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PETITIONER: THE  COMMISSIONER  OF INCOME-TAX, MADHYA PRADESH  &  BHOPAL,

       Vs.

RESPONDENT: BHOPAL TEXTILES LTD., BHOPAL.

DATE OF JUDGMENT: 17/10/1960

BENCH: HIDAYATULLAH, M. BENCH: HIDAYATULLAH, M. DAS, S.K. SHAH, J.C.

CITATION:  1961 AIR  426            1961 SCR  (2)   9  CITATOR INFO :  RF         1967 SC1907  (7)

ACT: Income  Tax--Supply of goods by non-resident  company--Place of  Payment, when place of receipt of money by  seller--Bank when agent of seller--Railway receipt, if document of  title of goods--Property in goods, when transferred to buyer.

HEADNOTE: Respondent,  a non-resident company, in the accounting  year supplied goods which were sent F. O. R. Bhopal to the buyers in British India.  The railway receipts were handed over  to a Bank in Bhopal with instructions to hand over the  railway receipts  to the buyers, who were named as consignees,  only on  receipt of payment of the bill and  collection  charges. The  branches  of  the Bank  within  the  taxable  territory collected  the amounts due from the buyers  and  transmitted them to Bhopal to the credit of the respondent. The  question  was  whether the profits in  the  goods  were received or deemed to be received in British India. Held,  that  the decision of this Court in  Commissioner  of Income-tax v. P.  M. Rathod & Co. applied to this case;  and the  income,  profits or gain must be deemed  to  have  been received within the taxable territory. The fact of payment to the agent determines the place  where the  money can be said to be received by the seller.   Since in  the  instant case the railway receipts were  not  to  be handed  over to the buyers by the Bank, as per  instructions of  the  seller, unless payment for the value of  the  goods were  received  by the Bank which  instructions  the  buyers could not countermand, this was sufficient to make the  Bank an agent of the seller. Held, also, that a railway receipt is a document of title to goods,  and, for all purposes, represents the  goods.   When the  railway  receipt  is handed over to  the  consignee  on payment, the property in the goods is transferred. The  Commissioner  of Income-tax v. P. M.  Rathod  and  Co., [1960] 1 S.C.R. 401, relied on.

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JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No. 755 of 1957. Appeal  by special leave from the judgment and  order  dated March  23,  1955, of the former Nagpur High Court  in  Misc. Civil Case No. 240 of 1953. 10 K.   N. Rajagopal Sastri, R. H. Dhebar and D. Gupta, for the appellant. Veda Vyasa, S. N. Andley, J. B. Dadachanji,_ Rameshwar  Nath and P. L. Vohra, for the respondent. 1960.  October, 17.  The Judgment of the Court was delivered by. HIDAYATULLAH  J.-This appeal, with special leave,  has  been filed  against  the judgment of the Nagpur High Court  in  a reference under s. 66(1) of the Indian Income-tax Act, 1922, by  which the High Court answered the following question  in the negative: "  Whether  the proportionate profits on the  goods  of  the value  of  Rs. 4,10,785 were received or were deemed  to  be received in British India, in the year of, account, by or on behalf of the assessee Company within the meaning of Section 4(1)(a) of the Indian Income-tax Act, 1922 ". The Commissioner of Income-tax, Madhya Pradesh and Bhopal is the appellant, and the Bhopal Textiles Ltd., Bhopal, is  the respondent.   For the assessment year 1944-45,  the  Company which  was  non-resident  was  treated  as  ’  resident  and ordinarily resident’ under s. 4(1)(c) of the Income-tax Act. In  the  year of account, it had supplied  its  manufactured articles  either to the Government of India or its  nominees at  Agra,  Allahabad  and Delhi.  Under the  orders  of  the Government,  the  goods  were sent  direct  to  the  persons nominated,  who  made the payment against  the  goods.   The goods were all sent for Bhopal, and the railway freight  and other  charges  were to be borne by the buyers to  whom  the railway receipts made out in the name of the consignees were sent  by  the Company through the Imperial Bank  at  Bhopal. The  Bhopal Branch sent the railway receipts to branches  of the  Bank at Agra, Allahabad and Delhi, which collected  the amounts  due  from the buyers, and transmitted them  to  the Imperial  Bank,  Bhopal, to the credit of the  Company.   On these  facts,  a total sum of Rs. 4,40,373 was held  by  the Department to have been received in British India.  of  that sum, an amount of Rs. 29,588 which represented the receipts 11 for  supplies direct to Government is no longer in  dispute. The balance represents the sum, which was the subject-matter of the reference. The  usual  appeals  followed, and  the  contention  of  the Company  that the money was not received in,  British  India was  not  accepted by the Tribunal.  The  Tribunal  did  not decide  about  the place of accrual.  A reference  was  then made by the Tribunal of the question quoted above.  The High Court  in deciding the reference went into the  question  of passing  of  property under the Indian Sale  of  Goods  Act, 1930, and came to the conclusion that since the property  in the  goods  had passed to the buyers, the Imperial  Bank  of India, Bhopal, must be " deemed to have received the railway receipts  as agents of the buyers ". Continuing the  reason, the learned Judges observed: "  So also the branches of the Bank at Agra,  Allahabad  and Delhi acted as the agents of the buyers when they  collected the money from them and transmitted it to the Bhopal branch. In  this view, the profits cannot be said to be received  by the  assessee  Company in British India.’  It  received  the money only when it reached the Bhopal branch as a credit  to

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its  own  account and that was not in British India  at  the material time ". The  case  was not decided by the Tribunal on the  basis  of accrual of the income, profits or gains to the Company.   It was decided on the fact of actual receipt, whether it was in British  India  or  in Bhopal, which was  then  outside  the taxable  territories.   We  need  not,  therefore,   concern ourselves  with  the problem whether property in  the  goods could  be  said  to have passed  absolutely  to  the  buyers without any right of disposal being reserved by the Company. It  is  a  matter  of some  doubt  whether  the  goods  were absolutely at the disposal of the buyers after the rail. way receipts  were handed over to the Bank.  It is in  evidence- and  has been adverted to by the Incometax Officer-that  the Company,  when  it handed over the railway  receipt  to  the Imperial Bank at Bhopal, did so along with a covering letter in  which it asked the Bank to deliver the  railway  receipt and the bill to 12 the   buyers  against  payment  of  the  bill  amount   plus collection  charges.  In this view of the matter, though  we do not express any final opinion, we doubt whether the right of disposal was parted with by the, Company. A railway receipt is a document of title to goods, and,  for all  purposes,  represents  the  goods.   When  the  railway receipt  is  handed over to the consignee  on  payment,  the property in the goods is transferred.  In this case, it is a matter  of  considerable doubt whether the property  in  the goods  can be said to have passed to the buyers by the  mere fact  of  the  railway receipts being in  the  name  of  the consignees,  as has been held by the High Court.   Since  we are  not  deciding  the  question  of  accrual,  we  do  not elaborate the point. Coming  now  to  the question as to  where  the  amount  was received, we have no doubt that the view of the Tribunal was correct.   This  income was received at Agra,  Allahabad  or Delhi  from  the buyers by the Imperial Bank acting  as  the agent  of  the  Company.  The Company had  handed  over  the railway receipts to the Bank, and asked the Bank not to hand over the railway receipts to the buyers, unless payment  was received.  This was sufficient to make the Bank an agent  of the  Company.  The buyers could not have  countermanded  the instructions  given by the Company to the Bank,  which  they would, indubitably, have been able to   do, if the Bank  was their agent.  This was laid down by     this  Court  in  The Commissioner of Income-tax v. P.   M.  Rathod  and   Company (1).    Mr.   Veda   Vyasa  contends  that   the   case   is distinguishable  on  the ground that  the  railway  receipts there  were " to self ’ whereas here the  railway  receipts, were  made out in the name of the consignee.  Nothing  turns upon  this distinction.  The document of title to goods  was still  the property of the Company till payment for  it  was received  and  it  was handed over.  In  this  view  of  the matter,  we are of opinion that the ruling in question  app- lies. Mr. Veda Vyasa finally contended that the agreement  between the parties was that the goods were to (1)  [1960] 1 S.C.R. 401. 13 be  sent for Bhopal, and that the price was also to be  paid there.   He contended that the handing over of  the  railway receipts  to  the Bank at Bhopal was in furtherance  of  the agreement,  that  the money was ultimately obtained  by  the Bank  and  handed over at Bhopal also, and that,  thus,  the money must be deemed to have been received there.  This,  in

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our  opinion, does not truly represent the character of  the transaction.  No doubt, under the agreement, payment was  to be made at Bhopal; but the circumstances show that that  was departed  from,  and  the ordinary  mercantile  practice  of handing over the railway receipts to one’s own bankers  with a  request to hand over the receipts against payment to  the buyers was followed.  The Bank, as we have shown above,  was thus  the  agent  of the sellers, as was laid  down  in  the ruling  of this Court, and the fact of payment to the  agent determines  the  place  where the money can be  said  to  be received by the Company.  That place was at Agra,  Allahabad or  Delhi.  In this view, the income, profits or gains  must be deemed to have been received in the taxable  territories, and  the  answer to the question ought to have been  in  the affirmative. We accordingly allow the appeal, and answer the question  in the  affirmative.   The appellant will be  entitled  to  his costs here and in the High Court. Appeal allowed. 14