TMI Blog1951 (3) TMI 46X X X X Extracts X X X X X X X X Extracts X X X X ..... are not in dispute and the statement of facts drawn up the appellate Tribunal has been agreed to by the Commissioner of Income-tax and the assessee. The assessee is Mysore Chromite, Ltd., a company registered under the Mysore Company Regulations. Its registered office is at Sinduvalli in Mysore State. It acquired certain mining rights from the Government of Mysore over certain properties situate in that State. Messrs. Oakely Bowden Co., Ltd., Madras, are the managing agents of the assessee, and their registered office is at No. 15, Armenian Street, Madras. The assessee sells chromite ore after converting it into a merchantable product, mostly to merchants outside India, that is to buyers in America and in Europe. Messrs. Bowden Oakley Ltd., London, are the agents of the assessee in Europe while Messrs. W.R. Grace and Co., New York, are the agents for business in New York. The course of dealing carried on by the assessee through their agents to buyers in Europe is that the buyers entered into contracts for the purchase of the product through the agents of the assessee in London. In regard to the American buyers, it appears that the agents in New York themselves entered into con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs by the Eastern Bank was only for guidance and that it did not involve any responsibility on the part of the bank. The balance of the price, that is, 10% in the case of European contracts and 20% in the case of American contracts was to be paid at London on ascertainment of the weight of the goods after they were assayed. There was a provision in the case of European contracts for insurance by the buyers but there is no such provision in the case of American contracts. In pursuance of this mode of mercantile dealing the goods were shipped by the managing agents of the assessee company who prepared the provisional in--voice and a bill of exchange on the buyers' bank for 90% or 80% as the case may be of the value of the provisional invoice amount payable at sight in the case of European contracts and at 90 days' sight in the case of American contracts to the Eastern Bank Ltd., London. The bill of exchange and the bill of lading which was taken in the name of the seller but endorsed in blank by the seller and the provisional invoice were than negotiated through the Eastern Bank Ltd., Madras. The Eastern Bank Ltd., Madras which, as stated already, is an exchange bank advanced ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, is not a sale of ascertained goods but of unascertained goods. The sale takes place and is completed and the profits arise at the place and at the moment when the property in the goods passed to the buyer. Where did the property in the goods pass in the present case ? Section 18 of the Sale of Goods Act lays down that in the case of sale of unascertained goods, the property in the goods does not pass to the buyer unless and until the goods are ascertained. Under Section 23 of the Act in the case of sale of unascertained goods unconditional appropriation of the goods to the contract either by the seller with the assent of the buyer or by the buyer with the assent of the seller passes the property in the goods to the buyer. But it must be noticed that the appropriation in such a case must be unconditional. Under Section 25 of the Act it is open to a seller either by virtue of the terms of the contract or by his appropriation, to reserve the right of disposal of the goods until certain conditions are fulfilled. In such a case, it is stated in the section, notwithstanding the delivery of the goods to a buyer, or to a carrier or other baile for the purpose of transmission to the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of exchange as provided in the contract itself and also as intimated by the letter of the Eastern Bank to the sellers. Their position, therefore, was merely that of intermediate financiers who, on the security of the documents of title to the goods which have been handed over to them and the bill of exchange under which they are the payees, agreed to advance 90% or 80% of the provisional invoice price to the sellers. Of course, these devices are intended to prevent the seller's money being locked up for a long time and make it unavailable for purposes of trade. It is a well known, method of securing money for purposes of further trade. It is nothing more than a mere loan to the sellers on security of the goods, It is not payment of the purchase price as at that moment of time the property in the goods did not pass and the Eastern Bank Ltd. were not acting in any sense of the term as agents of the buyers. The letter of credit was given by the buyer's bank and that fact was intimated through the Eastern Bank Limited, Madras, to the sellers. The Eastern Bank throughout acted as bankers acting on behalf of the sellers and they had nothing to do with the buyers. A further con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... intention. The bill of lading is the symbol of the goods. Apart from specific formalities or similar prescriptions of Municipal Law, which are not now material, such intention is a question of fact. The usual course of dealing in the export of merchandise and the interest of the parties concerned in it, suffice for the necessary inference in the absence of evidence to the contrary. When a shipper takes his draft, not as yet accepted, but accompanied by a bill of lading, endorsed in this way, and discounts it with a banker, he makes himself liable on the instrument as drawer, and he further makes the goods, which the bill of lading represents, security for its payment. If, in turn, the discounting banker surrenders the bill of lading to the acceptor against his acceptance, the inference is that he is satisfied to part with his security in consideration of getting this further party's liability on the bill, and that in so doing he acts with the permission and by the mandate of the shipper and drawer. Possession of the indorsed bill of lading enables the acceptor to get possession of the goods on the ship's arrival. If the shipper, being then owner of the goods, authorizes an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ract attaches. These thereupon he is bound to deliver and the buyer is bound to accept, subject to the terms of the contract. That, however, does not involve the passing of the property. The property cannot pass under a contract of sale until the goods are ascertained (the Sale of Goods Act, 1893, Section 16), but, once they are ascertained, the property passes at the time when the parties intended it shall [Section 17(1)]. As the parties seldom express any such intention, or perhaps even think of it, the intention will generally be a matter of inference from the terms of the contract, the conduct of the parties, and the circumstances of the case . Then Section 18 of the English Sale of Goods Act was quoted and at page 66 while referring to the requirement that the appropriation must be unconditional this is what the learned Lord says :- However, the Court, I venture to think, should not have disregarded the word ' unconditionally' in sub-rule (1) (corresponding to Section 23 of the Indian Sale of Goods Act). I do not construe sub-rule (1) as limited to a case where there is an express term that the notice of appropriation is unconditional, or, on the other hand, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in London and the answer to the first question referred to us must be in the affirmative and against the Income-tax Commissioner. The next question for consideration is whether it can be said that the profits were received in British India, as 80% and 90% of the provisional invoice price were paid by the Eastern Bank Ltd., Madras, in the circumstances already set forth. The attempt of the department is to tax the assessee on the ground that even if the profits arose out side British India they were at least received in British India and therefore he is liable to pay tax. The contention strongly pressed before us by Mr. Rama Rao Saheb, the learned Advocate for the Income-tax Commissioner, is that the amount paid to the Eastern Bank Ltd., Madras, as advance is really receipt of part of the purchase price at Madras in British India and therefore it is that the assessee is liable to pay tax on the income. Here again one should not overlook the position that arises on the facts of the case. In the first place it must be remembered that at the time the Eastern Bank Ltd., Madras, paid this money it was not paid as part of the purchase price. No doubt there was the confirmed letter of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... receipt of the profits. We are unable to accept this contention. The effect of the adjustment was only to lessen the liability of the assessee in British India to the Eastern Bank Limited, Madras. That cannot be treated as a receipt of the profits in British India. As has been pointed out by Kania, J., as the officiating Chief Justice, as he then was, in Sarupchand Hukumchand In re [1945] 13 ITR, 245 a mere lessening of liability in British India is not a receipt. To constitute a receipt there must be a receipt of the amount or at least by appropriate book entries of an asset which can be pointed out as resulting from the receipt (vide at page 260, and observations of Chagla, J., at page 262). As pointed out in the Gresham case (Gresham Life Assurance Society v. Bishop [1902] AC 287) the income may be received in specie or in any form known to the commercial world for the transmission of money from one country or place to another ; and that is the test which was adopted in Commissioner of Income-tax, Bombay v. Ahmedabad Advance Mills Ltd. [1938] ILR 1938 Bom. 171, 6 ITR 31 and also in Commissioner of Income-tax, Bombay v. The New India Assurance Co. Ltd. [1938] ILR. 1938 Bom. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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