Case: Rajkumar Mills Ltd Vs. Commissioner of Income Tax, Bombay

Indore offers received from the purchasers in British India. The Appellant informed the Reporters either accepting the said offers or quoting higher rates in which event the purchasers accepted the higher rates and the Reporters intimated to the Appellant that they had sold the goods at those higher rates. This communication was confirmed by the Appellant informing the Reporters that they had confirmed the sale. A formal document confirming the offer was then drawn up and was executed by the purchasers asking the Appellant to supply the goods therein mentioned. This offer was subject to a written acceptance by the Appellant in part or in full within 15 days of the date of the said document failing which it was to be considered as cancelled. 4. The High Court considered that the only ground on which the revenue could tax the sale proceeds in British India was that, the contracts for sale had taken place in British India and that therefore profits accrued or arose in British India. The High Court therefore gave the following directions in respect at these two classes of Sales : (a) The Tribunal "must first consider whether Ex. C constitutes a counter offer. Then they must consider that if it is a counter offer whether it was accepted by the assessee because then the agreement for sale would be entered into in Indore and not in British India; if they take the view that Ex. C does not constitute a counter-offer or if they find that although Ex. C constitutes a counter offer there was no, acceptance they can from that infer that the parties treated Ex. C not as a counter-offer but as the acceptance itself; then the view taken by the Tribunal will be correct that the contract for sale was entered into in British India and not in Indore." (b) The Tribunal were "to consider the evidence placed before it by the Asscssee and decide whether there was a written acceptance of the offer made by the merchant. If the Tribunal finds that there was such a written. acceptance, then undoubtedly the sale was effected in Indore and not in British India. If on the other hand they come to the conclusion that there was no written acceptance then they will adhere to their original order that the sale was effected in British India". 5.We are of the opinion that these directions were not in accordance with law. In order to arrive at the conclusion that the contract for the sale of goods to the Government of India was entered into in British India it was necessary to establish that the acceptance of the tender was made by the Government in British India or if Ex. C constitutes a counter- offer that counter-offer was accepted by the Appellant not at Indore but in British India. If such counter- offer had been accepted by the Appellant in Indore either by a letter of acceptance written by the Appellant or by conduct in supplying the goods in accordance with the terms of the counter-offer the contract for sale took place in Indore and not in. British India.In regard to the sales of goods to the various merchants in British India also it was necessary to establish that the offers made by these merchants to the Appellant were accepted by the Appellant not at Indore but in British India. The formal documents containing the offers which were drawn up and executed by the purchasers asking the Appellant to supply the goods therein mentioned stated that the offers were subject to a written acceptance by the Appellant in part or in full within 15 days of the date of the document and contained a further condition that should the offer not be accepted by the Appellant within 15 days it was to be considered as cancelled. If such written acceptances were forthcoming the contracts for sale took place in Indore and not in British India. If the offer not having been accepted within the 15 days therein mentioned was deemed to have been cancelled the circumstances attendant upon the supply of those goods would have to be scrutinised and a conclusion reached on a consideration of the relevant circumstances as to whether under those circumstances the contract for sale could be said to have been entered into in Indore or in British India. 6.The High Court was therefore in error in giving the directions it did to the Tribunal. It moreover abjured its advisory function and asked the Tribunal not to submit to it any further statement of the case but to dispose of the matter according to law and in accordance with the directions given by it. This in our opinion the High Court was not entitled to do. If the High Count on the statement of the case submitted to it by the Tribunal found it difficult to come to the conclusion that the contracts for sale had been entered into in British India it should have called upon the Tribunal to submit to it a further statement of the case. The question whether the contracts for sale were entered into in British India or at Indore was not a question of fact to be determined by the Tribunal. It was a question of law to be determined by the High Court on a true construction of the correspondence, documents and the conduct of the parties.The learned Attorney-General frankly conceded that he could not support that part of the order passed by the High Court and agreed that a further statement of the case should have been called for by the High Court in regard to the questions 1 and 2. 7. The direction which the High Court gave in regard the sum of Rs. 5,80,069 also was uncalled for. The statement of the case submitted by the Tribunal to the High Courts did not mention any such thing and the High Court was in error in giving any such direction to the Tribunal.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]5.We are of the opinion that these directions were not in accordance with law. In order to arrive at the conclusion that the contract for the sale of goods to the Government of India was entered into in British India it was necessary to establish that the acceptance of the tender was made by the Government in British India or if Ex. C constitutes a counteroffer thatr was accepted by the Appellant not at Indore but in British IndiaIf such counteroffer had been accepted by the Appellant in Indore either by a letter of acceptance written by the Appellant or by conduct in supplying the goods in accordance with the terms of ther the contract for sale took place in Indore and not in. British India.In regard to the sales of goods to the various merchants in British India also it was necessary to establish that the offers made by these merchants to the Appellant were accepted by the Appellant not at Indore but in British IndiaThe formal documents containing the offers which were drawn up and executed by the purchasers asking the Appellant to supply the goods therein mentioned stated that the offers were subject to a written acceptance by the Appellant in part or in full within 15 days of the date of the document and contained a further condition that should the offer not be accepted by the Appellant within 15 days it was to be considered as cancelledIf such written acceptances were forthcoming the contracts for sale took place in Indore and not in British India. If the offer not having been accepted within the 15 days therein mentioned was deemed to have been cancelled the circumstances attendant upon the supply of those goods would have to be scrutinised and a conclusion reached on a consideration of the relevant circumstances as to whether under those circumstances the contract for sale could be said to have been entered into in Indore or in British India6.The High Court was therefore in error in giving the directions it did to the Tribunal. It moreover abjured its advisory function and asked the Tribunal not to submit to it any further statement of the case but to dispose of the matter according to law and in accordance with the directions given by it. This in our opinion the High Court was not entitled to doIf the High Count on the statement of the case submitted to it by the Tribunal found it difficult to come to the conclusion that the contracts for sale had been entered into in British India it should have called upon the Tribunal to submit to it a further statement of the caseThe question whether the contracts for sale were entered into in British India or at Indore was not a question of fact to be determined by the Tribunal. It was a question of law to be determined by the High Court on a true construction of the correspondence, documents and the conduct of the parties7. The direction which the High Court gave in regard the sum of Rs. 5,80,069 also was uncalled for. The statement of the case submitted by the Tribunal to the High Courts did not mention any such thing and the High Court was in error in giving any such direction to the Tribunal.