SHINGHAL, J. - (1.) THIS is a consolidated reference under sub -s. (1) of S. 66 of the Indian IT Act, 1922 (Act 11 of 1922), hereinafter called the "Act", at the instance of the assessee, Seth Pushalal Mansinghka Private Limited, Bhilwara. The question which has been referred for our consideration on the reference is as follows : "Whether, on the facts and in the circumstances of the case, the assessee was entitled to any rebate under the Part B States (Taxation Concessions) Order in respect of its income from the mining business for the asst. yrs. 1950 -51 and 1951 - 52 -
(2.) THE assessee is a private limited company with its mines, factory and head office at Bhilwara in Rajasthan, and was incorporated as a company in the former State of Udaipur on 12th Nov., 1946. The assessee carried on mining business at Bhilwara and was engaged in the cutting, processing, sorting and packing of mica which was sent almost entirely by railway to Kodarma and Girdih villages in Part A and Part C States, as they then were. The assessee followed the mercantile method of accounting and the assessment years in question are 1950 -51 and 1951 -52, the corresponding previous years being the years from 2nd Nov., 1948, to 21st Oct., 1949, and 22nd Oct., 1949, to 9th Nov., 1950, respectively. The total sale proceeds of the assessee during the two assessment years amounted to Rs. 19,77,544 and the assessee tendered bills to the local branch of the Bank of Rajasthan to the extent of Rs. 15,64,475 and received that much of the payment at Bhilwara. As Rajasthan was then a Part B State, the assessee claimed that it was entitled to the benefit of rebate under the Part B States (Taxation Concessions) Order, 1950, and that S. 4(1)(a) of the Act was not applicable to its transactions. By his order dt. 31st May, 1954, for the asst. yr. 1951 -52, the ITO held that since the railway receipts were obtained by the assessee for "self" and were sent by the assessee through its banker to the buyers, the ownership in the goods continued to vest in the assessee until their actual delivery to the buyers, so that the title in the goods passed only at Kodarma when the delivery of the railway receipts was made by the bank on behalf of the assessee. The ITO rejected the assessee's contention that as bills to the extent of Rs. 15,64,475 had been discounted by the bank at Bhilwara, the payment to that extent should be deemed to have been received at Bhilwara. He reached that conclusion on the ground that the assessee's letter dt. 8th July, 1948, for the discounting of the bills was not genuine, and also because he arrived at the conclusion that, at any rate, the profits were earned by the assessee at Kodarma on the passing of the title to the buyers in respect of the consignments in question. The ITO refused to place reliance on the statement of the bank's manager, Raghuwardayal, that if the bills of exchange presented by the assessee along with the railway receipts had been dishonoured, the bank could not have debited the amount to the assessee. In reaching his conclusion, the ITO went on to hold that the assessee must have filed the necessary discount form and that the contents of that form were sufficient to negative the manager's statement to the contrary. In the alternative he also held that the mere giving of credit by way of overdraft against railway receipts was a matter of no consequence as such a facility might have been provided to the assessee because the bank in question was controlled by some of the directors of the assessee -company. A similar order was passed by the ITO for the asst. year 1950 -51. Appeals were preferred against both the orders, but were rejected by the AAC on 20th Sept., 1957, after he had made certain further inquiries from the ITO, so that no rebate was allowed to the assessee under the Part B States (Taxation Concessions) Order. The assessee once again filed an appeal before the Tribunal, Bombay Bench "C",but the Tribunal also reached the conclusion that as the goods were consigned to "self" and not to the buyers, the property in the goods did not pass to them until they took possession of the documents from the bank. The appeal was accordingly dismissed on the 18th Aug., 1958, and this is how the present reference has been made at the assessee's request. In order to appreciate the controversy, it is necessary to refer to some other facts which are not in dispute, so that the nature of the transactions which gave rise to the profits in respect of the two assessment years may be properly appreciated. The representatives of the buyers from Kodarma and Girdih used to visit Bhilwara, inspect the various qualities of mica which the assessee had for sale and entered into written contracts for their purchase. Four of such contracts have been placed on the record and marked as annexure "A",for it is admitted that they fairly represent all the contracts with which we are concerned. These contracts clearly show that the buyers purchased specified qualities of mica, "Bhilwara godown delivery",on the condition that the consignments would be sent to Kodarma or Girdih, as the case may be, and that the railway receipts would be sent "through bank". Then there is the further stipulation that 25 per cent of the price would be sent by way of an advance within a week's time, that the packing expenses would be payable by the buyers and that after the consignments left the godown, they would be entirely at the buyers' risk. Apart from these written terms and conditions of the contracts, the Department, as well as the Tribunal, have recorded their further finding of fact that the assessee consigned the goods to "self" and that the railway receipts along with the bills of exchange were presented by the assessee to the Rajasthan Bank, Bhilwara, for collection, after endorsing the railway receipts in favour of the bank. It has also been found that the bank, in its turn, endorsed the railway receipts in favour of its branches in Part A or Part C States and that the goods were delivered to the buyers only when they paid the price to the bank and obtained the railway receipts.
(3.) THE question is whether, on these facts and circumstances, the property in the goods could be said to have passed to the buyers at Bhilwara, as has been claimed by the assessee, or whether it passed at Kodarma or Girdih as has been held by the Department and the Tribunal.;