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Issues Involved:
1. Whether the proceeds of sale in the first category have been received in the taxable territories within the meaning of section 4(1)(a)? 2. Whether the proceeds of sale in the second category have been received in the taxable territories within the meaning of section 4(1)(a)? 3. Whether the proceeds of sale in the third category have been received in the taxable territories within the meaning of section 4(1)(a)? Detailed Analysis: Issue 1: Proceeds of Sale in the First Category The first issue revolves around the collection of sale proceeds amounting to Rs. 19,66,373 in the assessment year 1944-45, Rs. 28,156 in 1945-46, and Rs. 1,89,166 in 1946-47. The assessee, a non-resident company, argued that the sale proceeds were received in Ujjain, a Native State, and not in taxable territories. The Tribunal found that the proceeds were collected by the Imperial Bank of India, Ujjain, which acted merely as a collecting agent for the assessee. The bank forwarded the drafts or hundis to its branches in British India, collected the amounts, and credited them to the assessee's account only after realization. The Tribunal concluded that the amounts were received in British India, making the profits taxable. The court upheld this finding, stating that the bank was not a holder in due course but acted on behalf of the assessee. Therefore, the amounts were received in British India, and the profits were taxable. Issue 2: Proceeds of Sale in the Second Category The second issue pertains to the sale proceeds received by the assessee through demand drafts from the Government of India. The drafts were posted in Delhi and received at Ujjain. The contention was whether the post office acted as an agent of the assessee. The court held that there was no express or implied request from the assessee to receive payments via drafts. The drafts were not considered equivalent to cheques, and thus, the post office was not the agent of the assessee. Consequently, the proceeds were received in Ujjain, outside the taxable territories, and the profits were not taxable. Issue 3: Proceeds of Sale in the Third Category The third issue concerns the sale proceeds paid by the Government of India by cheques, posted in Delhi, and received by the assessee at Ujjain or Indore. The Tribunal applied the rule from the Supreme Court's decision in Commissioner of Income Tax v. Ogale Glass Works Ltd., concluding that the post office acted as the agent of the assessee due to an implied request to send the cheques by post. Therefore, the amounts were received in British India, making the profits taxable. The court agreed, stating that the instructions to pay by cheque to the Imperial Bank at Indore implied an agreement to receive payments by post, thus constituting the post office as the agent of the assessee. Conclusion: 1. The proceeds of sale in the first category were received in the taxable territories, making the profits taxable. 2. The proceeds of sale in the second category were not received in the taxable territories, making the profits non-taxable. 3. The proceeds of sale in the third category were received in the taxable territories, making the profits taxable. The court answered questions (a) and (c) in the affirmative, and question (b) in the negative, with the assessee required to pay two-thirds of the department's costs.
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