This reference under section 66(6), India Income-tax Act, 1922 (hereinafter called the Act), arises out of the order of the Income-tax Appellate Tribunal, Bombay, in I.T.A. No. 5997 of 1951-52, on the following question of law, namely : "Whether the proportionate profits on the goods of the value of Rs. 4,10,785 were received or deemed to be received in British India, in the year of account, by or on behalf of the assessee company within the meaning of section 4(1)(a) of the India Income-tax Act, 1922 ?" 2. The assessee, Bhopal Textiles Ltd., Bhopal, was a non-resident company in the year of account ending December 31, 1945. Its total sales amounted to Rs. 71,47,260 and net profits to Rs. 26,85,000. Out of the total sales, goods of the value of Rs. 4,10,785 were supplied to the nominees of the Government of India at Agra, Allahabad and Delhi.
This was done in pursuance of an agreement between the assessee company and the Government of India for the supply of goods to the Government or its nominees. It was agreed that the goods would be inspected, approved and taken delivery of at the mill premises and the price would be paid at Bhopal.
3. In accordance with this agreement the goods were dispatched to the nominees of the Government of India by railway, freight-to-pay, and the railway receipt were made out in the name of the consignees. The assessee company handed over the railway receipts to the Imperial Bank of India, Bhopal branch, for the purpose of collecting the money due, at ex-mill price price on the goods dispatched. The branches of the Imperial Bank of India at Agra, Allahabad and Delhi delivered the railway receipts to the consignees on payment of the necessary charges and the money collected from them was sent to the Bhopal branch for being credited to the assessee companys account.
"On these facts, we are of opinion, that the profits were received on behalf of the assessee company in British India. The Imperial Bank of India was the agent of the assessee company. The fact that another branch of the Imperial Bank of India collected the money does not, in our opinion, make any difference. We we cannot say that the Imperial Bank of India collected the money does not, in our opinion, make any difference. We cannot say, in Kanpur or Delhi. Even assuming that it is so, we are of opinion that the Imperial Bank of India, Delhi, or Kanpur, received the money on behalf of the assessee company." The Tribunal has explained that the Kanpur branch of the Imperial Bank of India was mentioned in the order only by way of illustration, and that as a matter of fact, the nominees of the Government of India received the goods at Agra, Allahabad and Delhi.
6. As the goods passed to the buyers, the Bhopal branch of the Imperial Bank of India should be deemed to have received the railway receipt as agents of the buyers. So also the branches of the bank at Agra, Allahabad and Delhi acted as the agents of the buyers when they collected the money from them and transmitted it to the Bhopal branch.
In this view, the profits cannot be said to be received by the assessee company in British India. It received the money only when it reach the Bhopal branch as a credit to its own account and that was not in British India at the material time.Turner Morrison & Co. Ltd. v. Commissioner of Income-tax and Keshav Mills Ltd. v. Commissioner of Income-tax, cited at the Bar, are easily distinguishable. In the former, the agent company of the resident assessee association effected the sales in British India and credited the account kept in its own name with a bank in British India.
Similarly, in the other case the assessee non-resident company effected sales in British India through its brokers who received payment on its behalf. So also in Sir Sobha Singh v. Commissioner of Income-tax, the payment was made to the assessee company at the officer of the Reserve Bank, Bombay, in accordance with the contract, and in Bangalore Woolen Cotton and Silk Mills Co. Ltd. v. Commissioner of Income-tax, the sales money was collected by the assessee companys managing agents in British India. The facts of this case are, however, different and are similar to those of Commissioner of Income-tax v. Anamallais Timber Trust Ltd., the appropriation of the goods and the receipt of money had taken place outside British India, and accordingly the income was held not liable to be taxed. It cannot, therefore, be held in the instant case that the income was received or should be deemed to be received in British India.
8. The question is, therefore, answered in the negative. Costs shall be borne by the department. Hearing fee Rs. 100.