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TMI Blog1966 (4) TMI 2X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 were borne by the allottees to whom they were to be despatched in accordance with the instructions of the competent officers. The assessee made out invoices in the name of the parties to whom goods had been allo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 account books and the bank pass books that the assessee got full credit for the entire amount represented by the bills. The bank had also in the course of the correspondence with the Income-tax Officer confirmed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom 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 parted with the documents at the time it handed over them to the bank and the bank in its turn allowed credit to the assessee on receipt of the documents ; and that thus the bank, after becoming a holder in due course of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 be accepted and must be given effect to when the department never applied to the Tribunal to submit a statement of the case to this court raising a question in regard to the validity of the aforesaid finding of fact rea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 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 the reference before us. In the statement of the case, the Tribunal has mentioned that at no time the department raised any question about the profits having accrued in the taxable territory and the whole case of the departm ..... X X X X Extracts X X X X X X X X Extracts X X X X
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