JUDGMENT

KHANNA, J.:—This judgment would dispose of three civil Appeals Nos. 980 to 982 of 1971 which have been filed by special leave against the judgment of the Andhra Pradesh High Court on a reference under Section 66 of the Indian Income-tax Act, 1922 (hereinafter referred to as the Act) answering, besides two other questions with which we are not concerned, the following question against the assessee appellant and in favour of the revenue:

"Whether, on the facts and in the circumstances of the case, the sale proceeds were received from Government of India in British India?"

2. The assessee company is a public limited company registered in what was at the relevant time the Nizam s Dominion (hereinafter referred to as Hyderabad State) outside British India. The matter relates to assessment years 1945-46, 1946-47 and 1947-48 for which the relevant accounting period ended on October 5, 1944, October 5, 1945 and October 5, 1946 respectively.

3. The assessee company had a textile mill at Warangal in Hyderabad State. During the Second World War the company supplied textile goods to the Department of Supplies. Government of India under what was known as "Panel System". The Government use