COMMISSIONER OF INCOME-TAX BOMBAY CITY & SUBURBAN DISTRICT, BOMBAY vs. HUKAMCHAND MILLS LTD. INDORE

CIVIL APPEAL No. 2178/1966Supreme Court[1968] 1 S.C.R. 4721 July 1967Bench: 3 JudgesAuthor: J.C. SHAH, S.M. SIKRI, V. RAMASWAMI7 pages
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What were the facts?

The assessee, Hukamchand Mills Ltd., incorporated in the State of Indore, manufactured and sold textiles. During 1941-1946, it made sales in British India through representatives, brokers, or visiting purchasers. Sales were F.O.R. Indore, with railway receipts issued to 'self', endorsed to customers, and handed to a bank for delivery against payment received at Indore. The Income-tax Officer taxed profits on an accrual basis for sales in British India. The Appellate Assistant Commissioner attributed 33.33% of profits to British Indian activities for certain sales. The Tribunal confirmed this. The High Court, on reference, ruled in favour of the assessee. The Commissioner appealed to the Supreme Court.

What did the Supreme Court hold?

The Supreme Court held that income accrued within British India and a proportionate part of it was assessable to Indian Income-tax. The Court followed its decision in Pushanlal Mansingka (P) Ltd. v. The Commissioner of Income-tax, Delhi, which held that on similar facts, property in goods passed where delivery was made, and income accrued when the purchaser paid the price through the bank. The Court found considerable force in the Revenue's submission that property passed in British India. Regarding Question No. 2, as the High Court had not expressed its views on several points raised by the assessee, the Court decided to remand the case to the High Court for answering Question No. 2 according to law. The appeals were allowed in part, with Question No. 3 answered in the affirmative.

What were the issues?

1. Whether, on the facts and circumstances, the Tribunal was right in holding that a proportionate part of the profits determined on sales under Items 3, 4, 5, and 9 in the assessment order, by application of Rule 33, was assessable to Income-tax? (Question No. 3). The Revenue contended that property in the goods passed in British India for all categories of sales and that the F.O.R. Indore delivery did not alter this position, thus the High Court wrongly held sales were not taxable in India. The Assessee contended that no such point was raised before the Tribunal and should not be allowed at this stage, and that the High Court had not expressed views on certain aspects relevant to Question No. 2. 2. Whether, on the facts and circumstances, the Tribunal was right in holding that in respect of sales of Rs. 14,80,059, the profit was correctly determined by the application of Rule 53 and one-third of the profits so determined could be said to accrue or arise in British India? (Question No. 2). This question was not answered by the High Court.

Which sections of the Income-tax Act were involved?

Section 66

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.. ····1 • 47 A COMMI~IONER OF INCOME-TAX BOMBAY B CITY &: SUBURBAN DISTRICT, BOMBAY v. HUKAMCHAND MILLS LTD. INDORE July 21, 1967 [J.C. SHAH, S. M. SJKRI AND V. RAMASWAMI, JI.)

Income Tax-Company in erstwhile State of Indore making sales in India-Railway Receipts issued to 'self' and endorsed to customers in British India-Handed over to bank to be given to custoiner on payment of sal.e price-Whether property .passed in British India- C Whether Indian Income tax leviable.

The respondent was a limited company incorporated in the State of Indore where it had a textile mill. During the years from 1941 to 1946, it effected sales in British India through canvassing by its own representatives;. through brokers or through the purchasers' brokers or representatives visiting Indore. The sales in British India D in all categories were mad.,-F.O.R. Indore: the Railway Receipts were made out in the name of 'self' and were endorsed in favour of the customer concerned and handed over to the Bank for delivery to the customer against payment of the sale price which was receiv- ed at Indore through the Bank's local branch.

In the course of its assessment to Indian Income-ta

The order continues below.

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