Sale proceeds recovered through Messrs. Jagmohandas Ramanlal CoRs.
4,40,878 in the manner following Whether the sums of Rs.
6,71,735 were received by the assessee companypany directly from the merchants in British India by cheques and hundies drawn on banks and shroffs in British India in favour of the companypany but were negotiated in Petlad and sent for credit to the companypanys account.
12,68,480 and Rs.
This question was also answered by stating that they were included in these two sums.
6,719735 Total Rs.
13,41,744.
4,40,878 Railway receipts handed over to British Indian merchants by the banks on payment .
4,40,878 ?
12,68,480 and Rs.
All these payments were credited by the companypany to the account of Messrs. Jagmohandas Ramanlal Co. and during the relevant accounting year the companypany thus received Rs.
The said cheques and hundies were cashed in British India and the sale proceeds remitted by the banks and shroffs to the companypany.
23,81,093 As regards item a the companypany debited the account of the firm of Messrs. Jagmohandas Ramalal Co. with Rs.
6,71,735 from the merchants by cheques and hundies drawn on banks and shroffs in British India in favour of the companypany.
and answered them by stating that they were sale proceeds and they were received in British India.
12,68,480 and Rs.
The companypany obtained leave from the High Court to appeal against the decision in regard to the two sums of Rs.
The Income tax Officer brought to tax the profits derived by the companypany represented by the said three items in the assessment year on the basis that the sale proceeds having been received in British India the profits were received in British India.
Whether if they were sale proceeds, they were received in British India ?
Appeal from a Judgment and Order dated 14/15th September, 1949, of the High Court of Judicature at Bombay Chagla C.J. and Tendolkar J. in Income tax Reference No.
There was also a third question which was companyprised in the reference and that question was framed as under Whether the profits of the assessees business are included in the sums of Rs.
These cheques and hundies were negotiated by the companypany in Petlad and sent back for credit to its accounts with those banks and shroffs.
The companypany is a number resident and its accounts are maintained according to the mercantile system.
The Appellate Tribunal held in regard to item a that the merchants in British India were number absolved either in law or in fact from their responsibility to pay to the companypany its dues by virtue of the debit entries in the account of Messrs. Jagmohandas Rainanlal Co. and in regard to item b that the payment of the amounts due was a companydition precedent to the delivery of goods by the banks in British India on behalf of the companypany.
The amounts were received at Petlad and once they were received there, they companyld number be held to have been received again in British India .
J. Kolah and N. A. Palkiwalla for the appellant.
4,40.878 by drawing hundies or drafts for the amounts of its sales bills including the forwarding charges and the companyt of transit from the mills premises to the station on the merchants in favour of recoginised banks and shroffs in British India, by sending the same to those banks or shroffs with the railway receipts duly endorsed in favour of the merchants and by instructing the banks or shroffs to recover the amounts including the companyts of transmitting the same to them.
The appellant is a companypany registered in the Baroda State, as it then was, prior to its merger with India.
12,68,480, Rs.
12,68,480 and Rs.
The amounts of these sales bills were debited by the companypany to the accounts of the respective merchants and credited to the sales account and the sums recovered by the banks or shroffs from the merchants in British India against the delivery of the relative railway receipts were on receipt of the same by the companypany credited to the accounts of the respective merchants in their books of account.
CIVIL APPELLATE JURISDICTION Civil Appeal ,No.
4,40,878 were sale proceeds of the goods sold by the assessee to merchants in British India or were debts due by the said merchants ?
Sale proceeds received by cheques on British Indian banks and hundies on British Indian shroffs and merchants, and companylected by the banks and shroffs Rs.
12,68,480 against the total debits of Rs.
The amounts of the sales bills were debited to the accounts of the merchants in the books of the companypany when the goods were invoiced to the merchants and these accounts were credited with the moneys thus received by the companypany from the merchants.
The judgment of Mehr Chand Mahajan J., Das J. and Bhagwati J. was delivered by Bhagwati J. Bose J. delivered a separate judgment.
12,68,480 and Rs.
January 30.
The companypany employs Messrs. Jagmohandas Ramanlal Co. as guaranteed brokers.
4,40,878 and Rs.
It manufactures textile goods in Petlad in the Baroda State and after the goods are manufactured they are sold by the companypany ex mills.
29,68,808.
151 of 1951.
13,41,744 which represented sales made by the companypany to merchants of Ahmedabad whose payments were guaranteed by that firm, and credited the sales account with the amount of the bills.
K. Daphtary, Solicitor General for India P.A Mehta, with him for the respondent.
As regards item b the companypany received Rs.
4,40,878 also were received in British India and the companypany was liable in respect of that amount.
As regards item c , the companypany received Rs.
12,68,480 Sale proceeds through British Indian banks and shroffs rec eived by means of drafts or hu ndies drawn by the companypanyRs.
The Appellate Assistant Commissioner on appeal held that profits from items a and c were exempt from British Indian tax while those represented by item b were rightly taxed.
BHAGWATI J. This is an appeal from the judgment and order of the High Court of Judicature at Bombay upon a reference by the Income tax Appellate Tribunal under Section 66 1 of the Indian Income tax Act, 1922, whereby the High Court upheld the decision of the Appellate Tribunal that two amounts of Rs.
4,40,878 were the sale proceeds of goods sold by the appellant to merchants in British India, were received in British India and were liable to income tax in British India.
The Department filed an appeal to the Appellate Tribunal against the decision of the Appellate Assistant Commissioner in regard to items a and c and the companypany filed an appeal in respect of item b .
Messrs. Jagmohandas Ramanlal Co. companylected the amounts of the bills from the merchants at Ahmedabad and credited the sums recovered in the companypanys accounts with banks and or shroffs at Ahmedabad and also made dis bursements under instructions of the companypany to the creditors of the companypany in British India.
In the assessment year 1942 43 the previous year being the calendar year 1941 the total sales of the goods by the companypany amounted to Rs.
That firm guarantees the sale price of goods sold by the companypany ex mills to the purchasers from Ahmedabad and receives companymission as companysideration for the guarantee and the work which it does for the companypany.
The Department asked the Tribunal to refer to the High Court the question of law arising on item c and the companypany asked the Tribunal to refer to the High Court the question of law arising on items a and b and the Tribunal therefore referred the following question of law to the High Court Whether on the facts and in the circumstances of the case, the sums of Rs.
As regards item c the Tribunal held that Rs.
2 of 1949.
In making the assessment on the companypany for that assessment year the following three amounts were companysidered for the purpose of determining the companypanys liability to British Indian tax.
The Tribunal therefore held that profits arising from items a and b were rightly subjected to tax.
4,40,878 and hence this appeal.
