Judgement

KAPUR J.: This appeal on a certificate by the High Court is brought against the judgement of the High Court of Madhya Bharat in a Reference by the Income Tax Appellate Tribunal under S. 66(I) of the Income Tax Act. The appellant is the Commissioner of Income Tax and the respondents are a firm of manufacturers of perfumery and hair oils at Ratlam in Madhya Bharat and their goods are sold throughout India. At the relevant time Madhya Bharat was a Part B State and the sole question for determination is where were the income, profits and gains received or were deemed to be received and on that would depend the rate at which the respondents would be liable to be assessed because of the concessional rates applicable to Part B States.

2. The facts lie in a short compass. The respondents, a registered firm, were assessed for the assessment year 1950-51 at the rate or rates applicable to income, profits and gains arising or accruing in Part A States. The course of their business was this: they sent out agents to various parts of India. They canvassed orders and sometimes took advance payments in full or in part and after deducting their expenses, remitted the balance to the respondents at Ratlam through Bank Drafts etc. The goods ordered were sent to the customers either by V.P.P. or by rail. In the latter case the Railway Receipts in favour of self were sent through a Bank deliverable against payment of the Demand Draft drawn upon the buyers and sent with the Railway Receipts. This price when received by the Bank was sent by the Bank by means of Bank Draft to the respondents at Ratlam who sent them for being cashed and credited to their account at Bombay.

3. The Income Tax Officer held that the major quantity of goods were supplied to the customers in what was Part A and C States either by V.P.P. or by rail, the Railway Receipts being in favour of the respondents and payment was received as stated above.

4. The assessees banker was the Bank of India Ltd., Bombay and the sale proceeds were, according to the Income Tax Officer, mainly realised through this Bank. He held that the sales were effected in Part A and C States and the payments were also received there. He therefore made the assessment on an estimated profit of Rs. 1,60,340 on sales of Rs. 5,09,424 without allowing any rebate on account of concessional rates applicable to Part B States. On appeal the Appellant Assistant Commissioner reduced the estimated profit by Rs. 20,000. The Income Tax Appellate Tribunal on further appeal reduced the total income from Part A and C States to Rs. 2,85,376. It found that the income received through the Post Office i.e. by V.P.P. was Rs. 1,23,710 and that received in respect of goods sent by rail and realized by the Bank Drafts was Rs. 2,85,376 making a total of Rs. 4,21,955. It also held that the advances received with orders were income, profits and gains received at Ratlam and not in Part A and C States and similarly the price of goods sent by V.P.P. was also money received at Ratlam. In regard to the price received by Bank Draft it held that they were received at Ratlam but were sent to the assessee s banker in Bombay for being cashed and therefore they must be taken to have been received in a Part A State. This amount was Rs. 2,85,376. The Tribunal after referring to the decision of the Bombay High Court in Kirloskar Bros. Ltd. V. Commr. of Income Tax 1952-21 ITR 82: said:

"The facts, however, in this case are entirely different. It appears from the printed advice sent by the assessee to its bankers in every case that the bankers are to hand over the goods against payment of the enclosed demand draft . It is not a case where the assessee gives unconditional discharge on the receipt of either a cheque or a bank draft. We agree with the Appellate Assistant Commissioner that sale proceeds to the extent of Rs. 2,85,376 were received at Bombay".

Both the assessees and the Commissioner applied for a reference to the High Court under S. 66