Chhangani, J - (1.) THIS is a consolidated reference by the Income-tax Appellate Tribunal (Delhi Bench) under sec. 66 (1) of the Income-Tax Act and has arisen out of eight applications, five by the assessee the Mewar Textile Mills Ltd. , Bhilwara, relating to the assessment year 1943-44, 1944-45, 1945-46, 1946-47 and 1947-48 and three by the Commissioner of Income-tax, Delhi, for the assessment year 1943-44 to 1946-47. The three questions referred for our answer are as follows - (1) Whether on the facts and in the circumstances of this case 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 drawn in the name of 'self' was received by the assessee in British India and liable to tax under the Indian Income-Tax Act ? (2) Whether the profit on the amounts received by the assessee's banker in British India as price of goods sold by the assessee on railway receipts in the name of the consignees or as price of goods delivered ex-godown Bhilwara was liable to tax under the Indian Income-tax Act ? (3) Whether the profit on the sales of standard cloth sold by the assessee to Government or its nominees was receipt of income in British India liable to tax under the Indian Income-tax Act ?
(2.) THE relevant facts have been set forth in the statement of case and briefly stated are as follows. THE assessee is a company situated in Bhilwara in the erstwhile Udaipur State which now forms part of Rajasthan. During the relevant years it did not form part of British India or the taxable territories. THE business of the assessee company is to manufacture cloth and to sell. THE sales were partly in British India and partly in Indian States. During the years under consideration large quantities of cloth, both standard and dosuti, were sold by the assessee to the Government. Part of the sales was also to private parties. Some cloth was also sold to Government nominees who had been appointed contractors for the purpose of manufacture of tents. THE sales effected by the assessee were of three categories - (1) Supply of standard cloth to Government for use in its offices and establishments. (2) Supply of dosuti (double yarn) cloth to Government for manufacture of army tents. (3) Sales to private parties who took delivery ex-godown and deposited part of the purchase price with the Mill's bankers in British India. In connection with sales to private parties in the assessment years 1943-44, 1944-45 and 1945-46, the amounts deposited by the purchasers through the Mills' banks in British India were as under - 1943-44 . . . . . . . . . . . . 12,62,911/- 1944-45 . . . . . . . . . . . . 7,17,022/- 1945-46 . . . . . . . . . . . . 34,389/- THE receipts of these amounts were treated by the Tribunal as falling under three categories - (1) On railway receipt in the name of self (explaining this it may be observed that the assessee company delivered the goods to the railway, obtained railway receipts in its own name and handed over the railway receipts with demand drafts for the price of goods to Banks with instructions to deliver the railway-receipts to the purchasers against payment of the price of goods ). THE Banks delivered the railway receipts to the purchasers and received the payments which were credited to the assessee's account. (2) On railway receipts in the names of the consignees. THE procedure was the same as in category No. 1 except that the railway receipts were not addressed to self but were addressed to the consignees. (3) In Cash. The assessee's case before the Income-tax Officer was that the contracts were executed and accepted at Bhilwara and, therefore, the properly in the goods had passed at Bhilwara and profits on the sale of the property were not liable to tax in the hands of the assessee as the same were not received in British India or had not accrued to the assessee in British India. The Income-Tax Officer held that although the goods had been despatched from Bhilwara godown the delivery was not given to the purchasers ex-godown at Bhilwara but the delivery was given in British India through the Banks and the moneys were received by the assessee through Banks. The Income-Tax Officer also held that these Banks operated as agents of the assessee for the purpose of receiving moneys and, therefore, the receipts of the profits was at places where the banks were situated, that is, at Ajmer and Bombay. The finding of the Income-tax Officer was confirmed on appeal by the Appellate Assistant Commissioner. On second appeals by the assessee, the Tribunal by its order dated 1. 9. 1958 held that, in respect of the amounts received by the assessee's bankers on railway receipts in the name of "self" and in cash, the assessee was liable to tax on receipt basis. The Tribunal further held that 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 the consignees inasmuch as in respect of these goods the delivery of the goods was in Bhilwara and the goods were appropriated there and not in British India. The tribunal held that although the consignees had paid the price of the goods to the assessee's bankers in British India,the bankers in British India had become the agents of the consignees and not the agents of the assessee. 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. As regards sales of Dosuti cloth, the Tribunal incorporated in the statement of the case a table showing the sale-proceeds realised by the assessee-company as also the particulars of the amount received by the assessee on railway receipts sent through bankers as in British India and or railway receipts sent through banks. Assessment years Amount received on railway receipts sent through bankers in British India Amounts received on railway receipts sent through bankers in Indian States 1943-44 . . . . . . . . . . . . . . . . . . . . . . . . . . 1944-45 Rs. 1,09,535/- . . . . . . . . . . . . . . . 1945-46 Rs. 48,607/- Rs. 2,60,065/- 1946-47 . . . . . . . . . . . Rs. 3,55,28 /9- The Income Tax Officer and the Appellate Assistant Commissioner held the entire sale proceeds as liable to tax. The Tribunal, however, found that the entire amount received through bankers in British India or on railway receipts addressed to 'self' was liable to tax on receipts of Rs. 2,60,065/-in the assessment year 1945-46, receipts to the tune of Rs. 1,65,877/- were on account of railway receipts in the name of the consignees, while all the receipts of the assessee in the subsequent years 1946-47 were on account of railway receipts in the names of the consignees. The Tribunal held that the property in the goods sold on railway receipts in the names of the consignees had passed to the purchasers at Bhilwara and the assessee was not, therefore, liable to tax on the profits on such sales. Thus, an amount of Rs. 1,65,877/-for the assessment year 1945-46 and an amount of Rs. 3,55,289/- for the assessment year 1946-47 were held not liable to tax. With regard to the third category, the following table from the statement of the case shows the sales effected by the assessee - Assessment years Imperial Bank, Ajmer where purchasers were in British India Imperial Bank, Ajmer where purchasers were in Indian state Bank in Indian state where purchasers were in British India Banks in Indian States where purchase where in Indian States 1943-44 - - - - 1944-45 - - - - 1945-46 3,161,205/- 2,35,283/- 92,119/- - 1946-47 - - 91,056/- 1,20,138/- 1947-48 - - 50,676/- 43,938/- The Income-tax authorities held that the profits realised by the assessee on sales of standard cloth was liable to tax. The Tribunal took into consideration the provisions of paragraph 15 (1) of the General Conditions of Contract applicable to Department of Supply (Purchase Branch) Contracts as amended by correction slip No. 11, D/- 1. 9. 1943, and also the letter of the assessee dated 5. 3. 1944 and held the assessee had chosen the Ajmer Branch of the Imperial Bank of India and there was a clear agreement between the assessee and the Government according to which the assessee had categorically stipulated that the payments were to be by cheques on the Imperial Bank of India. The Tribunal accordingly held that the post-office through which cheques were sent became the agent of the assessee and the receipts were, therefore, in British India. The Tribunal repelled the assessee's contention and confirmed the inclusion of the profits of the assessee by the sale of standard cloth in the total income. Both the assessee and the revenue authority felt aggrieved by the finding of the appellate Tribunal and (hey submitted applications under sec. 66 (1) of the Income Tax Act to the Tribunal and have got the above questions referred to us. The question Nos. 1 and 3 are at the instance of the assessee, while question No 2 is at the instance of the Department. No serious controversy was raised over question No. 1. It will be sufficient in this connection to refer to commissioner 6f Income-Tax, Delhi Vs. P. M. Rathod & Co. (l) which provides a complete answer to the question before us. The assessee in that case had sent some goods by rail. The assessee obtained the railway receipts in favour of self and sent them to a Bank to be delivered to the customers against payment of the demand-drafts drawn on the buyers. The Banks after receiving the price sent the same to the assessee by means of bank-draft at Ratla|m. On these facts, the Supreme Court laid down the law in the following terms - "the principle then is this that if the seller when sending the articles which he intends to deliver under the contract does so, with the direction that the articles are not to be delivered to the purchaser till the payment of price, the appropriation is not absolute but conditional and until the price is paid the property in the goods does not pass to the purchaser. " In view of the above principle and the absence of any serious controversy, the question No. 1 is answered in the affirmative. Similarly. , question No. 3 also does not raise any serious controversy. The Tribunal's finding is that the assessee had categorically stipulated that the payments of their bills should be made at the Ajmer Branch of the Imperial Bank of India and the cheques having been sent from post office within British India, the assessee is liable to income-tax on the principle laid down by the Supreme Court in Commissioner of Income-tax, Bombay South, Bombay vs. Ogale Works Ltd. (2) and Commissioner of Income-tax, Bombay South, Bombay vs. Kirloskar Bros. Ltd. (3 ). The question No. 3 is also accordingly answered in the affirmative. As regards question No. 2, relying upon Commissioner of Income-tax, Madhya Pradesh and Bhopal vs. Bhopal Textiles Ltd. (4), Mr. Chandmal contended that even though the railway receipts were addressed not to self but to the consignees, yet the assessee was liable to income-tax in the facts and circumstances of this case. He relied upon the following principles enunciated in this case - (1) A railway-receipt is a document of title to goods, and, for all purposes, represents the goods. When railway-receipt is handed over to the consignee on payment, the property in the goods is transferred. (2) The company had handed over the railway receipts to the bank, and asked the bank not to hand over the railway receipts to the buyers, unless payment was received. This was sufficient to make the bank an agent of the company. The buyers could not have countermanded the instructions given by the company to the bank, which they would, undoubtably, have been able to do, if the bank was their agent. This was laid down in Commissioner of Income-tax vs. P. M. Rathod & Co. (l ). Referring to the contention on behalf of the assessee that Commissioner of Income-tax vs. P. M. Rathod & Co. (l)'s case was distinguishable on the ground that in that case the railway receipts were to sell, the Supreme Court observed, "the document of title to goods was still the property of the cornpany till payment for it was received and it was handed over. In this view of the matter, we are of opinion that the ruling in question applies. " At this stage, we think it proper to refer to some facts relied upon by Mr. Agarwal, which according to him, take out the present case from the principle of the above case. In the year 1945-46 the amount of sale-proceeds received through bankers in Indian States has been shown at Rs. 2,60,065/-; out of which, Rs. 1,65,877/- were on account of railway receipts in the name of the consignees. The assessee had drawn hundis upon buyers in respect of the price of goods despatched. The assessee, however, got hundis worth Rs. 1,14,687/- discounted by the Bharat Bank Limited Bhilwara at the time of handing over the railway-receipts to them. Similarly, for the assessment year 1946-47 hundis for the entire amount of Rs. 3,55,289/- were got discounted by the assessee at the time of handing our the railway receipts to the bank. The Bharat Bank discounted, that is, purchased the hundis, credited the amounts of the hundis to the account of the assessee and became the holder in due course of the hundis. The assessee got the actual payment at Bhilwara and it was the bank which subsequently received the payment of the hundis on it's own behalf. There was thus no actual receipt of the payment by the assessee in British India. Reliance was placed in this connection upon Keshav Mills Company Ltd. vs. Commissioner of Income Tax Delhi Punjab and Ajmer-Merwara (6) and Chiranjilal Multanmal vs. Commissioner of Income Tax (7 ). Mr. Chand Mal raised an objection to the entertainment of the above argument on the ground that it was a new question which was not argued before the Tribunal and was not dealt with by it and has also not been raised before the Tribunal and/or dealt with by it in its order. There has been a difference of opinion amongst the High Courts and that turned out on the meaning to be given to the words "any question of law arising out of " the order of the Tribunal. The various decisions were reviewed by the Supreme Court in Commissioner of Income Tax, Bombay vs. Scindia Steam Navigation Co. Ltd. (8) and the entire position was summed up as follows : - "it will be seen from the foregoing review of the decisions that all the High Courts are agreed that sec. 66 creates a special jurisdiction, that the power of the Tribunal to make a reference and the right of the litigant to require it, must be sought within the four corners of sec. 66 (1), that the jurisdiction of the High Court to hear references is limited to questions which are properly referred to it under sec. 66 (1), and that such jurisdiction is purely advisory and extends only to deciding questions referred to it. The narrow ground over which the High Courts differ is as regards the question whether it is competent to the Tribunal to refer, or the High Court to decide, a question of law which was not either raised before the Tribunal or decided by it, whether it arises on the facts found by it. On this question, two divergent views have been expressed. One is that the words, "any question of law arising out of" the order of the Tribunal signify that the question must have been raised before the Tribunal and considered by it, and the other is that all questions of law arising out of the facts found would be questions of law arising out of the order of the Tribunal. The latter is the view taken by the Bombay High Court in Madanlal Dharnidharka Vs. Commissioner of Income Tax (1948) 16 ITR 227) and approved by the Nagpur High Court in Mohanlal Hiralal Vs. Commissioner of Income Tax (1952) 22 ITR 448 ). The former is the view held by all the other High Courts. Now the argument in support of the latter view is that on the plain grammatical construction of sec. 66 (1) any question of law that could be raised on the findings of fact given by the Tribunal, would be a question that arises out of the order, and that to hold that they meant that the question must have been raised before Tribunal and decided by it," would be to read into the section words which are not there. " Their Lordships thereafter examined the arguments based on English cases in support of the view taken by the Bombay High Court and recorded a conclusion "that in view of the difference between sec. 66 (1) and the corresponding provisions in the British statute, we consider that no useful purpose will be served by referring to the English decisions for interpreting sec. 66. " Their Lordships further held that the jurisdiction of a court in a reference under sec. 66 is a special one, different from its ordinary jurisdiction as a civil court. The High Court hearing a reference under that section, does not exercise any appellate or revisional or supervisory jurisdiction over the Tribunal. It acts purely in an advisory capacity, on a reference which properly comes before it under sec. 66 (1) and (2 ). It gives the Tribunal advice, but ultimately it is for them to give effect to that advice. It is of the essence of such a jurisdiction that the Court can decide only question. . . . . . . . . If the true scope of the jurisdiction of the High Court is to give advice when it is sought by the Tribunal, it stands to reason that the Tribunal should have had an occasion to consider the question so that it may decide whether it should refer it for the decision of the court. How can it be said that the Tribunal should seek for advice on a question which it was not called upon to consider and in respect of which it had no opportunity of deciding whether the decision of the Court should be sought. Examining one of the reasons given in the Bombay case that the contrary view must result in great injustice in a case in which the applicant had raised question before the Tribunal but it had failed to deal with it owing to mistake or inadvertence, and that in such a case, the applicant would be deprived, for no fault of his, of a valuable right which the Legislature had intended to give him, their Lordships observed - "but we see no difficulty in holding that in those cases the Tribunal must be deemed to have decided the question against the appellant, as Falshaw, J. was disposed to do in Mash Trading Co. Vs. Commissioner of Income Tax (1956) 30 I. T. R. 388". Their Lordships in the end, summed up the result as follows - 1. When a question is raised before the Tribunal and is dealt with by it, it is clearly one arising out of its order. 2. When a question of law is raised before the Tribunal but the Tribunal fails to deal with it, it must be deemed to have been dealt with by it, and is, therefore, one arising out of its order. 3. When a question is not raised before the Tribunal but the Tribunal deals with it, that will also be a question arising out of its order, 4. When a question of law is neither raised before the Tribunal nor considered by it, it will not be a question arising out of its order notwithstanding that it may arise on the findings given by it". Clarifying the position further, it was observed - "sec. 66 (1) speaks of a question of law that arises out of the order of the Tribunal. Now a question of law might be a simple one having its impact at one point, or it may be a complex one, trenching over an area with approaches leading to different points therein. Such question might involve more than one aspect, requiring to be tackled from different standpoints. All that sec. 66 (1) requires is that the question of law which is referred to the court for decision and which the court is to decide must be the question which was in issue before the Tribunal. Where the question itself was under issue, there was no further limitation imposed by section that the reference should be limited to those aspects of the question which had been argued before the Tribunal. It will be an over-refinement of the position to hold that each aspect of a question is itself a distinct question for the purpose of sec. 66 (1) of the Act. " Now, the controversy between the parties is whether the amounts of Rs, 1,65,887/- and Rs. 3,55,289/- are liable to tax. The assessee relied upon twofold grounds - 1. That the railway-receipts in respect of sale proceeds to the extent of Rs. 1,65,877/- and Rs. 3,55,289/- were addressed to the consignees and, therefore, the sale proceeds to that extent are not liable to tax on that ground. 2. That in respect of Rs. 1,14,687/- and Rs. 3,65,289/- the assessee had got the hundis discounted at Bhilwara and, therefore, to that extent the sale-proceeds are not liable to tax. These two grounds are only different aspects of the same question and on the last principle quoted from the Supreme Court judgment, we consider it proper and necessary to examine this aspect of the case. Alternatively, if the controversy now joined be treated to raise a new and independent question and not merely subsidiary or allied question, the principle laid down in the Supreme Court case that if a question was raised and was decided, it shall be deemed to be decided against the assessee, shall come into operation and, on that ground also, the assessee is entitled to raise this question. Reference may also be usefully made to Commr. of Income-tax, Bombay South, Bombay Vs. Messrs Ogale Glass Works Ltd. , Ogale Wadi (9 ). In that case, the Solicitor General on behalf of the Department, contended that the cheques were delivered to the assessee as soon as they were posted. On behalf of the assessee it was said that this was an entirely new question of law which was never raised or argued or dealt with before the Tribunal and, therefore, could not be said to arise out of the Tribunal's order. It was suggested that the question must be read as limited one to those facts on which alone reliance was placed in support of the arguments actually advanced before the Tribunal and on which Tribunal's decision was founded leaving out all other facts appearing on the record and even referred to in the Tribunal's order and the statement of the case. Their Lordships saw no warrant, for accepting such a suggestion. In the present case this aspect of the case was raised before the Tribunal when it initially heard the appeals; the Tribunal then remanded the case to get further information on this aspect of the case but after hearing the appeal second time this aspect was not expressly adjudicated. This was because the assessee could get the relief on a decision on the first ground in its favour. The principle of this case (Ogale's case-9) also justified the examination of the arguments advanced on behalf of the assessee. The crucial question which then emerges for consideration is whether the fact that the assessee got the hundis discounted by Bharat Bank Ltd. at Bhilwara, which became the holder in due course of the hundis, received the sale-proceeds at Bhilwara or in British India where the Bank realised the amounts of the hundis and delivered the railway-receipts to the consignees. Referring to Mysore Glass and Enamel Works Ltd. Vs. Commissioner of Income-tax, Madras (10), Mr. Chandmal for the Department contended that the mere fact that the hundis drawn by the assessee were discounted at Bhilwara would not take out the case from the preview of sections 4 (1) (a) and 4 (1) (c) of the Income-tax Act. The assessee in that case was a company incorporated in Mysore State which was at the relevant time outside the taxable territories. Sales outside that State of the glass and enamel articles which it manufactured within that State were effected exclusively through distributors. Upon receipt of an order booked by the distributors, the assessee despatched the goods by rail addressed to self, drew a hundi on the buyer for the price of the goods and sold the hundi with the relevant railway receipt to its banker within the Mysore State. The banker forthwith credited the discounted price of the hundi to the assessee's account and transmitted the hundi and the relevant receipt to the buyer in the taxable territories and collected the amounts due thereon. On these facts, the High Court held - (1) That the seller had reserved a right of disposal over the goods at the time of their despatch inasmuch as it consigned the goods to self and took the railway-receipts in its own name and further created a security or lien in favour of the banker as security for the amount paid for the hundis or bills. (2) That when the assessee negotiates the hundi with the banker, the latter does so only as a part of its banking business. The purchase by the banker of the Hundi cannot mean that there is a sale of the goods to him. . . . . . . . . The money paid by the banker to the seller as price for the hundi is not the sale price of the goods in any sense. . . . . . . . . The purchase of the hundi by the banker is only a convenient arragement between the banker and his own customer, the seller, to avoid freezing of credit of the latter and one done in the course of his banking transactions. Price of goods sold can, there fore, be held to be earned only when the buyer pays the price or enters into an arrangement with the banker, the indorsee of the hundi; for, till then, the latter will have a right of recourse against the seller in case the hundi is dishonoured. The discounting of the hundis was an independent transaction between the bank and the assessee though it was done in connection with the sale of goods.
(3.) NOW, so far as the taxability of the income on the accrual basis is concerned, we entirely agree that the fact that the vendor got hundis discounted outside the taxable territories will make no difference in determining the taxability of the sale price on accrual basis Can the principle be extended to a case of taxability on receipt basis ? The decision relied upon, namely, Mysore Glass & Enamel Works Ltd Vs. Commissioner of Income-tax, Madras (lo), itself does not necessarily contemplate such an extension. In that case the counsel for the assessee relied upon Sir Sobha Singh Vs. Commissioner of Income-tax (6) for the proposition that where a creditor who had accepted a cheque as a negotiable instrument, cashed it as such with his banker, the payment should be deemed to have been received by the assessee at the bank where he had negotiated the cheque. The learned Judges of the Madras High Court distinguished that case by observing that the assessee in the case before them were charged to income-tax not on receipt of monies sent by cheques, but on the sales effected by it i. e. on the price paid by the buyer. It is also note-worthy that there is some difference in the principle governing taxation on accrual basis and on mere receipt basis. In the former case where the assessee is both a manufacturer and a seller and the manufacture takes place outside the taxable territories and the sale takes place within the taxable territories the assessee can claim apportionment of profits on the principle enunciated in sec. 42 of the Income-tax Act, vide The Anglo French Textile Company Ltd. Vs. Commissioner of Income-tax, Madras (i 1) even though sec. 42 does not in terms apply as the accrual is actual and not a deemed or fictitious one. In view of the difference pointed above we are of the opinion that in determining liability on the receipt basis considerable emphasis must be laid upon the place where the assessee receives the money and that it will not be proper to take into account considerations as to the passing of the property in the goods sold and the accrual of profits and to arrive at a conclusion of constructive receipts with reference to these considerations. The result of adopting such a course will be that the assessee will be indirectly held responsible on accrual basis without claiming the benefits of apportionment of profits available on the accrual basis. The facts of the present case are that the assessee delivered the goods to the Railway, obtained railway receipts in the names of the consignees and drew hundis upon the consignees and discounted hundis to the extent of Rs. 1,14,687/- and Rs. 3,55,289/ -. These hundis were drawn to recover the price from the consignees and they were discounted at the Bharat Bank Ltd. Bhilwara. The hundis were negotiable and the Bharat Bank Ltd. , Bhilwara having discounted the hundis, became the holder in due course of hundis. The assessee got unconditioned payment under the hundis at Bhilwara and thereafter the amounts of the hundis were realised by the Bharat Bank Ltd. , in the taxable territories as holders in due course of the hundis and not as agents of the assessee. Ofcourse, in case the Hundis were not honoured the Bank had its remedies against the drawer under the negotiable Instrument Act, but that does not affect the conclusion that in case it received the payments in the taxable territories it did on its own behalf. The assessee having received the sale price of the goods by discounting hundies, cannot be said to have again received the sale price when the Bharat Bank got the payments of the hundis in the taxable territories. The assessee could not receive the sale price over again. The facts that the Bank was holding railway receipt as agent of assessee and that the property in the goods passed only when railway receipt were delivered to the consignees, cannot have any relevance in determining the receipt of income although they may have bearing upon the question of the accrual of income. We, therefore, find it little difficult to accept that the assessee can be held to have received payment in taxable territories in those cases where the assessee got the hundis discounted at the Bharat Bank, Bhilwara Branch. This brings us to the question whether the liability of the assessee to tax can be upheld on accrual basis. Two questions arise in this connection - (1) Whether it is open to the Department in the present reference to rely upon accrual basis ? (2) Whether the facts and the circumstances of the case justify a conclusion that the above sales took place in the taxable territories and the assessee is liable on accrual basis ? In dealing with the first question, we may atonce observe that there is no controversy over the facts relating to the terms of the contract for the supply of dosuti cloth, the mode of transfer and the manner of payment of the goods sold. The Department contends that on the basis of the undisputed facts the sales were complete in British India or the taxable territories and the assessee is liable to tax on the accrual basis. The point raised on behalf of the Department is merely one of an appropriate inference to be drawn from the facts and does not contemplate an investigation of facts. The Department wants the determination of the question of the liability of the assessee from a different aspect. In our opinion, on the principle laid down in Commissioner of Income-tax, Bombay v. Scindia Steam Navigation Co. Ltd. (8) and Commissioner of Income Tax, Bombay South, Bombay V. Messrs Ogale Glass Works Ltd. Ogale Waddi (9) the contention raised on behalf of the Department can be appropriately considered in answering question No 2. It may be also significantly pointed out that the Income Tax Officer actually held that the sales in question took place not at Bhilwara but at different places in British India. On appeal, the Appellate Assistant Commissioner relying upon a decision of the Madhya Pradesh High Court reported in Bhopal Textiles Ltd. Vs. Commissioner of Income Tax, Madhya Pradesh and Bhopal (l2) held that the transactions in which the railway receipts were prepared in the names of the consignees would not constitute sales in the taxable territories, though the Appellate Assistant Commissioner, held the assessee liable even in respect of these transactions on receipt basis. The Appellate Tribunal in second appeal treated such sales as not liable to tax. The decision in Bhopal Textiles Ltd. vs. Commissioner of Income Tax, Madhya Pradesh and Bhopal (12) was reversed by Supreme Court in Commissioner of Income Tax, Madhya Pradesh and Bhopal vs. Bhopal Textiles Ltd. (4 ). Thus the question of the assessee's taxability on accrual basis was at issue before the departmental authorities and is not sought to be raised for the first time and there is no justification for excluding the consideration of the point raised on behalf of the department. Coming to the second point, we may refer to the special conditions of the dosuti contract vide Ex. O. The condition No. 3 relates to payment and reads as follows - "the supplying mills shall deliver or despatch Dosuti to the specified tentage contractor and shall submit on their own forms bills for full payment against railway receipts or local deliveries at the agreed price to the tentage contractors. If a tentage contractor fails to make payment or refuses to take delivery of the goods the Dosuti shall then be taken over from the supplying mills and paid by the purchaser (Government) at the agreed price. Failure to take delivery of the goods and or to meet payment shall be reported 10 the purchaser forthwith by the supplying Mills. . " It is clear from the above condition that the tentage contractor could obtain the railway receipts only against payment of price and in case of refusal to pay the price the assessee could withhold the delivery of railway receipts and consequently the delivery of the goods also. This clearly implies that the seller reserved right of disposal over the goods and there could be no absolute appropriation of the goods by the fact of the assessee having delivered the goods to the railway. In Commr. of Income-tax, Madras Vs. Mysore Chromite Ltd. (12) the Supreme Court had an occasion to consider the question when the property in the goods should be deemed to pass to the buyers. After examining the various sections of the Indian Sale of Goods Act, the rule was laid down thus - "the requirement of the section is not only that there shall be appropriation of the goods to the contract but that such appropriation roust be made unconditionally. This is further elaborated by section 25 which provides that where there is a contract for the sale of specific goods or where goods are (subsequently appropriated to the contract, the Seller may, by the terms of the contract or appropriation, reserve the right of disposal of the goods until certain conditions are fulfilled. In such a case, notwithstanding the delivery of goods to the buyer, or to a carrier or other bailee for the purpose of transmission to the buyer, the property in the goods does not pass to the buyer until the conditions imposed by the seller are fulfilled " In Commissioner of Income-Tax, Madhya Pradesh and Bhopal Vs. Bhopal Textiles Ltd. (4) the observations of the Supreme Court also lend support to the above view. Their Lordships expressed serious doubt whether the property in the goods can be said to have passed to the buyers by the mere fact of the railway receipts being in the name of the consignees, as has been held by the High Court. Ofcourse, the Supreme Court did not express a final opinion in this case. The same view has been taken in Mysore Glass and Enamel Works Ltd. Vs. Commissioner of Income-tax, Madras (lo ). ;