TMI Blog1966 (4) TMI 2X X X X Extracts X X X X X X X X Extracts X X X X ..... the relevant previous year of which ended on 1st November, 1948. During the relevant previous year, the assessee-firm, M/s. Laxmichand Muchhal, Indore, carried on business at Indore and Ujjain in the sale and export of cloth. These two places were then in non-taxable territory. In that year, there was an all India control over the disposal of cloth. Under the All India Cloth Distribution Scheme, which was then in force, the assessee-firm was appointed as nominee for the United Provinces and certain districts of Punjab for supply of cloth from particular mills in Indore and Ujjain according to the allocations made by the competent Textile Commissioner. When the assessee received allotment orders for supply of cloth to United Provinces and certain districts of Punjab from mills in Indore and Ujjain, it took delivery of the allotted cloth and then despatched the cloth to various destinations in Uttar Pradesh and other places according to the instructions received from time to time from the competent authorities. The goods were stocked by the assessee in godowns until they were actually despatched to the allottees. They were put on rail at Indore and Ujjain and all transport charges w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... voices and documents was on its own behalf and not on behalf of the assessee ; and that consequently the assessee received the amounts at Indore and Ujjain and not in the taxable territory where the bank recovered the money from various allottees. The assessee relied on the decision of the Punjab High Court in Chiranji Lal Multani Mal v. Commissioner of Income-tax. On a consideration of the material on record, which consisted of the assessee's account books, bank pass books, and the correspondence that was exchanged between the State Bank of Indore and the Income-tax Officer regarding the course of dealings between the assessee and the bank with respect to these particular transactions, the Tribunal came to the conclusion that the State Bank of Indore actually purchased the documents from the assessee or discounted them, and when it subsequently received the sale proceeds from the allottees, it received the sum for itself and not for the assessee. On this point, the Tribunal expressed its view thus: "The first point for consideration is whether the assessee had negotiated actually the documents of title and whether the bank had discounted the same. It is found on a perusal of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve been entitled to get the valuable consideration paid for the discounting of the drafts or hundis. It was said that crediting the assessee's account by the bank did not, therefore, alter the position of the bank from that of agent for collection to that of holder for value. Learned Advocate-General proceeded to say that the finding recorded by the Tribunal that the State Bank of Indore was a holder in due course of the drafts and hundis and not a collecting agent of the assessee was contrary to the evidence on record and was vitiated ; that if the bank was merely a collecting agent of the assessee, then the amounts received by it from allottees in the taxable territory was on behalf of the assessee ; and that, therefore, the profits of the cloth transactions were received by the assessee in the taxable territory within the meaning of section 4(1)(a). Shri Chitale, learned counsel for the assessee, argued that the State Bank of Indore, in whose favour hundis and drafts were drawn by the assessee, was a holder in due course ; that the drawing of the drafts or the handing over of the drafts by the assessee in favour of the bank was not conditional ; that the assessee finally parte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . It has been stated in Halsbury's Laws of England (volume 2, 3rd edition), at page 212, that: "Where bills, notes or cheques pass from a customer to a banker, a question of fact arises whether the banker takes them for collection subject to the lien, or as transferee, so as to become absolute holder for value." Here, the Tribunal has found as a fact that the State Bank of Indore actually purchased from the assessee the documents or discounted them and the assessee received full credit for the entire amount of the instruments on the very date of their presentation, and the bank collected the amount of the instruments from the allottees on its own behalf and not on behalf of the assessee. On the facts found by the Tribunal that the State Bank of Indore collected the amount from the allottees on its own behalf and not as a collecting agent for the assessee, it must be held that the sale proceeds were received by the assessee at Indore and Ujjain and not at places in the taxable territory where the bank received the amounts from the allottees. Learned Advocate-General no doubt sought to question the validity of this finding of fact reached by the Tribunal. But that finding has to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Tribunal found that the bank had neither discounted nor purchased the drafts or hundis nor credited the sale proceeds to the assessee's cash credit account prior to collection. It was on these facts that in the case of Hira Mills Ltd. the Tribunal came to the conclusion that the bank was acting only as a collection agent and collected the amount from various dealers in British India for and on behalf of the assessee and, therefore, the amount of the sale proceeds was received by the assessee in the taxable territory in British India. Before the Tribunal, the department strongly relied on the decision of the Madras High Court in Mysore Glass and Enamel Works Ltd. v. Commissioner of Income-tax. The Tribunal rightly held that the Madras case was not in point here as it was decided with reference to the place of accrual of profits and the principle laid down there, namely, that if the right of disposal is reserved till the payment is made, the property passes and the sale effected at the place where the payment is made against delivery of goods or documents of title is of no assistance in determining the place of receipt of the profits in circumstances such as those present in th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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