COMMISSIONER OF INCOME-TAX, DELHI vs. MESSRS. P. M. RATHOD & CO.

CIVIL APPEAL No. 373/1957Supreme Court[1960] 1 S.C.R. 40120 May 1959Bench: 3 JudgesAuthor: BHUVNESHWAR PRASAD SINHA, J.L. KAPUR, M. HIDAYATULLAH COMMISSIONER OF INCOME10 pages
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What were the facts?

The respondents, manufacturers of perfumery and hair oils in Ratlam (a Part B State), were assessed for AY 1950-51 on profits from sales to customers in Part A and C States. Goods were sent via Value Payable Post (VPP) or rail. For rail consignments, railway receipts were sent through banks, deliverable against payment. Payments received by banks were remitted to the respondents in Ratlam. The Income-tax Officer treated the sales as effected and payments received in Part A/C States, applying higher tax rates. The respondents claimed receipts in Ratlam, entitling them to concessional Part B State rates. The Tribunal referred two questions to the High Court, which ruled in favour of the respondents. The Commissioner of Income-tax appealed to the Supreme Court.

What did the Supreme Court hold?

The Supreme Court reframed the first question to: "Whether on the facts and circumstances of this case the payment received from a buyer by a banker in Part A or C States against delivery of railway receipts for goods sent by the seller is payment in these States or in Ratlam which was a Part B State." The Court held that where goods are sent by rail and railway receipts are sent through a bank for delivery against payment, the contract is performed only when monies are paid and receipts delivered. Therefore, the contract was taken to have been performed in Part A or C States, and income arising from these transactions was received there. Regarding VPP, the Court held that the post office acts as an agent of the seller for price recovery, retaining control until delivery against payment. The appropriation is conditional, and property passes only upon fulfillment of the condition (payment). Thus, the price was received in Part A or C States, not Ratlam. Consequently, the respondents were not entitled to concessional rates applicable to Part B States. The appeal was allowed.

What were the issues?

1. Whether bank drafts payable in Part A or C States but received at Ratlam and encashed through the assessee's bankers at Bombay constituted receipts in a Part A State? 2. Whether the receipt of sale proceeds at Ratlam, including the assessee's profits, in respect of goods sent by VPP to customers in Part A or C States amounted to receipts of income, profits, or gains at Ratlam in a Part B State? Assessee's Arguments: The respondents argued that the prices realised constituted receipts in Ratlam, entitling them to concessional rates applicable to Part B States. They relied on the principle that the post office acts as a bailee for transmission and that goods were delivered to the post office at the buyer's instance. Revenue's Arguments: The Commissioner of Income-tax contended that sales were effected and payments received in Part A and C States, thus attracting higher tax rates. The revenue argued that the post office is an agent of the seller for price recovery and retains control until payment, and that the appropriation of goods to the contract is conditional until payment is made.

Which sections of the Income-tax Act were involved?

Section 66(1),Section 25(1),Section 148

AI-generated summary — verify with the full judgment below

S.C.R. SUPREME COURT REPORTS 401 expedition because if a nuisance exists it should be removed without delay in order to preserve the health of the community and the fertility of the soil.

The appeal is accordingly allowed with costs. A petition (No. 174 of 1958) under Art. 32 of the Constitution was also filed by the appellant. It is unnecessary to pass any formal order on this petition as, the appellant has i:mcceeded in the Civil Appeal No. 173 of 1959, and it is dif-!posed of accordingly except that there will be no order for costs in this petition. Appeal allowed. COMMISSIONER OF INCOME-TAX, DELHI v. MESSRS. P. M. RATHOD & CO. (B. P. SINHA, J. L. KAPUR and M. HIDAYATULLAR, ,JJ.) Income-tax-Place of accrual or receipt of profits-Goods sold by a trader in a Part B State to customers in Part A or C States- Goods sent by Value Payahle Post or by rail-Post office, whethe1 agent of seller or bailee of goods-Railway receipt sent to bankers to be delivered to customers against payment--Concessional rate of taxation applicable to Part B States-Indian Sale of Goods Act, I9JO (3 of I9JO), s. 25(I)-lndian Contract Act, I872 (9 of I872), s. I48. The respondents wer

The order continues below.

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