The place of receipt of income is the place where the drafts were received by the assessee.

SAMVATSAR, J.

This is a reference by the Income-tax Tribunal at Delhi under S. 66(1), Income-tax Act. The facts which have given rise to the reference may be stated as follows :

The assessee, Messrs. P.M. Rathod and Co., manufacture perfumes and hair-oils at Ratlam and sell them to the customers all over India including Part A and Part C States.

In the assessment year 1950-51, i.e., accounting year 1949, the total sales effected by the assessee amounted to Rs. 7,64,000/-, out of which goods of the value of Rs. 4,21,955/- were sold to the customers in Part A and Part C States. These goods were sold either on orders received from the customers directly at Ratlam or on orders booked by the assessees travelling agents.

Part of the sale-proceeds were received by way of earnest or as advance payments with the orders, either in cash or by means of bank drafts. The remaining balance was received through post office at Ratlam when the goods were despatched by value payable parcels or through bank drafts when the goods were despatched by the railways or otherwise. The details of the receipts are set out in the order of reference and are as follows :

I. On orders received from the customers directly :

Advances with orders in cash or bank drafts payable at Ratlam 8,458/-

Through Ratlam post office in respect of goods despatched by V.P. Ps. 1,09,686/-

Bank drafts received by the assessee at Ratlam but payable in Part A and C States 1,69,926/-

2,88,070/-

II. On orders booked by Travelling Agents outside Ratlam :

Advances with orders received by Travelling Agents 4,411/-

Through Ratlam post office in respect of goods despatched by V. P. Ps. 14,024/-

Bank drafts received by the assessee at Ratlam but payable in Part A and C States 1,15,450/-

1,33,885/-

4,21,955/-

2. The Income-tax Officer and the Appellate Assistant Commissioner held that the assessee had received a sum of Rs. 4,21,955/- in Part A and Part C States and taxed the assessee at the higher rates prevailing in those States. The assessee appealed to the Tribunal and it held that the sum of Rs. 1,36,579/-, which was received at Ratlam in cash or through post office, constituted payment received in Madhya Rharat and the balance of Rs. 2,85,376/-alone represented receipts in Part A States. The order of the Assistant Appellate Commissioner was accordingly modified by the tribunal.

3. Both the Commissioner and the assessee were not satisfied with the decision of the Tribunal and approached it for making a reference to the High Court under S. 66 of the Indian Income-tax Act. The tribunal agreed with the parties that questions of law arose from out of its appellate order and referred the following two questions for the opinion of this Court :

"(1) Whether receipts of sale-proceeds at Ratlam (which included the assessees profits) in respect of goods sent by the assessee to customers in Part A or Part C States by Value Payable Parcel, amounted to receipt of income, profits or gains at Ratlam in Part B State?

(2) Whether bank drafts payable in Part A or Part C States, but received at Ratlam and encashed through the assessees bankers at Bombay, constitute receipts in Part A States?"

The first question arises out of an application by the Commissioner, whereas the second question is raised at the request of the assessee.

4. Both the Part A and Part B States are now included in taxable territories, but at the material time Part B States were governed by certain concessional rates. The assessee therefore contended that the sums received at Ratlam through bank drafts or through post office for the V. P. Ps. were received in Part B States whereas the Income-tax Department claimed that these sums constituted payments received in. Part A State and were assessable at the higher rates which applied to Part A and Part C States.

5. On the first point, the contention raised on behalf of the Department is that the sum of Rs. 1,23,710/- which was received at the post office at Ratlam for goods despatched by V