DALICHAND MOTICHAND Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE assessee, M/s Dalichand Motichand, is an unregistered firm. The assessment year with which we are concerned is the year 1947 48, the accounting year being the year 1946 47. At the relevant time, the assessee carried on business as merchants and commission agents at Dhoraji in the former Native State of Gondal in Kathiawar. The assessee entered into a contract for the supply of certain quantity of hemp nets lying at Bhavnagar to M/s Chimanlal Sarabhai & Co. The contract provided for the sale of the entire quantity of hemp nets weighing 558 tons and 10 cwt. at the rate of Rs. 320 per ton. The goods were then lying at various presses of Bhavnagar and were to be delivered to the purchaser after they were pressed in bales. A term of the contract provided that the payment in respect of the goods should be made by the purchaser to the assessee in Kathiawar within one month of the taking of delivery of the goods. The goods were delivered to the purchaser, M/s Chimanlal Sarabhai & Co. at Bhavnagar, and a sum of Rs. 1,78,720, being the purchase price of the goods, was paid to the assessee. This sum of Rs. 1,78,720 was paid in the manner following. A bank draft for Rs. 70,000 was delivered to Nanchand Motichand, a partner in the firm of the assessee, at Dhoraji by Sarabhai Sakalchand, a partner in the firm of M/s Chimanlal Sarabhai & Co. on 16th Dec., 1946. There is no dispute in connection with this amount and this amount has been considered to have been paid at Dhoraji. A sum of Rs. 30,000 was paid in cash by Sarabhai Sakalchand to Nanchand Motichand, on behalf of the assessee firm, on 16th Dec., 1946, along with the delivery of the bank draft for Rs. 70,000. In regard to this sum of Rs. 30,ooo also there is now no dispute that it was paid at Dhoraji and no question arises in connection with this payment. A further sum of Rs. 40,000 was paid on 22nd Jan., 1947, and the balance of Rs. 38,720 was paid on 25th Feb., 1947. The question that arose for consideration was whether these two sums of Rs. 40,ooo and Rs. 38,720 were paid at Ahmedabad, the place where the purchaser was carrying on business, or were paid at Dhoraji. The ITO took the view that payments were made at Ahmedabad and held that the profits attributable to them were assessable to tax. The matter was carried further before the AAC who took the same view as the ITO and held that the sums of Rs. 40,ooo and Rs. 38,720 were paid at Ahmedabad and that the profits attributable to these sums were, therefore, assessable to tax. An appeal was preferred before the Tribunal but the same proved unsuccessful in so far as the sum Of Rs. 40,000 and Rs. 38,720 were concerned, for the Tribunal also held these sums to have been received at Ahmedabad and the profits attributable to them to be assessable to tax. These proceedings, it may be mentioned, arose as a result of a notice issued against the assessee under S. 34(1)(a) of the IT Act, 1922. Apart from the contentions on the merits relating to the sums of Rs. 40,ooo and Rs. 38,720 the assessee contended that the ITO, Ward D, Rajkot, who issued the notice under S. 34(1)(a) of the IT Act, 1922, had no jurisdiction to make the assessment. The assessee also contended that the assessment was not properly made under S. 34(I)(a) of the IT Act, 1922. These two contentions were also negatived by the Tribunal. The assessee therefore required the Tribunal to refer three questions of law arising out of its decision for determination by the Court under S. 66(I) of the IT Act, 1922, but the Tribunal raised only two questions of law which, in its opinion, arose from the order and referred the same for the decision of the Court, the two questions being:

(2.) THE assessee being aggrieved by the decision of the Tribunal not to refer to the Court the question relating to the aforesaid payments of Rs. 40,000 and Rs. 38,720 aggregating to Rs. 78,720 took out a notice of motion for a direction that the question whether there was any evidence to support the Tribunal's finding that the sum of Rs. 78,720 was actually received in British India be referred to the Court. An order was made on the notice of motion that the reference be referred back to the Tribunal with a direction to draw up the necessary statement of case referring to the Court the following question of law :

(3.) THE first piece of evidence that we must consider is the contract between the assessee and the purchaser, M/s Chimanlal Sarabhai & Co. Under the terms of the contract, it is clear that payment in respect of the goods had to be made in Kathiawar within one month of the taking of delivery of the goods. Payment must therefore be presumed to have been made in Kathiawar in accordance with the terms of the contract unless the contrary is shown by the Department.