the sellers' nominee. A complete set of shipping documents were to be presented to the bank and payments of the invoices value, in terms of the contract, to be made to the shippers, in the equivalent Pakistan currency at the exchange rate ruling on the date of presentation of documents at the bank, less freight if payable in India." ;