MAHABIR COMMERCIAL CO. LTD versus C.I.T. WEST BENGAL, CALCUTTA

Citation: [1973] 2 S.C.R. 134 · Decided: 08-09-1972 · Supreme Court of India · Bench: P. JAGANMOHAN REDDY · Disposal: Appeal(s) allowed

Judgment (excerpt)

MAHABIR COMMERCIAL CO. LTD 
A 
v. 
C.l.T. WEST BENGAL, CALCUTTA 
September 8, 1972 
(P. JAGANMOHAN REDDY AND H. R. KHANNA• JJ.] 
B 
/ncome tax Act (11 of 1922) Place, where property passes. 
Sale of Goods Act (3 of 1930), s. 23(2)-Efject of appropriation on 
passing of property. 
utter of Credit and C.l.F. contract-Nature of, explained. 
In all transactions of sale of goods the time and place of <•?propriation 
are important elements for determining when the property in the goods 
passea. In the case of a sale of unascertained goods in a deliverable state, 
under s.23(2) of the Sale of Goods Act, 1930, if, in pursuance of the con· 
tract the seller delivers the goods to the buyer or to a car•ier or other 
bailee, whether named by the buyer or not, for the purpose of trans-
mission to the buyer, and the seller do'S not reserve the right of dispo.<al, 
be is deemed to have unconditionally appropriated the goods to the co11r 
tract and the buyer's assent to the passing of the property is implied. But 
appropriat:on of the goods to the contract by itsel'f would not be such as to 
pass the property in the goods if it appears o• can be i•ferred that there 
was no actual intention to pass the property. The intent:on of the parties· 
therefore dete•mines the situs of the passi•g of property to the buyer in 
punuance di the contr2ct. [1420-H; 1550] 
ID the case of translr.Ctions of sale of goods between the buyer and 
..Uer livh•8 1n two dlllecent cou.ttnes the ••lier sends the goods through 
a carr.er and the contract may envisage the payme.it be.ng made eillter at 
the p.ace wnere the seller resides or where the buyer res1dos. In such a 
transaction the banks and tne bankers, comm,rc1a1 credit system, woich 
usurea payment to the seller on tne one hand and oe.1vcry ot tnc goods to 
the buyer on the otner play an important purl. une of tnc means ot eucct-
log commercial credit 1s by letters of ctedit. The buyer requests his bank tc 
faciutate credit in the country of the sc.ler, where the ba.ik or its co .. sti-
tuent, for some consideration,. assumes Jiabi11ty for payment of price 
apinst 
spectfied documents. The 
buyer agrees also to indemnify tne 
bankers in respect of such advances and of any claim arising out of the 
cred.t. On receipt of the bankers' appl.cation, the ba .. k issues the credit. 
These letters of cred;t are given for tne purpose of being shown to third 
parties who may act thereon. Such letters are either revoca.ble or rrevoc .. 
able and where they are the latter, they may be confirmed or unconfirmed. 
If confirmed, it means that words ol confirmation ol another banker are 
added to it by which that banker also commits h:msclf irrevocab.y. The 
Jetter of credit notifies the seller that the issuing bank.or or his corres-
pondent 
will 
accept 
or 
honour 
drafts 
drawn 
for 
the 
price 
of the goods, provided that the documents of title and other documents 
specified in the letter of credit are simultaneously presented to the banker. 
On receipt of the informat:on the seller ships the goods, insures them aid 
d'tains.a bill of lading. He then draws a draft for the price of the goods 
and presents it for acceptance, ·payment and negotiation together with 
the other docume~ts specified in the letter of credit such as the bill of 
Jading, policy, invoice etc. The documents are sent by the Banker to tlie 
c 
D 
F 
F 
G 
H 
' 
MAHABIR COM. CO. LTD. V. C.!.T. 
135 
A 
;.uyer's bank and on the bill of exchange ·being accepted by him by pay-
ment. the b;tJ of lading and the invoice are delivered to the buyer to enable 
him to obtain delivery of the goods. [143A-D; 1440-H; 14SA-E] 
B 
c 
D 
E 
F 
G 
H 
In a C.I.F. contract, that is, where the contract is for the sale of goode 
at a price to cover cost, insurance and freight and ex-ship, the seller bas 
first to ship at the pon of shipment goods of the description contained In 
the contract. He must then procure the ahipping documeats as contem· 
plated by the contract upon the terms current covering the whole transit 
of the goods. 
He must arrange fof insurance, must make out an invoice 
wh:ch is a written account of the particulars of goods delivered and their 
price and charges etc. This invoice 'is made out debiting the buyer with the 
agreed price and giving him credit for the amount Of freight which he will 
pay the shipowners on actual delivery. The shipper should tender the 
shipping documents to enable the buyer 
to deal with the goods in the 
usual way

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