# 2 S.C.R. SUPREME COURT REPORTS THE COMMISSIONER OF INCOME-TAX, MADHYA PRADESH & BHOPAL, NAGPUR v. BHOPAL TEXTILES LTD., BHOPAL

- **Citation:** [1961] 2 S.C.R. 9
- **Court:** Supreme Court of India
- **Decided:** 1961
- **Case number:** CIVIL APPELLATE JuBISDIOTION: Civil Appeal No. 755 of 1957
- **Bench:** S. K. DAs, M. Hidayatullah, J. C. Shah
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/2-s-c-r-supreme-court-reports-the-commissioner-of-income-tax-madhya-pradesh-1935
- **Pages:** 5

## Headnote

Income Tax-Supply of goods by non-resident company-~
Place of paymeitt, when place of receipt of money by seller-Bank
when agent of seller-Railway receipt, if document of title of goods
-Property in goods, when transferred to buyer.
Respondent, a non-resident company, in the accounting
year supplied goods which were sent F. 0. R. Bhopal to the
'
buyers in British India. The railway receipts were handed
ovd to a Bank in Bhopal with instructions to hand over the
railway receipts to the buyers, who were named as consignees,
only on receipt of payment of the bill and collei;tion charges.
The branches of the Bank within the taxable territory collected
the amounts due from the buyers and transmitted them to
Bhopal to the credit of the respondent.
Tlie question was whether the profits in the goods were
received or deemed to be received in British India,
Held, that· the decision of this Court in Commissioner of
Income-tax v. P. M. Rathod ©- Co. applied to this case; and the
income, profits or gain must be deemed to have been received
within the taxable territory.
The fact of payment to the agent determines the place
where the money can be said to be received by the seller. Since
in the instant case the railway receipts were not to be handed
over to the buyers by the Bank, as per instructions of the seller,
unless payment for the value of the goods were· received by the
Bank which instructions the buyers could not countermand,
this was sufficient to make the Bank an agent of the seller.
Held, also, that a railway receipt is a document of title to
goods, and, for all purposes, represents the goods. When the
;~
railway receipt is handed over to the consignee on payment,
the property in the goods is transferred.
The Commissioner of Income-tax v. P. M. Rathod and Co.,
(1960] l S.C.R. 401, relied on.
CIVIL APPELLATE
JuBISDIOTION:
Civil
Appeal
No. 755 of 1957.
Appeal by special leave from the judgment and
order dated March 23, 1955, of the former Nagpur
t
High Court in Misc. Civil Case No. 240 of 19.53,
a
z960
Octobsr z7.
10
,SUPREME COURT REPORTS
[1961]
z960
K. N. Rajagopal Sastri, R.H. Dhebar a.nd D. Gupta,
.
-
for the appellant.
T~e Com111issio11e1·
••
of Incomc-tax
Veda Vyasa, S. N. Andley, J.B. Dada.chanJi, RameMadhya Prndc~h shwar Nath and P. L. Vohra, for the respondent.
& Bhopal, Nagpur
1
v.
1960 .. October 17. The Judgment of the Court
Bhopal Toxliles was delivered by
' Ltd .• Bhopal
•. H
J
Th"
I
"th
. ] 1
IDAYATULLAH .-
IS a ppea ' WI
ipecia.. ea. ve,
Hidayatullah r. ha.s been filed against the judgment of the Nagpur
1
•
High Court in a reference under s. 66(1) of the Indian
Income-tax Act, 1922, by which the High Court
answered t.he following question in the negative :
"Whether the proportionate profits on the goods
of the value of Rs. 4,10,785 were received or were
deemed to be received in British India, in the year of
account, hy or on behalf of the a.ssessee Company
within the meaning of Section 4(l)(a.) of the Indian
Inco111e-tax Act, 1922 ".
The Commissioner of Income-tax, Madhya. Pradesh
a.nd Bhopal is the appellant, and the Bhopal Textiles
Ltd., Bhopal, is the respondent. For the assessment
year 1944-45, the Company which wa.s non-resident
was treated as ' resident a.nd ordinarily resident'
under s. 4(l)(c) of the Income-tax Aot. In the year
of account, it had supplied its manufactured articles
either to the Government of India. or its nominees a.t
Agra, Alla.ha.bad and Delhi. Under the orders of the
Government, the goods were sent direct to the persons
nominated, who ma.de the payment against the goods.
The goods were a.II sent f.o.r. Bhopal, a.nd the re.ii wa.y
freight and other charges were to be borne by the
buyers to whom the railway receipts made out in the
name of the consignees were sent by the Company
through the Imperial Bank a.t Bhopal. The Bhopal
Bra.nob sent the railway receipts to branches of the
Bank a.t Agra., Alla.haba.d and Delhi, which collected
the a.mounts due from the buyers, and transmitted
them to t

## Text

2 S.C.R. SUPREME COURT REPORTS
THE COMMISSIONER OF INCOME-TAX,
MADHYA PRADESH & BHOPAL, NAGPUR
v.
BHOPAL TEXTILES LTD., BHOPAL.
9
(S. K. DAs, M. HIDAYATULLAH, and J. C. SHAH, JJ.)
Income Tax-Supply of goods by non-resident company-~
Place of paymeitt, when place of receipt of money by seller-Bank
when agent of seller-Railway receipt, if document of title of goods
-Property in goods, when transferred to buyer.
Respondent, a non-resident company, in the accounting
year supplied goods which were sent F. 0. R. Bhopal to the
'
buyers in British India. The railway receipts were handed
ovd to a Bank in Bhopal with instructions to hand over the
railway receipts to the buyers, who were named as consignees,
only on receipt of payment of the bill and collei;tion charges.
The branches of the Bank within the taxable territory collected
the amounts due from the buyers and transmitted them to
Bhopal to the credit of the respondent.
Tlie question was whether the profits in the goods were
received or deemed to be received in British India,
Held, that· the decision of this Court in Commissioner of
Income-tax v. P. M. Rathod ©- Co. applied to this case; and the
income, profits or gain must be deemed to have been received
within the taxable territory.
The fact of payment to the agent determines the place
where the money can be said to be received by the seller. Since
in the instant case the railway receipts were not to be handed
over to the buyers by the Bank, as per instructions of the seller,
unless payment for the value of the goods were· received by the
Bank which instructions the buyers could not countermand,
this was sufficient to make the Bank an agent of the seller.
Held, also, that a railway receipt is a document of title to
goods, and, for all purposes, represents the goods. When the
;~
railway receipt is handed over to the consignee on payment,
the property in the goods is transferred.
The Commissioner of Income-tax v. P. M. Rathod and Co.,
(1960] l S.C.R. 401, relied on.
CIVIL APPELLATE
JuBISDIOTION:
Civil
Appeal
No. 755 of 1957.
Appeal by special leave from the judgment and
order dated March 23, 1955, of the former Nagpur
t
High Court in Misc. Civil Case No. 240 of 19.53,
a
z960
Octobsr z7.
10
,SUPREME COURT REPORTS
[1961]
z960
K. N. Rajagopal Sastri, R.H. Dhebar a.nd D. Gupta,
.
-
for the appellant.
T~e Com111issio11e1·
••
of Incomc-tax
Veda Vyasa, S. N. Andley, J.B. Dada.chanJi, RameMadhya Prndc~h shwar Nath and P. L. Vohra, for the respondent.
& Bhopal, Nagpur
1
v.
1960 .. October 17. The Judgment of the Court
Bhopal Toxliles was delivered by
' Ltd .• Bhopal
•. H
J
Th"
I
"th
. ] 1
IDAYATULLAH .-
IS a ppea ' WI
ipecia.. ea. ve,
Hidayatullah r. ha.s been filed against the judgment of the Nagpur
1
•
High Court in a reference under s. 66(1) of the Indian
Income-tax Act, 1922, by which the High Court
answered t.he following question in the negative :
"Whether the proportionate profits on the goods
of the value of Rs. 4,10,785 were received or were
deemed to be received in British India, in the year of
account, hy or on behalf of the a.ssessee Company
within the meaning of Section 4(l)(a.) of the Indian
Inco111e-tax Act, 1922 ".
The Commissioner of Income-tax, Madhya. Pradesh
a.nd Bhopal is the appellant, and the Bhopal Textiles
Ltd., Bhopal, is the respondent. For the assessment
year 1944-45, the Company which wa.s non-resident
was treated as ' resident a.nd ordinarily resident'
under s. 4(l)(c) of the Income-tax Aot. In the year
of account, it had supplied its manufactured articles
either to the Government of India. or its nominees a.t
Agra, Alla.ha.bad and Delhi. Under the orders of the
Government, the goods were sent direct to the persons
nominated, who ma.de the payment against the goods.
The goods were a.II sent f.o.r. Bhopal, a.nd the re.ii wa.y
freight and other charges were to be borne by the
buyers to whom the railway receipts made out in the
name of the consignees were sent by the Company
through the Imperial Bank a.t Bhopal. The Bhopal
Bra.nob sent the railway receipts to branches of the
Bank a.t Agra., Alla.haba.d and Delhi, which collected
the a.mounts due from the buyers, and transmitted
them to the Im peria.l Bank, Bhopal, to the credit of
the Company.
On these facts, a. total sum of
Rs. 4,40,373 was held by the Department to have
been received in British India..
Of that sum, an
amount of Rs. 29,588 which represented the receipts
\
i
2 S.C.R. SUPREME COURT REPORTS
11
for supplies direct to Government is no longer in disr96o
pute. The ha.la.nee represents the sum, which was the Th c
..
•
E:
e
ommissioner
sub1ect-ma.tter of the reierence.
of Income-tax,
The usual appeals followed, and the contention of Madhya Pradesh
the Company that the money was not received in & Bhopal, Nagpur
British India was not accepted by the Tribunal. The
. v.
.
Tribunal did not decide a.bout the place of accrual. A Bhopal Textiles
reference was then made by the Tribunal of the quesLtd., Bhopal
tion quoted above. The High Court in deciding the Hidayatullah J.
reference went into the question of passing of property under the Indian Sa.le of Goods Act, 1930, and
ca.me to the conclusion that since the property in the
goods had passed to the buyers, the Imperial Bank
of India, Bhopal, must be" deemed to have received
the railway receipts a.s . agents of the buyers".
Continuing the reason, the learned Judges observed:
"So also the branches of the Bank at Agra., Alla.-
ha.bad and Delhi acted as the a.gents 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 reached the Bhopal branch as a credit
to its own account and that was not in British India
at the material time".
The case was not decided by the Tribunal on the
basis of accrual of the income, profits or gains to the
Company.
It was decided on the fact of actual
receipt, whether it was in British India or in Bhopal,
which was then outside the taxable territories. We
need not, therefore, concern ourselves with the problem whether property in the goods could be said to
have passed absolutely to the buyers without any
right of disposal being reserved by the Company. It
is a matter of some doubt whether the goods were
absolutely at the disposal of the buyers after the railway receipts were handed over to the Bank. It is in
evidence-and has been adverted to by the Income.
tax Officer-that the Company, when it handed over
the railway receipt to the Imperial Bank at Bhopal,
did so along with a covering letter in which it asked
the Bank to deliver the railway receipt and the bill to
12
SUPREME COURT REPORTS
[1961]
r960
the buyers against payment of the bill amount plus
-. .
collection charges. In this view of the matter, though
The Commimonu we do not express any final opinion, we doubt wheof Income-tox,
.
•
1
d
· h b
h
Madhya Pradesh ther the right of d1sposa
was parte wit
y t e
&'Bhopal, Nagpur Company.
.
I
v.
A railway receipt is a document of title to goods,
Bhopal Textiles and, for all purposes, represents the goods.
When
: Lid., Bhopal
the railway receipt is handed over to the consignee on
Hidayatullah J. payment, the property in the goods is transferred. In
this case, it is a matter of considerable doubt whether
the property in the goods can be said to have passed
to the buyers by the mere fact of the railway receipts
being in the name of the consignees, as has been held
by the High Court. Since we are not deciding the
question of accrual, we do not elaborate the point.
Coming now to the question as to where the amount
was received, we have no doubt that the view of the
Tribunal was correct. This income was received at
Agra, Allahabad or Delhi from the buyers by the Imperial Bank acting as the agent of the Company. The
Company had handed over the railway receipts to the
Bank, and asked the Bank not to hand over the railway receipts to the buyers, unless payment was received. This w&s sufficient to make the Bank an agent of
the Company. The buyers could not have countermanded the instructions given by the Company to the
Bank, which they would, indubitably, have been able
to do, if the Bank was their agent. This was laid down
by this Court in The Commissioner of Income-tax v.
P. M. Rathod and Company(').
Mr. Veda VyaE1a contends that the case is distinguishable on the ground that
the railway receipts 'there were "to self'', whereas
here the railway receipts, were made out in the name
of the consignee. Nothing turns upon this distinction.
The document of title to goods was still the property
of the Company till payment for it was received and
it was handed over. In this view of the matter,
~e a.re of opinion that the ruling in question a.pphes.
Mr. Veda Vyasa finally contended that the agreement between the parties was that the goods were to
(l) [1960] 1 S.C.R. 401.
!
II
I
2 S.C.R. SUPREME COURT REPORTS
13
~ be sent f.o.r. Bhopal, and that the price was also to be
z96o
paid there. He contended that the handing over of Th c
..
"l
·
h
B
k
Bh
l
.
e
omnuss1oner
the ra1 way receipts to t e
an
at
opa was m
of Income-ta.,
furtherance of the agreement, that the money was Madhya Prade~h
ultimately obtained by the Bank and handed over at & Bhopal, Nagpur
Bhopal also; and that, thus, the money must be deemv.
ed to have been received there. This, in our opinion, Bhopal Te.,tiles
does not truly represent the character of the transacLid .• Bhopal
tion. No doubt, under the agreement, payment was Hidayatullah J.
tq'be made at Bhopal; but the circumstances show
that that was departed from, and the ordinary merc~ntile practice of handing over the railway receipts
'
to one's own bankers with a request to hand over the
receipts against payment to the buyers was followed.
T·he Bank, as we have shown above, was thus the
agent of the sellers, as was laid down in the ruling of
this Court, and ·the fact of payment to the agent
determines the place where the money can be said
to be received by the Company. That place was at
Agra, Allahabad or Delhi. In this view, the income,
profits or gains must be deemed .to have been received
in the taxable territories, and the answer to the
~
question ought to have been in the affirmative.
We accordingly allow the appeal, and answer the
question in the affirmative. The 'appellant will be
entitled to his costs here and in the High Court.
Appeal allowed.