Case: Seth Pushalal Mansinghka Private Ltd Vs. Commissioner of Income Tax, Delhi, Rajasthan &amp; Madhya Pradesh

2. The appellant is a private limited company having its mines, factory and Head Office at Bhilwara in Rajasthan which was at the relevant periods in a part "B" State. The appellant carried on mining business at Bhilwara and was engaged in the cutting, processing, sorting and packing of mica which was exported by it to Kodarma and Giridih which were situated in Part "A" and part "C" States and sold there to purchasers The mica was sent almost entirely by railway from Bhilwara to Kodarma and Giridih. The appellant 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 November 2, 1948 to October 21, 1949, and October 22, 1949 to November 9, 1950 respectively. The total sale proceeds of the appellant during the two assessment years amounted to RS. 19,77, 544. The appellant tendered bills to the local branch of the Bank of Rajasthan to the extent of Rs. 15,64,475 and received payment of that amount of Bhilwara. The appellant claimed that it was entitled to the benefit of rebate in regard to profits from these sales under the Part B States (Taxation Concessions) Order, 1950 and that S. 4 (1) (a) of the Income-tax Act, 1922 (hereinafter called the Act) was not applicable to its transactions. By his orders, dated March 24, 1955 and Mat 31, 1954 the Income-tax Officer held that the sales book place in Part A and Part C States and the entire profits from those sales accrued and were received by the appellant in Part A and Part C States and, therefore, no rebate was admissible under the Part B States (Taxation Concessions) Order, 1950. The Income-tax Officer also rejected the claim of the appellant that in regard to some of the sales Bills were discounted by the Rajasthan Bank and payment to that extent should be treated as having been received at Bhilwara in the Part B State. It was held by the Income-tax Officer: (1) that the letter for discounting was forged, (2) that even assuming that the appellant tendered some of its bills for discounting, the responsibility of the appellant under the conditions stipulated by the Bank in its form did not cease till the Bank realised payment from the purchaser and hence there was not discounting of the bills which were merely handed to the Bank for collection. On appeal, the Appellate Assistant Commissioner by his order, dated September 20, 1957 held that the Income-tax Officer was justified in holding that the appellant was not entitled to any rebate under the Part B States (Taxation Concessions) Order, 1950. On further appeal, the Appellate Tribunal held by its order, dated August 18, 1958 that the appellant received the sale proceeds in regard to the goods consigned to the purchasers in Part A and Part C States and not in Part B State and, therefore, the appellant was not entitled to the rebate claimed by it. The Appellate Tribunal, thereafter stated a case under S. 66 (1) of the Act and referred the following question of law for the opinion of the Highon 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 income from the mining business for the assessment years 1950-51 and 1951-52its judgment, dated April 29, 1964, the High Court answered the question in the negative and against the appellant.

Court's reasoning:
In the context of the facts found in this case we are of the opinion that profits accrued to the appellant at the place where the property in the goods passed to the purchasers. The problem in the present case, therefore, is to determine whether the property in the goods passed to the purchasers at Bhilwara, as claimed by the appellant, or at Kodarma or Giridih, as claimed by the respondent. In the case of a contract for sales of unascertained goods the property does not pass to the purchaser unless there is unconditional appropriation, of the goods in a deliverable state to thedo not think there is any substance in this argument. Before the appellate Tribunal the case of the appellant was that the railway receipt and the hills were sent by it to the bank for collection from the purchasers from Part A and Part C States. It was held by the Appel1ate Tribunal that the letter, dated July 8 1948, alleged to have been written by the appellant was a faked document and no instructions were given to the Rajasthan Bank for discounting the appellants bills. Even assuming that the bank gave credit of part of the amount of some of the bills to the appellant. it is apparent from the conditions specified in the discount form of the bank that the responsibility of the appellant did case till the bank realised payments from the purchaser.e proceed to consider the next contention of the appellant, namely, that ca was extracted, processed, sorted, packed and despatched at Bhilwara in Part B State and there was accrual of a part of the income at Bhilwara and the appellant was, in any case, entitled to claim apportionment of the profits accrued.Counsel on behalf of the appellant placed reliance upon the decisions of this Court in C. I. T. Bombay v. Ahmedbhai Umarbhai and Co., Bombay, 1950-18 ITR 472  =(AIR 1950 SC l34) and in Anglo-French Textile Co. Ltd. v. C. 1. T., Madras. 19,54-25 ITR 27  =(AIR 19.51 SC 198), where it was pointed not that in the case of a composite business, for instance where a person carries on a manufacturing and selling business it was not possible to say that the only place where the profits accrue to him is the place of sale. The profits are received by him firstly for his business as a manufacturer and secondly for his trading operations and profit and loss has to be apportioned between these businesses according to the principles of accountancy. But it is not possible for us to accept this argument in this case, because the appellant did not raise the question of apportionment of profits before the Appellate Tribunal, nor was it considered and decided by it. In C. I. T. Bombay v. Scindia Steam Navigation Co. Ltd.. 1961-42 ITR, 589 = (AIR 1961 SC 1633  ), it was pointed out by this Court that when a question of law is neither raised before the Tribunal nor considered by it will not be a question rising out of the order of the Tribunal and the High Court will be acting beyond its jurisdiction in dealing with any such question. We accordingly hold that Mr. Karkhanis is unable to make good his argument on this aspect of theis clear, therefore, that the income may accrue to an assessee without actual receipt of the same. If the assessee acquires a right to receive the income, the income can be said to accrue to him though it may be received later on its being ascertained. The basic conception is that he must have acquired a right to receive the income(See E.D. Sassoon and Co. Ltd. V.C.I.T., Bombay City,ITR 27 at p.51= (AIR 1954 SC 470   at p.is clear, therefore, that the income may accrue to an assessee without actual receipt of the same. If the assessee acquires a right to receive the income, the income can be said to accrue to him though it may be received later on its being ascertained. The basic conception is that he must have acquired a right to receive the income(See E.D. Sassoon and Co. Ltd. V.C.I.T., Bombay City,482).6. As pointed out by the Judicial Committee in C.I.T., Bombay Presidency and Aden v. Chunilal B. Mehta,ITR 521= (AIR 1938 PC 232  ), it is impossible to lay down any general test to determine the place where the profits of the business accrue. In some cases it may be the place of the formation of the contract, but other mattersfor instance the place where the contract is carried out or acts are done under the contractmay be decisive in certain circumstances. When the business consists of buying and selling goods, profits accrue as a general rule at the place where the contract of sale is made or where sales are effected. But the question depends very much upon thee facts and circumstances of each particular case. At p. 533 of the Report (ITR) = (at p. 238 of AIR), the Judicial Committee observed asLordships are not laying down any rule of general application to all classes of foreign transactions, or even with respect to the sale of goods. To do so would be nearly impossible and whollyuse the language of Lord Esher in Erichsenv. Last, (1881) 8 QBD414. They are not saying that place of formation of the contract prevails against everything else. In some circumstances it may be so, but other mattersacts done under the contract, for examplecannot be ruled out a priori. In the case before the Board the contracts were neither High Courts conclusion that the profits accrued or arose outside British India is wellIn the present case, the appellant has reserved the right of disposal over the goods at the time of despatch. The consignment was sent "self" railway receipt was taken in the name of the appellant and the railway receipt along with the bill of exchange was presented by the appellant to the Rajasthan Bank for collection after endorsing the railway receipt in favour of the Rajasthan Bank. The goods were delivered to the buyers only when they paid the price to the bank and obtained the railway receipts endorsed in their favour. The fact that the goods are by the bill of lading made deliverable to the order of the seller or his agent is a prima facie reservation of the right of disposal so as to prevent the property from passing to the purchaser. If the seller deals `with or claims to retain the bill of lading, in order to secure the contract price as when he ends forward the bill of lading with a bill of exchange attached, with directions that the bill of ladling is not to be delivered to the purchaser till acceptance or payment of the bill of exchange the appropriation is not absolute but until acceptance of the draft, or payment or tender of the price, is conditional only, and until such acceptance or payment or tender, the property in the goods does not pass to the. Imperial Ottoman Bank, (1878) 3 Ex D164 at p.If the seller discounts a draft upon the buyer with a bank. and authorises the bank to hand to the buyer a bill of lading to the order of the seller and endorsed in blank by him upon his acceptance of the draft, the intention to be inferred, according to general mercantile understanding, is that the seller intends to transfer the ownership when the draft is accepted, but intends also to remain the owner until this has been done. So, when the seller draws a hundi or a hill of exchange on the purchaser and delivers the hundi or the bill of exchange with a relative railway receipt to his own banker for the purpose of delivery of the railwayreceipt to the purchaser on his honouring the hundi the property in the goods cannot be held to pass to the purchaser till he pays the price and takes delivery of the railway receipt from the banker. The matter is very clearly put by Lord Summer in Prinz Adalbert, 1917 AC, 586 , as followsa shipper takes his draft, not as yet accepted, but accompanied by a bill of lading, endorsed in this way, and discounts it with a banker, he makes himself liable on the instrument as drawer, and he further makes the goods. which the bill of lading represents. security for itsin turn, the discounting banker surrenders the bill of lading to the acceptor against his acceptance, the inference is that he is satisfied to part with his security in consideration of getting this further partys liability on the bill, and that in so doing he acts with the permission and by the man date of the shipper and drawer. Possession of the indorsed bill of lading enables the acceptor to get possession of the goods on the ships arrival. If the shipper, being then owner of the goods, authorises and directs the banker. to whom he is himself liable and whose interest it is to continue to hold the bill of lading till the draft is accepted, to surrender the bill of lading against the acceptance of the draft, it is natural to infer that he intends to transfer the ownership when this is done, but intends also to remain the owner until this has been done...................... The general law infers under these circumstances that the ownership in the goods is transferred when the draft drawn against them iso not think there is any substance in this argument. Before the appellate Tribunal the case of the appellant was that the railway receipt and the hills were sent by it to the bank for collection from the purchasers from Part A and Part C States. It was held by the Appel1ate Tribunal that the letter, dated July 8 1948, alleged to have been written by the appellant was a faked document and no instructions were given to the Rajasthan Bank for discounting the appellants bills. Even assuming that the bank gave credit of part of the amount of some of the bills to the appellant. it is apparent from the conditions specified in the discount form of the bank that the responsibility of the appellant did case till the bank realised payments from theit is not possible for us to accept this argument in this case, because the appellant did not raise the question of apportionment of profits before the Appellate Tribunal, nor was it considered and decided by it. In C. I. T. Bombay v. Scindia Steam Navigation Co. Ltd..ITR, 589 = (AIR 1961 SC 1633  ), it was pointed out by this Court that when a question of law is neither raised before the Tribunal nor considered by it will not be a question rising out of the order of the Tribunal and the High Court will be acting beyond its jurisdiction in dealing with any such question. We accordingly hold that Mr. Karkhanis is unable to make good his argument on this aspect of the