THE COMMISSIONER OF INCOME-TAX, MADRAS vs. MYSORE CHROMITE LIMITED.

CIVIL APPEAL No. 117/1953Supreme Court[1955] 1 S.C.R. 84901 November 1954Bench: 5 JudgesAuthor: MEHR CHAND MAHAJAN, SUDHI RANJAN DAS, GHULAM HASAN, NATWARLAL HARILAL BHAGWATI, T.L. VENKATARAMA AIYYAR13 pages
AI SummaryDismissed

What were the facts?

The assessee, Mysore Chromite Limited, with its registered office in Mysore State and management in Madras, sold chrome ore to buyers primarily outside India. Sales to European buyers were facilitated by Bowden Oakley and Co. Ltd., London, who signed contracts there. Sales to American buyers were through W.R. Grace & Co., New York, with contracts signed in America and Madras. All contracts stipulated price as F.O.B. Madras. Buyers opened confirmed irrevocable Bankers' credits in London. Eastern Bank Ltd., London, informed Eastern Bank Ltd., Madras, which then notified the assessee. The assessee shipped goods, obtained bills of lading in its name, and drew bills of exchange on the buyers' banks. These bills, along with endorsed bills of lading and provisional invoices, were negotiated with Eastern Bank Ltd., Madras, which credited the assessee. Eastern Bank Ltd., Madras, forwarded documents to London, where upon acceptance of the bill of exchange, documents were delivered to the buyers' banks. The final price was settled upon arrival and assay, with the balance paid to Eastern Bank Ltd., London, the assessee's agent.

What did the Supreme Court hold?

The Tribunal held that the property in the goods could not have passed to the buyer earlier than the date when the bill of exchange was accepted by the buyers' Bank in London and the documents were delivered by the assessee's agent, Eastern Bank Ltd., London, to the buyers' Bank. As this always took place in London, the sales occurred outside British India, and consequently, the profits derived from such sales arose outside British India. Repelling the revenue's second contention, the Tribunal held that the payment of 80% or 90% by Eastern Bank Ltd., Madras, was not a payment of the price but an advance by the bank to its customer (the assessee) on the security of the goods and bill of exchange. The actual receipt of the price, both the initial advance and the balance, was by Eastern Bank Ltd., London, on behalf of the assessee. Therefore, profits were received outside British India. The High Court's decision answering both questions in favour of the assessee was upheld.

What were the issues?

1. Whether, on the facts and in the circumstances, the profits derived by the assessee company from sales made to European and American buyers arose outside British India, pursuant to Section 4 of the Indian Income-tax Act, 1922? The revenue contended that sales took place in British India because the price and delivery were F.O.B. Madras, insurance was the buyer's concern, and payment of a portion of the price was made in Madras by Eastern Bank Ltd., Madras, implying property passed in Madras. The assessee argued that property passed outside British India. 2. Whether, on the facts and in the circumstances, the profits derived by the assessee company from sales made to European and American buyers were received outside British India, pursuant to Section 4 of the Indian Income-tax Act, 1922? The revenue argued that profits were received in Madras as the assessee drew bills of exchange and received amounts from Eastern Bank Ltd., Madras, which constituted receipt of price. The assessee contended that the actual receipt of price occurred in London.

Which sections of the Income-tax Act were involved?

Section 4,Section 66(1)

AI-generated summary — verify with the full judgment below

-- - - , S.C.R. SUPREME COURT REPORTS 849 Instead of adopting that straightforward course the officers of the State have sought to circumvent the decision of this Court on a flimsy pretext and covertly to challenge its correctness on an obviously untenable plea which has not even the merit of a seeming plausibility. This conduct verges dangerously on a contempt of this Court. We desire to make it quite clear that we view with great disfavour such unworthy attempt to get round the decision of this Court. THE COMMISSIONER OF INCOME-TAX, MADRAS v. MYSORE CHROMITE LIMITED. [MEHR CHAND MAHAJAN C.J., s. R. DAS, GHl)LAM HASAN, BHAGWATI and VENKATARAMA AYYAR JJ.)

Indian Income-tax Act, 1922 (Act XI of 1922), s. 4-Profits derived by the assessee-W hether arose or were 1·eceived in British India in the present case.

The assessee con;ipaqy with its registered office in Mysore State and its management vested in Oakley Bowden Co.

Ltd., Madras, sold Chrome ore to buyers mostly outside India who were in America and Europe.

The sales to the purchasers in Europe were put through in London by Bowden Oakley and Co. Ltd., London, the agent of the assess

The order continues below.

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