SETH PUSHALAL MANSINGHKA PRIVATE LIMITED Vs. COMMISSIONER OF INCOME TAX DELHI RAJASTHAN AND MADHYA PRADESH

JUDGEMENT

(1.) These appeals are brought, by special leave, from the judgment of the Rajasthan High Court, dated April 29, 1964 in Income-tax Reference No. 2 of 1963.

(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 High Court:

(3.) The method of the appellant in making sales was as follows:The representatives of the buyers from Kodarma and Giridih used to visit Bhilwara, inspect the various qualities of mica which the appellant had for sale and entered into written contracts for purchase. The aforesaid contracts are marked as Annexure 'A' to the statement of the case and it is admitted by the parties that they represent all the contracts with which we are concerned in these appeals. These contracts plainly show that the buyers purchased specified qualities of mica, 'Bhilwara godowns delivery" on the condition that the consignments would be sent to Kodarma or Giridih as the case may be and the railway receipts would be sent "through bank". 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 godowns at Bhilwara, they would be entirely at the buyer's risk. Apart from these written terms and conditions of the contract, the Income-tax Appellate Tribunal has recorded the further finding of fact that the appellant consigned the goods to "self" and that the railway receipts along with 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.