il Appeals Nos 2178 to 2182 of 1966
Appeals by special leave from the judgment and order dated August 28 1961 of the Bombay
High Court in Income tax Reference No 5 of 1961
section T Desai R Ganapathy Iyer R N Sachthey and section P Nayar for the appellant in all the appeals
T V Viswanatha Iyer O C Mathur and B Parthasarathy for the respondent in all the appeals
The Judgment of the Court was delivered by Sikri J
These appeals by special leave are directed against the judgment of the High Court of Judicature at Bombay answering the following question Question No 3 against the Commissioner of Income tax Bombay City and Suburban District appellant before us 3
Whether on the facts and in the circumstances of the applicant s case the Tribunal was right in holding that a proportionate part of the profits determined on sales grouped under Items 3 4 5 and 9 in the assessment order by the application of Rule 33 was assessable to Income tax The High Court in view of its answer to this question did not answer the following question Question No 2 Whether on the facts and in the circumstances of the applicant s case the Tribunal was right in holding that in respect of sales of Rs 1480059 the profit was correctly determined by the application of Rule 53 and one third of the profits so determined could be said to accrue or arise in British India We are not concerned with the remaining question Question No 1 which related to sales to the Government of India as that question was answered in favour of the appellant
Relevant facts are as follows The respondent Hukamchand Mills Ltd Indore hereinafter referred to as the assessee is a limited company incorporated in the State of Indore and had a textile mill at Tadore
It carried on the business of manufacture and sale of textiles in the calendar years 1941 1942 1944 1945 and 1946
For the relevant assessment years namely 1942 43 1943 44 1945 46 1946 47 and 1947 48 the Income tax Officer found that the assessee effected certain sales to merchants and others in British India
For the assessment year 1942 43 the Income tax Officer classified the total sales of Rs 9245151 into four categories
Out of the total sales sales 49 Rs 1480059 formed the subject matter of the two questions reproduced above
The statement of the case details the categories in the following chart Sales Balance Sales effected of pursu Total and columns ant to Category of Sales Sales received II and cent
Balance in British III racts India bearing Stamps of Indore State a Sales in pursuance of business canvassed by company s represemita
tives in British India 1002642 335855 666787 20759 646028 3 b Sales to British Indian merebants through birokers and agents in British India 291891 291891 291891 4 c Sales to British Indian merchants and brokers during their visit at lndore 385214 385214 286224 5 d Sales to British Indian merchants at the time of their own or their brokers  visit at Indore 313306 313306 57390 255916 9 ____________________________________________________________ 1993053335855 16571981771391480059 ____________________________________________________________ The figures at the extreme right show the item numbers used by the Income tax officer in para 2of the assessment order
The modus operandi for effecting the sales enumerated in the chart referred to above is described as follows in the statement of the case a Sales of Rs 666787 The assessee had a paid representative at Bombay who canvassed on behalf of the Company to British Indian Merchants
The orders were sent by such merchants to Indore
On acceptance of orders by the Company at Indore the Company prepared the contracts signed them and forwarded the same for being signed by the customer
One contract was signed by the customer and returned to the assessee
Thus the Company signed at Indore and the customer signed in British India
The contracts were signed on company s forms
On some contracts there were stamps of Holkar State
On the remainder there were British India  stamps
Sales on which Holkar Stamps were affixed aggregated to Rs 20759 which were deleted by the Appellate LPN1SCI 5 50 Assistant Commissioner from the said sales of Rs 666787
Sales of Rs 335855 under this category received in British India by the representative of the assessee at Bombay were taxed on receipt basis and the same was not contested as stated above
The goods under the contracts referred to hereinabove were delivered FOR Indore
The relevant railway receipt made in the name of self  was endorsed in favour of the customer and was handed over to Imperial Bank of India Indore for being delivered to the merchant
Sale proceeds were received at Indore through the Imperial Bank of India Indore
bSales of Rs 291891  The brokers in British India who were described as free lance brokers transmitted the offers to the company
These offers were made on the brokers  own forms and were communicated to the merchants through the brokers
Such orders were placed by the brokers in the normal course of business of these brokers who were not en aged by the Mill as such
The goods were delivered FOR Indore
The relevant railway receipt made in the name of Self  was endorsed by the assessee in favour of the merchants and handed over to the Imperial Bank of India
cSales of Rs 385214 These sales were made to British Indian merchants and customers who came to Indore to negotiate and place orders
The orders were accepted at Indore
On some contracts made for sales under this item stamps of Holkar State were affixed
Sales pursuant to contracts on which stamps at Holkar State were affixed aggregated to Rs 98990 which was deleted by the Appellate Assistant Commissioner from the aforesaid sales of Rs 385214
The goods were delivered FOR Indore
The railway receipt was made out in the name of Self  and was endorsed by the assessee in favour of the customer and handed over to the Imperial Bank of India for being delivered to the party concerned
The sale proceeds were received at Indore as in other cases
dSales of Rs 313306 Sales under this category were made to British Indian merchants on their or their broker s personal visit to Indore
Contracts for such sales were made in the same manner as stated hereinbefore
Such sales in respect of which relevant contracts bore the Holkar State stamps aggregated to Rs 57390 which were deleted by the Appellate Assistant Commissioner from the aforesaid sales of Rs 313306
The goods were delivered FOR Indore
The railway receipt was made in the name of self  and was endorsed in favour 51 of the customer and handed over to the Imperial Bank of India for being delivered to the merchants
The sale proceeds were recovered from the Imperial Bank of India Indore at Indore as in other cases
 The Income tax Officer held that profits apportionable on sales of Rs 1657198 accrued or arose in British India and as such taxed the same on accrual basis
Rs 335855 having been received in British India were taxed on accrual cum receipt basis
The Appellate Assistant Commissioner on appeal held that taking into account all facts of the case it would be fair to take 3 3 13  of the profits realised on sales amounting to Rs 1657198 as attributable to activities in British India
Out of this amount he deducted sales totalling Rs 177139 as the contracts in respect of these were signed at Indore and accepted at Indore
On the balance of sales of Rs 1480059 the Appellate Assistant Commissioner held that on the analogy of Rule 33 of the Indian Income tax Rules 3 13 profits out of the total profits apportionable to such sales should be attributable to the activities in British India and as such taxed in the hands of the assessee
The Tribunal confirmed the order of the Appellate Assistant Commissioner
In compliance with the order of the Bombay High Court the Appellate Tribunal drew up a statement of the case under section 664 of the Indian Income tax Act and referred three questions mentioned above
The High Court as stated above answered Question No 3 in favour of the assessee and the appellant having obtained special leave the appeal is now before us
Mr section T Desai the learned counsel for the appellant con tends that the High Court was wrong in holding that no part of the profits of the sales could be said to have accrued or arisen in British India
He says that on the facts and circumstances of the case the property in the goods passed in British India in all the four categories
He says that the method of delivery in the four categories was similar namely that the railway receipts were made in the name of self  and endorsed in favour of the customers and were handed over to the Imperial Bank of India Indore for being delivered to the merchant and sale proceeds were received at Indore through the Imperial Bank of India Indore
He further says that the fact that the goods were to be delivered FOR at Indore does not make the property in the goods pass at Indore
There
is considerable force in the learned counsel s submissions
In Pushanlal Mansinghka P Ltd vs The Commissioner of Income Tax
Delhi1 this Court on similar facts held that the property in the goods passed in Part A and Part C States where the delivery was made
This Court further held that the income accrued only 1 Civil Appeals Nos
557 558 of 1966 judgement delivered on May 5 1967
52 when the purchaser paid the price through the bank
The method of delivery
in that case was as follows The appellant consigned the goods to self  and the railway receipts alongwith the bills of exchange were presented by the appellant to the Rajasthan Bank
Bhilwara for collection after endorsing the railway receipts in favour of the Bank
It has also been found that the Rajasthan Bank in its turn endorsed the railway receipts in favour of its branches in Part A  and 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
 We may mention that in Commissioner of Income tax Delhi vs P M Rathod  Co1 Kapur J speaking for the Court on similar facts observed The railway receipts in favour of self could not be delivered to the buyer till the money was paid and although the goods had been handed over to a common carrier the appropriation to the contract was only conditional and the performance was completed only when the monies were paid and the railway receipts delivered This case was followed in Commissioner of Income tax vs Bhopal Textiles Ltd2
It is true that the Court in these cases was concerned with the question of the receipt of income but there is no difference in principle as in both cases the question of passing the property in the goods or performance of the contract had to be considered 
The learned counsel for the assessee contends that no such point was raised before the Appellate Tribunal and we should not allow the appellant to raise this point at this stage
It seems to us that before the High Court stress was laid on the formation of the contract and its complete performance and not on the aspect of the passing of property in the goods
These questions are perhaps relevant to the answering of Question No 2 but we are unable to regard this aspect as a new question
Following our judgment in Pushanlal Mansinghka P Ltd vs The Commissioner of Income tax Delhi1 we hold that income accrued within British India and that a proportionate part of the income was assessable to incometax
In view of this the answer to the question Question No 3 must be in the affirmative
1  150
2 3 Civil Appeals Nos
557 558 of 1966 judgment delivered on May 51967
53 Regarding Question No 2 the learned counsel for the appel lant invited us to answer the question
The learned counsel for the assessee raised a number of points on which the High Court has not expressed its views
Under the circumstances we think it would be proper if we remand the case to the High Court for answering Question No 2 according to law
In the result the appeals are allowed and question No 3 answered in the affirmative and the case remitted to the High Court to answer question No 2 in accordance with law
The High Court did not allow any costs
Under the circum stances there will be no order as to costs in this Court
RKPS Appeals allowed


Summary:
The respondent was a limited company incorporated in the State of Indore where it had a textile mill
During the years from 1941 to 1946 it effected sales in British India through canvassing by its own representatives
through brokers or through the purchasers  brokers or representatives visiting Indore
The sales in British India in all categories were made FOR Indore the Railway Receipts were made out in the name of self  and were endorsed in favour of the customer concerned and handed over to the Bank for delivery to the customer against payment of the sale price which was received at Indore through the Bank s local branch
In the course of its assessment to Indian Income tax for some of the years during the period 1942 43 to 1947 48 the Income tax Officer apart from taxing the income actually received in India also held that the profits apportionable to all the other sales made in British India accrued or arose in the taxable territories and were therefore liable to Indian Income tax
He accordingly taxed the same on accrual basis
The Appellate Assistant Commissioner in appeal held that taking into account the fact of the case it would be fair
on the analogy of Rule 33 of the Indian Income tax Rules 1922 to attribute 331 per cent of the profits to the activities in British India and to assess them to Indian Income Tax
The Tribunal confirmed this order but the High Court on a reference under section 66 of the Indian Income tax Act held in favour of the respondent
In the appeal to Supreme Court it was contended on behalf of the appellant that on the procedure adopted for the sales the property in the goods passed in British India in all the categories of sales and that the fact that the goods were sold FOR at Indore did not make any difference to that position
The High Court had therefore wrongly taken the view that the sales were not taxable in India
HELD Allowing the appeal the income accrued within British India and a proportionate part of it was assessable to Indian Incometax
52G H Pushanlal Mansingka P Ltd
The Commissioner of Income Tax Delhi Civil Appeal Nos
557 558 of 1966 decided on May 5 1967 followed
Commissioner of Income tax Delhi vs PM Rathod  Co  150 Commissioner of Income tax vs Bhopal Textiles Ltd  referred to 48