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TMI Blog1954 (11) TMI 5X X X X Extracts X X X X X X X X Extracts X X X X ..... on the bill of exchange was similarly received in London by the Eastern Bank Ltd., London, on behalf of the assessee-company. The subsequent adjustment made in the books of the Eastern Bank Ltd., London, did not operate as a receipt of profits in British India. In our opinion the High Court correctly answered the second question also in favour of the assessee-company. Appeal dismissed. - - - - - Dated:- 1-11-1954 - Judge(s) : MEHR CHAND MAHAJAN., S. R. DAS., GHULAM HASAN., N. H. BHAGWATI., T. L. VENKATARAMA AYYAR JUDGMENT The judgment of the Court was delivered by DAS, J.---This is an appeal from the judgment pronounced by the High Court of judicature at Madras on the 29th March, 1951, on a consolidated reference by the Income-tax Appellate Tribunal under section 66(1) of the Income-tax Act whereby the High Court answered in the affirmative both the referred questions which were expressed in the following terms : "(1) Whether on the facts and in the circumstances of the case the profits derived by the assessee-company from sales made to European and American buyers arose outside British India ?" (2) Whether on the facts and in the circumstances of the case t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to open a confirmed irrevocable Bankers' credit in favour of Messrs. Mysore Chromite Ltd., Madras (to be advised to sellers) through the Eastern Bank Ltd., for 90 per cent. (ninety per cent.) of the Provisional Invoice against documents. Documents to consist of :--- 1. Bills of Lading, 2. Provisional Invoice. Provisional invoice to be based on Bill of Lading weight and contract price for 48 per cent. Cr 203. Balance on ascertainment of weight and analysis to be paid in London to Bowden Oakley Co. Ltd., within 10 days of the final invoice, based on outturn weights and assays. The corresponding terms of payment under the American contracts were as follows :---- "Payment.----Letter of credit for eighty per cent. (80%) of invoice value to be available against drafts at ninety (90) days' sight with documents attached to be opened immediately in London in favour of the seller. Balance estimated twenty (20%) of the margin duo to be paid by telegraphic transfer through London on receipt of information as to assay and outturn which should be submitted within a month after the arrival of the steamer at destination. Charges for such telegraphic transfer for account of benefi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on. The bill of exchange together with the relative bill of lading endorsed in blank by the assessee-company and the provisional invoice was then negotiated with the Eastern Bank Ltd., Madras, the bankers of the assessee-company, who used to credit the assessee-company with the amount of the bill of exchange. The Eastern Bank Ltd., Madras, then forwarded the documents to the Eastern Bank Ltd., London, who used to present the bill of exchange to the buyers' bank in London and upon the bill of exchange being accepted the Eastern Bank Ltd., London, used to deliver the bill of lading and the invoice to the buyers' bank. The buyers' bank in due course used to pay the amount of the bill of exchange to the Eastern Bank Ltd., London. Thereafter, on arrival of the goods and after weighment and assay, the sale price was ascertained and the balance of price, after deducting the payments made against the bill of exchange, used to be paid to the Eastern Bank Ltd., London, which was the assessee-company's agent and banker in London. On the facts stated above the Income-tax Officer assessed the assessee- company on the entire profits in respect of these sales on the footing that they arose and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transfers or agrees to transfer the property in goods to the buyer for a price and where under a contract of sale the property in the goods is transferred from the seller to the buyer, the contract is called a sale, but where the transfer of property in the goods is to take place at a future time or subject to some condition thereafter to be fulfilled, the contract is called an Agreement to sell. By sub-section (4) of that section an agreement to sell becomes a sale when the time elapses or the conditions are fulfilled subject to which the property in the goods is to be transferred. Section 18 of the Act clearly indicates that in the case of sale of unascertained goods no property in the goods is transferred to the buyer unless and until the goods are ascertained. In the present case, the contracts were always for sale of unascertained goods. Skipping over sections 19 to 22 which deal with contract of sale of specific goods we come to section 23 which lays down that where there is a contract for the sale of unascertained or future goods by description and goods of that description and in a deliverable state are unconditionally appropriated to the contract, either by the seller with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s from the seller to the buyer are strong indications as to the passing also of the property in the goods to the buyer but they are not decisive and may be negatived, for under section 25 the seller may yet reserve to himself the right of disposal of the goods until the fulfilment of certain conditions and thereby prevent the passing of property in the goods from him to the buyer. The facts found in this case are that the assessee-company shipped the goods under bill of lading issued in its own name. Under the contract it was not obliged to part with the bill of lading which is the document of title to the goods until the bill of exchange drawn by it on the buyers' bank where the irrevocable letter of credit was opened was honoured. It is urged that under the provision in the contract for weighment and assay, which, was ultimately to fix the price unless the buyer rightly rejected the goods as not being in terms of the contract, the passing of property in the goods could not take place until the buyer accepted the goods and the price was fully ascertained after weighment and assay. It is submitted that that being the position, the property in the goods passed and the sales were con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the learned Solicitor-General. The words " through the Eastern Bank Ltd.," appear to us to go with the preceding words " to be advised to sellers " which are put within brackets which seem to have been wrongly closed after the word " sellers " instead of after the words " the Eastern Bank Ltd." Ordinarily, the buyer opens a letter of credit with his bank in favour of the seller and the words " through the Eastern Bank Ltd." would be meaningless unless it was contended to mean that the irrevocable credit which was in favour of the assessee-company was to be operated upon by the latter through the Eastern Bank Ltd. If that were the true meaning, then that certainly does not make the Eastern Bank Ltd., the agent of the buyers. The words " available by delivery to us " occurring in the letter of the Eastern Bank Ltd., Madras, do not appear to us to indicate that this was any part of the terms of the letter of credit. This was an intimation in accordance with the advice received by the Eastern Bank Ltd., Madras, from the Eastern Bank Ltd., London, that the assessee-company might avail itself of the letter of credit by delivery of the documents to the Eastern Bank Ltd., Madras. This ..... X X X X Extracts X X X X X X X X Extracts X X X X
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