TMI Blog1964 (4) TMI 1X X X X Extracts X X X X X X X X Extracts X X X X ..... income from the mining business for the assessment years 1950-51 and 1951-52 ?" The assessee is a private limited company with its mines, factory and head office at Bhilwara in Rajasthan, and was incorporated as a company in the former State of Udaipur on 12th November, 1946. The assessee carried on mining business at Bhilwara and was engaged in the cutting, processing, sorting and packing of mica which was sent almost entirely by railway to Kodarma and Girdih villages in Part A and Part C States, as they then were. The assessee followed the mercantile method of accounting and the assessment years in question are 1950-51 and 1951-52, the corresponding previous years being the years from 2nd November, 1948, to 21st October, 1949, and 22nd October, 1949, to 9th November, 1950, respectively. The total sale proceeds of the assessee during the two assessment years amounted to Rs. 19,77,544 and the assessee tendered bills to the local branch of the Bank of Rajasthan to the extent of Rs. 15,64,475 and received that much of the payment at Bhilwara. As Rajasthan was then a Part B State, the assessee claimed that it was entitled to the benefit of rebate under the Part B States (Taxation C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -tax Appellate Tribunal, Bombay Bench "C", but the Tribunal also reached the conclusion that as the goods were consigned to " self " and not to the buyers, the property in the goods did not pass to them until they took possession of the documents from the bank. The appeal was accordingly dismissed on the 18th August, 1958, and this is how the present reference has been made at the assessee's request. In order to appreciate the controversy, it is necessary to refer to some other facts which are not in dispute, so that the nature of the transactions which gave rise to the profits in respect of the two assessment years may be properly appreciated. The representatives of the buyers from Kodarma and Girdih used to visit Bhilwara inspect the various qualities of mica which the assessee had for sale and entered into written contracts for their purchase. Four of such contracts have been placed on the record and marked as annexure " A ", for it is admitted that they fairly represent all the contracts with which we are concerned. These contracts clearly show that the buyers purchased specified qualities of mica, " Bhilwara godown delivery ", on the condition that the consignments would be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the bank's favour and were delivered to the bank because such an endorsement was sufficient to pass a title in favour of the bank who was the buyer's agent. Further, the learned counsel has pointed out that the question whether the goods were unconditionally appropriated towards the contract at Bhilwara within the meaning of section 23 of the Sale of Goods Act has not been properly considered and appreciated and that since the appropriation was at Bhilwara, the subsequent process for the purpose of effecting actual delivery of the goods to the buyers or obtaining the price from them was of no consequence. These arguments have been supported by reference to certain decided cases and we shall have occasion to refer to them a little later. It may be mentioned here that an alternative argu ment has been made by the learned counsel for the assessee that, even if it was held that the sales in question took place in a Part A or Part C State, the assessee was entitled to apportionment of the profits as it has not been disputed that the mica in question was extracted, processed, sorted, packed and despatched at Bhilwara. Now, as we have stated earlier, the assessee regularly employed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provision that, for the purpose of ascertaining such an intention, regard shall be had to, (i) the terms of the contract, (ii) the conduct of the parties, and (iii) the circumstances of the case. Then there is the provision in sub-section (3) of section 19 to the effect that : "Unless a different intention appears, the rules contained in sections 22 to 24 are rules for ascertaining the intention of the parties as to the time at which the property in the goods is to pass to the buyer." The case of the assessee is that the sales in question fall within the purview of section 20 because there was, in each case, an unconditional contract for sale of specific goods in deliverable state and that the property in the goods accordingly passed to the buyers when the contract was made. The question is whether these could be said to be unconditional contracts within the meaning of section 20. It has been argued by the assessee's learned counsel that there is nothing in the various letters of contract marked annexure " A " or in the other evidence on the record, which could show that this was not an unconditional contract for the sale of mica, and it is in this connection that his other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommissioner of Income-tax v. Bhopal Textiles Ltd., Mysore Glass and Enamel Works Ltd. v. Commissioner of Income-tax and Mewar Textile Mills Ltd. v. Commissioner of Income-tax. Now, it is well settled that the inference in respect of a mercantile contract is that each party will do what is " merchantably reasonable." So, when it was made a condition of the contract that the railway receipt would be sent through the bank, it would follow that such a term had the effect of inserting a condition in the contract of sale that the seller would deliver the railway receipt to the bank for onward transmission to the buyer, and that it would be the bank which would secure a clearance of the transaction. Such a provision obviously had the effect of providing that the bank would deliver the railway receipt to the buyer only against payment of its value, or, in other words, on the honouring of the bill of exchange by the buyer. We are, therefore, inclined to the view that the parties to the contract virtually stipulated, as an important condition for the sale of the goods in question, that the property in the goods would pass to the buyer on payment of the value thereof, and not otherwise. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osed to take the view that the statement is reliable. Thus, there is no force in the argument that the bank was the buyer's agent and that the delivery of the railway receipts to it was on behalf of the buyers and that it passed the property in the goods to them. In this view, Commissioner of Income-tax v. Ogale Glass Works Ltd. and Commissioner of Income-tax v. Patney Co., which have been cited by the learned counsel for the assessee, have no relevance. Those cases relate to the posting of cheques at the request of the assessee and that was why it was held that the post office became the assessee's agent so that the delivery of the cheque to the post office amounted to delivery to the assessee so far as the receipt of the payment by the assessee was concerned. An argument has also been advanced on behalf of the assessee that a serious error has been committed in drawing up the order of assessment, inasmuch as the department failed to take notice of the fact that, by making the endorsement in favour of the bank, the assessee passed on the title in respect of the goods at Bhilwara and that there was, at any rate, an unconditional appropriation of the goods there within the mea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the buyer's bank against the acceptance of the relative bill of exchange. This case was sought to be distinguished by the assessee's learned counsel on the ground that it was not a case of " ascertained goods" and that it differed from the present case also for the reason that there is an unconditional contract for the sale of the mica in this case. These so-called distinguishing features are really of no importance, for the fact remains that the view which prevailed with their Lordships was that as the bill of lading was handed over to the buyers' bank against acceptance of the relative bill of exchange, the property in the goods passed in London ; and that decision would amply govern the present case. Then we come to Commissioner of Income-tax v. P. M. Rathod Co. In that case, the goods ordered by the buyers were sent to them either by V. P. P. or by rail and, in the latter case, the railway receipts in favour of " self " were sent through bank to be delivered to the buyers against payment of the demand draft drawn on the buyer. It was held by their Lordships of the Supreme Court that as the railway receipts could not be delivered to the buyers till the money was paid, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome could not be said to have arisen in a Part A or Part C State. An objection was however raised by Mr. Lodha that such a plea was not advanced before the department or the Income-tax Appellate Tribunal and that it could not be allowed to be raised for the first time before us. A point similar to that raised by Mr. Lodha arose for consideration in Commissioner of Income-tax v. Scindia Steam Navigation Co. Ltd. and, after examining the relevant provisions and the case-law, their Lordships of the Supreme Court summed up the position as follows :-- " (1) When a question is raised before the Tribunal and is dealt with by it, it is clearly one arising out of its order. (2) When a question of law is raised before the Tribunal but the Tribunal fails to deal with it, it must be deemed to have been dealt with by it, and is, therefore, one arising out of its order. (3) When a question is not raised before the Tribunal but the Tribunal deals with it, that will also be a question arising out of its order. (4) When a question of law is neither raised before the Tribunal nor considered by it, it will not be a question arising out of its order notwithstanding that it may arise on the f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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