Dixit, C.J.

1. In this reference under Section 66(1) of the Indian Income Tax Act, 1922, at the instance of the assessee the question that has been propounded by the Tribunal for decision is :

" Whether, on the facts and in the circumstances of the case, the sum of Rs. 1,58,537 for which hundies were drawn in Gwalior and which hundies were discounted in Gwalior, was received in Gwalior State ?"

2. The material facts are that the assessees Gabhabhai Velji carried on business as a commission agent in khursani (niger seed) during the period from 2nd November, 1948, to 21st October, 1949, which was the account year period for the assessment year 1950-51, at Pachhar which was at that time in the erstwhile Gwalior State. Between the period from 17th January, 1949, to 28th January, 1949, certain forward delivery contracts of khursani which the assessee had entered into with Premji Haridas and Co. of Bombay during the period from 23rd July, 1948, to 11th August, 1948, were settled by the Bombay firm by selling the goods and buying the difference. On account of this settlement the assessee became entitled to receive from the Bombay firm an amount of Rs. 1,58,537. For payment of this amount by the Bombay firm the assessee drew hundies from time to time directing the firm of Premji Haridas & Co. of Bombay to pay to Thakersey Muraiji, a businessman said to be carrying on business at Gwalior, the sum specified in the bundles " on sight as per rules of the Grain Merchants Association ". Each of the bundles drawn by the assessee mentioned that the amount specified in the hundi had been received by the assessee at Pachhar from Thakersey Murarji. The said Thakersey Murarji negotiated these bundles through the Imperial Bank, Hyderabad, and/or Secunderabad. As the Tribunal has found these hundies were further negotiated and ultimately the Bombay firm made payment on these hundies either to the Imperial Bank of India, Bombay, or to certain shops carrying on business in Bombay. In the assessment proceedings the assessee claimed the benefit of the provisions of the Part B States (Taxation Concessions) Order, 1950, contending that the amount of Rs. 1,58,537 accrued to him in the former State of Gwalior and not in the then taxable territories within the meaning of Section 4(1)(a) of the Indian Income Tax Act, 1922. This claim was negatived by the Income Tax Officer as well as by the Appellate Assistant Commissioner and the Tribunal in the appeals which the assessee preferred.

3. In our judgment, on the facts found by the Tribunal the question placed before us for decision must be answered in the negative. The amount of Rs. 1,58,537 can be treated as having been received by the assessee at Pachhar only if it is found that Thakersey Murarji purchased the hundies and took them so as to become absolute holder for value and not as an agent for collection of the amounts specified in the hundies on behalf of the assessee. The Tribunal has not found that Thakersey Murarji purchased the hundies so as to become absolute holder for value. On the other hand, the Tribunal has found on the concession made before it on behalf of the assessee that before " discounting " these hundies with Thakersey Murarji, the assessee did not accept a prior acceptance of the Bombay firm. If that be so, then the hundies, without such acceptance of the Bombay firm, did not operate as an assignment in favour of Thakersey Murarji of the funds in the hands of the drawee. It is well settled that a bill of exchange does not by itself create any obligation between the drawee and the holder ; that if the drawee refuses to accept or to pay it on its due date, the holder cannot sue him for the amount and his remedy is only against the drawer and the prior endorsers ; but when once the drawee has accepted the instrument, his liability on it is fixed, for by his acceptance he responds to the request of the drawer to take up the instrument and thus becomes the principal party liable. In