TMI Blog1968 (1) TMI 11X X X X Extracts X X X X X X X X Extracts X X X X ..... he Hukumchand Mills Ltd., Indore, the assessees, were doing business of manufacturing and selling textiles in the account years relevant to the assessment years 1942-43, 1943-44, 1945-46, 1946-47 and 1947-48. In the relevant years of account, the assessees were obliged to divert a portion of their production for meeting military requirements and such sales aggregated to Rs. 7,36,156. The total sales of the company amounted to Rs. 92,45,151. These were classified into various categories by the Income-Officer, but for the purpose of the question which survives in this-reference, it is not necessary to refer to any of the other categories except categories Nos. 3, 4, 5 and 9 as classified by the Income-tax Officer. In respect of these categories of sales, the facts have been stated in a tabular form in the statement of the case as follows : --------------------------------------------------------------------------------------------------------------------------------------------------- Sales pursuant Sales to contracts effected Balance bearing Bearing Total and received of columns stamps of sales Category of sales sales in Br. India (2) (3) Indore State sales (a) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee-company's representative had canvassed for orders in British India and upon that point being taken this court took the view that the mere circumstance that the company's representative had canvassed for orders in British India would not have the effect of making any part of the income accrue or arise in British India, since the formation of the contract and its complete performance had taken place in Indore and not in British India. The question as regards the passing of the property in the goods comprised in these contracts was not as such raised before this court. The Commissioner was granted special leave to appeal by the Supreme Court against this decision and the appeal was decided on the 21st July, 1967 (Civil Appeals Nos. 2178 to 2182 of 1966). Before the Supreme Court the principal point taken was that it could not be held that no part of the profits of the sales could be said to have accrued or arisen in British India because, on the affidavits and the circumstances of the case, the property in the goods passed in British India in all the four categories. It was urged that in all the four categories the method of delivery was similar. The railway receipts were made ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 2 but we are unable to regard this aspect as a new question " (the underlining is ours). Relying upon the passage which we have underlined above, Mr. Mehta has now urged that in deciding the question of apportionment of the profits between British India and Indore State, we mast ourselves look into the facts relating to the passing of property in the goods. He has strenuously urged that by the above remarks that question was kept open by the Supreme Court for consideration by us in deciding question No. 2. He has urged, therefore, that taking all the facts established in the case and the finding of the Supreme Court into account, there is nothing to establish that in this case the goods were paid for in British India and that, therefore, the property in the goods passed to the buyers in British India. He accepts the facts that the assessee effected these sales to merchants and others in British India. He also accepts the position that the method of delivery in the four categories as found by the Supreme Court was similar. namely, that the railway receipts were made out in the name of "self" by the assessee and endorsed in favour of merchants and were handed over to the Imperial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... preme Court. Moreover, it cannot be said, as argued, that there is no finding given by the Supreme Court that the moneys were paid in Bombay against delivery of the documents of title, namely, the railway receipts or that there is no finding that the property in the goods passed, at Bombay. In our opinion, these findings are implicit in the finding given by the Supreme Court : " We hold that income accrued within British India and that a proportionate part of the income was assessable to income-tax." The ground upon which they so held obviously is that the property in the goods passed in British India in all the four categories. This they have stated as the argument of counsel on behalf of the Commissioner before them, which argument they accepted. That the Supreme Court has so held is clear when we consider the cases to which they referred, namely, Seth Pushalal Mansinghka's case, Commissioner of Income-tax v. P. M. Rathod Co., and Commissioner of Income-tax v. Bhopal Textiles Ltd. In Pushalal Mansinghka's case the Supreme Court pointed out that the facts were that the appellant had consigned the goods to " self " and the railway receipts along with the bills of exchange ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Native State was left over. We cannot, therefore, accept this contention of counsel on behalf of the assessee. The next point which Mr. Mehta has argued is as to the apportionment of the profits between British India and the Native State. He has referred to the decision of the Supreme Court in Anglo-French Textile Company Ltd. v. Commissioner of Income-tax and urged that the profits accrue where the business operations are carried on and, therefore, in judging the quantum of the profits which accrued in British India, we must have regard to the quantum of the operations which the assessee carried on in British India in effecting the sales. He has also urged that in their judgment in this case the Supreme Court has itself said that the question of the formation of the contract and its complete performance may perhaps be relevant to the answering of question No. 2. Therefore, Mr. Mehta urged that we must have regard to the formation of the contract and the nature of its performance and that we should take into account the extent of the operations carried on in British India and only to that extent and proportion would it be permissible to tax the profits. In view of this deci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but we do not think that that consideration has influenced the finding of the Tribunal. The assessments of the proportion of the profits by the Appellate Assistant Commissioner and the Tribunal have been concurrently made at 33 1/3% of the profits in British India as being attributable to operations in British India as against 66 2/3% being attributable to operations in Indore State. This assessment of the proportion of the profits is made only on the analogy of the principle laid down in rule 33. Rule 33 as such does not apply because these are actual profits and not profits deemed to be so. Counsel for both the parties conceded that position. Therefore, ultimately and in essence the finding on the question of proportion of profits is an estimate made concurrently by the Appellate Assistant Commissioner and the Tribunal and there does not appear to be anything on the record or in their findings to show that that estimate was erroneous or grossly improper. They have taken into account the relevant facts and come to the conclusion that in their estimate one-third of the profits should be held attributable to operations in British India. In a reference we can hardly interfere with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apportionment of profits was arbitrary and not on any rational basis. Moreover, the Madras High Court itself has pointed out in that case that they were deciding that case only with reference to the particular facts of that case and they emphasised that it should not be treated as a precedent. At page 789 they have observed : " They contract that the assessee obtained had special features. We should like to guard ourselves at this stage by emphasising that all our observations are only with reference to the contract before us. We are not to be understood as laying down as a proposition of law of general application to all cases where a contract for execution of works takes place within the taxable territories and all the other operations take place outside the taxable territories. " In view of these remarks which the Division Bench itself made, we can hardly hold that that case lays down any proposition of law. We are surprised that it should have been reported at all. These were the only submissions made on behalf of the assessee to challenge the apportionment of the profits at 33 1/3% for British India and 66 2/3% for Indore. We cannot see anything wrong with the estimate ..... X X X X Extracts X X X X X X X X Extracts X X X X
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