PUSHALAL MANSINGHKA (P) LTD. vs. COMMISSIONER OF INCOME-TAX, DELHI, RAJASTHAN & M.P.

CIVIL APPEAL No. 557/1966Supreme Court[1967] 3 S.C.R. 96105 May 1967Bench: 3 JudgesAuthor: J.C. SHAH, S.M. SIKRI, V. RAMASWAMI B10 pages
AI SummaryDismissed

What were the facts?

The appellant, Pushalal Mansinghka (P) Ltd., a company based in Bhilwara (a Part 'B' State), exported mica to Kodarma and Giridih (Part 'A' and Part 'C' States). Goods were consigned to 'self', with railway receipts sent through the appellant's bank in Bhilwara for collection. The bank's branches in Part 'A' and 'C' States released goods upon payment. For assessment years 1950-51 and 1951-52, the appellant claimed rebate under the Part 'B' States (Taxation Concessions) Order, 1950, arguing income accrued in Part 'B'. The Income-tax Officer rejected this, holding sales and profit accrual occurred in Part 'A'/'C' States. The claim that bills discounted by the local bank meant payment was received in Bhilwara was also rejected. Appeals to the Appellate Assistant Commissioner, Tribunal, and High Court were dismissed.

What did the Supreme Court hold?

The Supreme Court held that the appellant became entitled to the purchase money only upon the passing of title to the purchasers in Part 'A' and Part 'C' States. Therefore, the income accrued to the appellant in those States, and it was not entitled to exemption under the Part 'B' States (Taxation Concessions) Order, 1950. The Court clarified that when a seller draws a bill of exchange on a purchaser and delivers it with the railway receipt to their own banker for delivery upon honouring the bill, property in goods does not pass until the purchaser pays the price and obtains the railway receipt. Regarding the discounting of bills by the local bank, the Court found no substance in the appellant's argument. It held that the bank's discounting was part of its banking business, and the appellant's responsibility did not cease until the bank realized payment from the purchasers. Therefore, any money paid by the bank to the appellant was not the sale price of the goods. The contention regarding apportionment of profits was not considered as it was not raised before the Tribunal.

What were the issues?

1. Whether the property in the goods passed and income accrued to the appellant in Part 'A' and Part 'C' States, thereby disentitling it to exemption under the Part 'B' States (Taxation Concessions) Order, 1950, and making Section 4(1)(a) of the Income-tax Act, 1922 applicable? Assessee's contention: The appellant argued that since mica was extracted, processed, sorted, and packed in Bhilwara (Part 'B' State), a part of the income accrued there, entitling it to apportionment. It also contended that when the local bank discounted bills, payment was received in Bhilwara. Revenue's contention: The revenue contended that sales and profit accrual occurred in Part 'A' and Part 'C' States. It argued that the discounting of bills by the local bank did not constitute receipt of income in Part 'B' State, as the appellant's liability continued until the bank realized payment from the purchasers.

Which sections of the Income-tax Act were involved?

Section 4(1)(a)

AI-generated summary — verify with the full judgment below

A B c D E F G H PUSHALAL MANSINGHKA (P) LTD. v. COMMISSIONER OF INCOME-TAX, DELHI, RAJASTHAN & M.P.

May 5, 1967 (J. C. SHAH, S. M. SIKRI AND V. RAMASWAMI, JJJ Income-Tax Act 1922 s. 4(1) (a)-Exporter in Part 'B' State selling goods to pwchasers in Part 'A" and Part 'C' States-Sending 'selves' rail1vay receipts through local bank 'lo be given to purchaser on pay- ment of price-Bank discounting some bills locally-whether property in goods passing and income accruing, outside Part 1B' State.-Whether exen1ption 1jro1n tax available under Part 'B' States (Taxation. Concessions)

Order, 1950, The appellant carried> on mining business at Bhilwara whioh was, dur- ing the relevant period. in a Part 'B' State and exPorted mica t.o Kodarma and Giridih situated in Part 'A' and Part 'C' States respectively.

The appellant entered into contracts with purchasers whereby the consign- ments would be sent to Kodarma and Giridih by railway and the railway receipts would be sent through the bank.

The goods were con- signed to "self" and the railway receipts along with the Bills of Exchange were presented by the appellant to its bank in Bhilwara for collection after endo

The order continues below.

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