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1965 Supreme(SC) 353
SUPREME COURT OF INDIA
K. SUBBA RAO, J.C. SHAH AND S.M. SIKRI, JJ.
Commissioner of Income-tax, Delhi and Rajasthan, New Delhi, Appellant
Versus
Mewar Textile Mills Ltd., Respondent.
Civil Appeal No. 969 of 1964.
Advocates appeared
Mr. A. V. Viswanatha Sastri, Senior Advocate, (M/s. S. K. Aiyar, B. R. G. K. Achar and R. N. Sachthey, Advocates, with him), for Appellant,; Mr. S. T. Desai, Senior Advocate, (M/s. Z. S. Meeratwal and Naunit Lal, Advocates, with him), for Respondent.
A.V.VISHWANATHA SASTRI, B.R.G.K.Achar, NAUNIT LAL, R.N.SACH, S.K.AIYAR, S.T.DESAI, Z.S.MIRATVAL
The profit on sales of goods completed in British India is liable to tax under the Indian Income-tax Act, even if the goods were manufactured in an Indian State and the assessee is located in an Indian State.
Headnote:
INCOME TAX - Assessment year 1943-44 - Profit on amounts received by assessee's bankers in British India as price of goods sold by assessee on railway receipts in names of consignees or as price of goods delivered ex-godown Bhilwara - Whether liable to tax under Indian Income-tax Act - Held, yes.
Fact of the Case:
The assessee, a textile mill located in Bhilwara, Rajasthan (an Indian State), sold goods to customers in British India. The goods were either delivered ex-godown Bhilwara or sold on railway receipts in the names of the consignees. The assessee received payment for the goods from its bankers in British India. The question before the Court was whether the profit on these sales was liable to tax under the Indian Income-tax Act.
Finding of the Court:
The Court held that the profit on the sales was liable to tax under the Indian Income-tax Act. The Court reasoned that the sales were completed in British India, where the goods were delivered or where the railway receipts were transferred to the consignees. The Court also held that the assessee's bankers in British India were acting as agents of the assessee, and not as agents of the consignees.
Issues: Whether the profit on the amounts received by the assessee's bankers in British India as price of goods sold by the assessee on railway receipts in the names of the consignees or as price of goods delivered ex-godown Bhilwara was liable to tax under the Indian Income-tax Act.
Ratio Decidendi: The Court held that the sales were completed in British India, where the goods were delivered or where the railway receipts were transferred to the consignees. The Court also held that the assessee's bankers in British India were acting as agents of the assessee, and not as agents of the consignees.
Final Decision: The Court allowed the appeal, set aside the order of the High Court of Rajasthan, and remanded the case to the High Court for a fresh decision.
Judgement
SIKRI, J. : This appeal, by certificate granted under S. 66A (2) of the Indian Income-tax Act, 1922, hereinafter referred to as the Act, read with S. 261 of the Indian Income-tax Act, 1961, is directed against the judgment of the Rajasthan High Court in a consolidated reference made to it by the Income-tax Appellate Tribunal, Delhi Branch, under S. 66 (1) of the Act. This appeal relates to the assessment year 1943-44 and the relevant question with which we are concerned is as follows:
"whether the profit on the amounts received by the assessee s bankers in British India as price of goods sold by the assessee on railway receipts in the names of the consignees or as price of goods delivered ex-godown Bhilwara was liable to tax under the Indian Income-tax Act ?"
This question was referred at the instance of the appellant and the item in dispute now before us is the item amounting to Rupees 2,73,488, which was held not liable to taxation by the Appellate Tribunal. The question which arises in this appeal is whether the Tribunal was right. The first submission, however, of Mr. A. V. Vishwanatha Sastri, the learned counsel for the appellant, is that the High Court has not deal with this question in so far as it relates to this sum. Mr. Desai, on the other hand, contends that the appellant has not appealed as far as this item is concerned; and, therefore, before we attempt to answer the question we must first see whether the appellant s appeal covers this item.
2. Mr. Desai refers us to the petition for leave to appeal to SC, filed in the High Court, and says that there is no express mention of the item of Rupees 2,73,488. He is right as far as this is concerned, but the appellant apparently felt it was not necessary to mention expressly this item. Mr. Sastri points to Paras. 12 and 13 of the petition which read as follows :
"12. That on account of applying the principle of accrual basis and allowing apportionment of profit between the manufacturing and selling processes in the ratio of 75 per cent : 25 per cent the revenue that would be lost to the Department would be approximately Rs. 36,000.
13. That the point of law decided by this Hon ble Court while returning the answer the question No. 2, namely, whether the liability to pay tax can be fastened on the assessee on receipt basis or accrual basis is a substantial question of law and is of great public and private importance and would form important precedent governing the numerous other cases. The tax effect is also of considerable value.Further, Mr. Sastri points out that the first seven paras of the petition which deal with the facts and the proceedings before the Income-tax Authorities are general and cover the said item of Rs. 2,73,488; also the grounds of appeal, Nos. 1 and 2, are very general and cover the item in dispute. It is true, as pointed out by Mr. Desai, that the High Court in granting leave to appeal to the SC did not expressly deal with this item at all, but then the High Court was dealing with the question of law as such and was not adverting to the facts in detail. Be that as it may, the appellant has filed an appeal in respect of the assessment year 1943-44 and the only possible question that can arise in this appeal is regarding the disputed item of Rs. 2,73,488, and we do not feel justified in accepting this technical objection and debarring the appellant from urging that this item is taxable.
3. Now, coming to the merits of the submission of Mr. Sastri, we find that the Rajasthan High Court has omitted to consider the question of the taxability of this item. This item was exempted by the Appellate Tribunal. In this connection the Appellant Tribunal observed as follows :
" but the assessee would not be liable to tax in respect of goods sold by the assessee to the purchasers on railway receipts in the names of consignees. In respect of these goods, the delivery of the goods was in Bhilwara, the goods were appropriated there and not in British India and the
