COMMISSIONER OF INCOME TAX Vs. MYSORE CHROMITE LIMITED

JUDGEMENT

(1.) THE Appellate . Tribunal referred the following two questions of law to this Court for decision under Section 66 of the Indian Income-tax Act. THE questions are:

(2.) THE Assessee is Mysore Chromite, Limited, a company registered under the Mysore Company Regulations. Its registered office is at Sinduvalli in Mysore State. It acquired certain mining rights from the Government of Mysore over certain properties situate in that State. Messrs. Oakley Bowden & Company, Limited, Madras, are the Managing Agents of the assessee, and their registered office is at No. 15, Armenian Street, Madras. THE assessee sells chromite ore after converting it into a merchantable product, mostly to merchants outside India, that is to buyers in America and in Europe. Messrs. Bowden Oakley, Limited, London, are the agents of the assessee in Europe while Messrs. W. R. Grace and Company, New York are the agents for business in New York. THE course of dealing carried on by the assessee through their agents to buyers in Europe is that the buyers entered into contracts for the purchase of the product through the agents of the assessee in London. In regard to the American buyers, it appears that the agents in New York themselves entered into contracts with the company without disclosing the principals on whose behalf they seem to have acted. THE contracts are signed by Messrs. Bowden Oakley and Company (Madras), Limited, on behalf of the assessee at Madras in respect of the American buyers. THE contracts for sale between the European buyers and the assessee are signed by Messrs. Bowden Oakley, Company, (London), Limited. Two specimen forms of contract with the European and American purchasers are set out in the order of the Tribunal.

(3.) A further contention that was argued on behalf of the department is that the conditions Imposed under the contract namely, provision for. payment and assay are Indicative of the Intention of the parties that the property in the goods had already passed and that they were merely conditions subsequent. We do not think that this correctly states the position. After the goods were delivered to the buyers when the bill oi exchange was accepted under the terms of the contract the buyers had the right to have the goods weighed and assayed in order to find out whether the specification in the contract of the percentage of chromite in the ore is satisfied or not, and if they were not so satisfied it was open to them to make the necessary adjustments in the price. The price was finally determined after weighment and assay and when that was finalised the amounts mentioned in the provisional invoice is revised and the price of the goods is finally fixed. It is after that that the balance of the purchase price deducting the amount payable under the term of the contract, namely, 90 per cent in the case of European contracts and 80 per cent. in the case of American contracts was realised. The conditions, therefore are not conditions which would indicate that already the property in the goods had passed at an earlier point of time earlier even to the acceptance of the bill of exchange and that subsequently if there was a breach of those conditions there was a defeasance of the title in the goods which was vested in the buyers. It is really unnecessary In view of the clear language of the Sale of Goods Act to refer to the decisions on the point but the position was examined and clearly defined in two decisions, one of the Privy Council and the other of the House of Lords. The decision of the Privy Council is in "THE PRINZ ADALBERT', (1917) AC 586. In that case Lord Sumner points out at page 589 the legal effect of transactions of sale of a similar nature and the point of time at which the sales takes place. The learned Lord observed: