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TMI Blog1964 (4) TMI 1X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 Concessions) Order, 1950, and that section 4(1)(a) of the Act was not applicable to its transactions. By his order dated 31st May, 1954, for the assessment year 1951-52, the Income-tax Officer held that since the railway receipts were obtained by the assessee for " self " and were sent by the assessee through its banker to the buyers, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ow 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 sent to Kodarma or Girdih, as the case may be, and that the railway receipts would be sent " through bank ". Then there is the further stipulation that 25 per cent. of the price would be sent by way of an advance within a week's time, that the packing expenses would be payable by the buyers and that after the consignments left the godown ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the mercantitle method of accounting and there can be little doubt that, by virtue of section 13 of the Act, its income, profits and gains shall have to be computed in accordance with that method of accounting, i.e., on the basis of accrual, and not on the basis of receipt. We may in this connection refer to the well-known case of E. D. Sass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ections 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 argument that the bank was the agent of the buyers comes in for consideration. The learned counsel has pointed out that the Income-tax Appellate Tribunal committed a serious mistake when in paragraph 8 of its order dated 18th August, 1958, it referred to the bankers as the bankers of the assessee, and it has further been argued that it was onl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 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 cannot, therefore, be said that the provision for the sending of the railway receipts through the bank was so innocuous or insignificant that it could be ignored and the contract held to be an unconditional contract for sale. As such, we are clearly of the opinion that this case is not covered by section 20 of the Sale of Goods Act, and that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 meaning of section 23(2) of the Sale of Goods Act. This argument also fails to convince us because the sub-section provides that where, in pursuance of the contract, the seller delivers the goods. to the buyer or to a carrier or other bailee for the purpose of transmission to the buyer and does not reserve the right of disposal, he is deemed to have unco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 spite of the fact that the goods had been handed over to a common carrier, the appropriation to the contract was only conditional and that the performance was completed when the monies were paid and the railway receipts delivered in a Part A or Part C State. It has been urged before us that the case is distinguishable for the reason that there was evide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sioner 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 findings given by it. Stating the position compendiously, it is only a question that has been raised before or decided by the Tribunal that could be held to arise out of its order." We have gone through the order of the Tribunal in the light of these observations of their Lordships of the Supreme Court and we have no doubt that the question of apportionment of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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