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

Citation: [1968] 1 S.C.R. 47 · Decided: 21-07-1967 · Supreme Court of India · Bench: J.C. SHAH · Disposal: Appeal(s) allowed

Judgment (excerpt)

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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-tax for some 
of the yeal'S during the period 1942-43 to 1947-48, the Income-tax 
E Of!lcer, apart from taxing the income actually received in India, 
also held that the profits apportionable to all the other sales made 
in British India accrued or arose in the taxable tercitories and were 
therefore liable to Indian Income-tax. He accordingly taxed the same 
on accrual basis. The Appellate Assistant Commissioner in appeal 
held that taking into account the fact• of the case. it would be fair. 
on the analogy of Rule 33 of the Indian Income-tax Rules 1922 to 
attribute 33! per cent of the profits to the activities in British India 
p and to assess them to Indian Income Tax. The Tribunal confirmed 
this order but the High Court. on a reference under s. 66 of the 
Indian Income-tax Act. held in favour of the respondent. 
In the appeal to Supreme Court it was contended on behalf of 
the appe11ant that on the procedure adooted for the sales, the pro-
perty in the goods passed in British India in all the categ"°ies of 
sales and that the fact that the goods were sold F.O.R. at Indore did 
G not make any clifference to that position. The High Court had there-
fore wrongly taken the view that the sales were not taxable in India. 
HELD;. Allowing the appeal: the income accrued within British 
India and a proportionate part of It was assessable to Indian Income-
tax. [52G-H] 
Pushanlal Mansingka IP) Ltd. v. The Commissioner of .Income 
H Tax, Delhi, Civil Appeal Nos. 557-558 of 1966, decided on May 5, 
1967; followed. 
Commissioner of Income-tax, Delhi v. P.M. Rathod & Co. ".rl I.T.R. 
145, 150: Commissioner of Income-tax v. Bhopal Textiles Ltd., 41 I.T.R. 
72, referred to. 
48 
SUP!lEm: COURT ltEPORTS 
[1968] l 8.0.B. 
CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 2178 to A 
2182 of 1966. 
Appeals by special leave from the judb•ment and· order dated 
August 28, 1961 of the Bombay High Court in Income-tax Refer-
ence No. 5 of 1961. 
S. T. Desai, R. Ganapathy Iyer, R. N. Sachtlrey and S. P. B 
Nayar, for the appellant (in all the appeals). 
T. V. VJswanatha Iyer, 0. C. Mathur, and B. Parthasarathy, 
for the respondent (in all the appeals). 
The Judgment of the Court was delivered by 
Slkrl, J.-These appeals by special leave are directed against 
the judgment of the High Court of Judicature at 'Bombay answer-
ing the following question (Question No. 3) against the Commis-
sioner of Income-tax, Bombay City and Suburban District, appel-
lant before us: 
c 
"3. Whether on the facts and in the circumstances of the 
D 
applicant's case the Tribunal was right in holding that 
a proportionate part of the profits determined on sales 
grouped under Items 3, 4. 5 and 9 in the assessment 
order by the application of Rule 33 was assessable to Jn. 
come-tax?" 
The High Court, in view of its answer to this question did not E 
answer the following question (Question No 2): 
"Whether on the facts and in the circumstances of the 
applicant's case, the Tribunal was right in holding that 
in respect of sales of Rs. 14,80,059 the profit was correct-
ly determined by the application of Rule 53 and one-third 
of the profits so determined could be said to accrue or 
F 
arise in British India?" 
We are not concerned with the remaining question (Question No. I) 
which relate

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