Kotval, CJ.— Of the three questions which were originally referred for the decision of this court, only question No. 2 now survives for decision and question No. 2 is as follows:

"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 correctly determined by the application of rule 33 and one-third of the profits so determined could be said to accrue or arise in British India?"

The circumstances under which this question survives for our decision and the facts upon which it falls to be determined are as follows: The Hukumchand Mills Ltd., Indore, the assessees, were doing business of manufacturing and selling textiles in the account years relevant to the assessment years 1942-43, 1943-44, 1945-46, 1946-47 and 1947-48. In the relevant years of account, the assessees were obliged to divert a portion of their production for meeting military requirements and such sales aggregated to Rs. 7,36,156. The total sales of the company amounted to Rs. 92,45,151. These were classified into various categories by the Income-tax Officer, but for the purpose of the question which survives in this reference, it is not necessary to refer to any of the other categories except categories Nos. 3, 4, 5 and 9 as classified by the Income-tax Officer. In respect of these categories of sales, the facts have been stated in a tabular form in the statement of the case as follows:

(The figures at the extreme right show the item numbers of the classification made by the Income-tax Officer in paragraph 2 of the assessment order.)

We are now concerned only with the figure of Rs. 14,80,059, which has been found to be the balance of the sale price which was brought to tax and with which question No. 2 is concerned. The assessee entered into these sale transactions in the different modes indicated in column No. 1. It is not necessary at this stage to mention the details of the manner in which the transactions under each of the four categories were entered into. They are found stated in paragraph 11 of the statement of the case and were verbatim accepted by the Supreme Court.

When this reference had come before this court on an earlier occasion, the question raised before the Division Bench was, whether all or any of these sales comprised in items Nos. 3, 4, 5 and 9 was assessable to income-tax in the taxable territories for the reason that the profits in respect of these items accrued in British India, and this court took the. view, after considering each of the four categories before it that no part of the profits of the said sales could be said to have accrued in British India so as to make rule 33 of the Indian Income-tax Rules applicable to the same. Before this court the question canvassed was that the entire formalities of the contract and its complete performance had taken place in Indore and not in British India and that the only circumstance that was established upon the facts was that the assessee-company's representative had canvassed for orders in British India and upon that point being taken this court took the view that the mere circumstance that the company's representative had canvassed for orders in British India would not have the effect of making any part of the income accrue or arise in British India, since the formation of the contract and its complete performance had taken place in Indore and not in British India. The question as regards the passing of the property in the goods comprised in these contracts was not as such raised before this court.

The Commissioner was granted special leave to appeal by the Supreme Court against this decision and the appeal was decided on the 21st July, 1967 in CIT v. Hukumchand Mills Ltd. [1968] 67 ITR 79 (SC), Before the Supreme Court the principal point taken was that it could not be held that no part of the profits of the sales could be said to have accrued or arisen in British India because, on the affidavits and the circumstances of the case, the property in the goods passed in British India in all the four categories. It was urged that in all the four categories the method of delivery was similar. The railway receipts were made out in the name of "self" by the assessee-company and endorsed in favour of the customer and the railway receipts were handed over to the Imperial Bank of India, Indore, for being delivered to the merchants and the sale proceeds were received at Indore through the Imperial Bank of India, Indore. It was urged that the mere fact that the goods were to be delivered f.o.r. at Indore did not make the property in the goods pass at Indore. These submissions were accepted by the Supreme Court and relying upon their decisions in Seth Pushalal Mansinghka (P.) Ltd. v. Commissioner of Income-tax [1967] 66 ITR 159 (SC) Commissioner of Income-tax v. P.M. Rathod & Co. [1959] 37 ITR 145 ; [1960] 1 SCR 401, and Commissioner of Income-tax v. Bhopal Textiles Ltd. [1961] 41 ITR 72; [1961] 2 SCR 9 the Supreme Court held that the income from these sales accrued within British India and that the proportionate part of the income was assessable to income-tax in the taxable territory. Accordingly they disposed of the third question originally referred to this court by answering it in the affirmative in favour of the department. Now this court had, upon the view which it had taken that no part of the profits on the said sales could be said to have accrued in British India, stated that the second question which dealt with the question of apportionment of the profits only in the event of it being held that the profits from the sales were taxable, did not survive. The Supreme Court having held that the income from these sales was taxable, remitted question No. 2 to this court for decision according to law.

So far as the first question originally referred to this court is concerned, it was answered in favour of the department by the Division Bench and no appeal was taken to the Supreme Court against that answer. Therefore, the first question no longer survives.

In answering question No. 3 in favour of the department, the Supreme Court noted the argument on behalf of the assessee that the question as regards the passing of the property in the goods in British India was never raised and that it should not be allowed to be raised by the Commissioner before it and the Supreme Court dealt with that argument by observing :

"It seems to us that before the High Court stress was laid on the 'formation of the contract and its complete performance' and not on the aspect of the passing of property in the goods. These questions are perhaps relevant to the answering of question No. 2 but we are unable to regard this aspect as a new question" (the underlining ^* is ours) p.84.

Relying upon the passage which we have underlined* above, Mr. Mehta has now urged that in deciding the question of apportionment of the profits between British India and Indore State, we must ourselves look into the facts relating to the passing of property in the goods. He has strenuously urged that by the above remarks that question was kept open by the Supreme Court for consideration by us in deciding question No. 2. He has urged, therefore, that taking all the facts established in the case and the findings of the Supreme Court into account, there is nothing to establish that in this case the goods were paid for in British India and that, there fore, the property in the goods passed to the buyers in British India. He accepts the facts that the assessee effected these sales to merchants and others in British India. He also accepts the position that the method of delivery in the four categories as found by the Supreme Court was similar, namely, that the railway receipts were made out in the name of "self" by the assessee and endorsed in favour of merchants and were handed over to the Imperial Bank of India, Indore, being delivered to the merchants and the sale proceeds were received at Indore through the Imperial Bank of India, Indore. As held by the Supreme Court, the fact that the goods were to be delivered f.o.r. Indore, does not make the property in the goods pass at Indore. But then, says Mr. Mehta, there is absolutely nothing else established upon the mode of dealing accepted by the Supreme Court to show that the property in the goods did pass at Bombay or in any part of British India. He says that there is no finding given by the Supreme Court that the railway receipts which were made out to "self" and which were endorsed in favour of customers were ever brought into British India or that the money paid against those receipts was paid in British India. Therefore, he says that it could not be held that the property passed in India or that the profits in respect of the sales accrued in British India and in so far as the question No. 2, whether one-third of the profits determined by the authorities could be said to accrue or arise in British India, is concerned, we should answer that question in favour of the assessee by holding that no part of the profits arose in British India.

We are unable to accept this contention because in the first place it does not appear from the remarks of the Supreme Court in the passage which we have quoted above that the question of the passing of the property in the goods was at all left open for our consideration. What the Supreme Court has said in its decision, and even having regard to the passage we have quoted, is that before the High Court stress was laid on only the formation of the contract and its complete performance and not on the question of the passing of the property in the goods. The two former questions, namely, the question of the formation of the contract and its complete performance may perhaps be relevant to answering question No. 2, but the question which was raised before them, namely, the question of the passing of the property in the goods was in their opinion not a new question. It is for that reason that they considered and decided it and we do not think that we can on the basis of this argument possibly go behind the decision of the Supreme Court which is absolutely binding upon us. The whole argument, it seems to us, is an ingenious attempt to get behind the findings of the Supreme Court.

Moreover, it cannot be said, as argued, that there is no finding given by the Supreme Court that the moneys were paid in Bombay against delivery of the documents of title, namely, the railway receipts or that there is no finding that the property in the goods passed at Bombay. In our opinion, these findings are implicit in the finding given by the Supreme Court :

"We hold that income accrued within British India and that a proportionate part of the income was assessable to income-tax." (p. 84)

The ground upon which they so held obviously is that the property in the goods passed in British India in all the four categories. This they have stated as the argument of counsel on behalf of the Commissioner before them, which argument they accepted.

That the Supreme Court has so held is clear when we consider the cases to which they referred, namely, Seth Pushalal Mansinghka's case (Supra), P.M. Rathod & Co. case (Supra), and Bhopal Textiles Ltd. case (Supra). In Pushalal Mansinghka's case (Supra), the Supreme Court pointed out that the facts were that the appellant had consigned the goods to "self" and the railway receipts along with the bills of exchange were presented by the assessee to the Rajasthan Bank at Bhilwara for collection after endorsing the railway receipts in favour of the bank. The Rajasthan Bank in its turn endorsed the railway receipts in favour of its branches in Part "A" and Part "C" States and the goods were delivered to the buyers only when they paid the price to the bank and obtained the railway receipts. It was argued before the Supreme Court that that was a case where the buyers of the goods were in the Part "A" and Part "C" States but the Supreme Court remarked that at page 83 : "It is true that the court in these cases was concerned with the question of the receipt of income, but there is no difference in principle as in both cases the question of passing of the property in the goods or performance of the contract had to be considered." Therefore, the Supreme Court held that the facts in Pushalal Mansinghka's case (Supra), were similar to the present case. They also pointed out that in the case of P.M. Rathod & Co.'s case (Supra), the goods had been handed over to a common carrier and the railway receipts endorsed to "self" could not be delivered to the buyer till the money was paid. Therefore, the appropriation to the contract was only conditional and the performance was completed only when the moneys were paid and the railway receipts were delivered. P.M. Rathod & Co.'s case (Supra), was followed in Bhopal Textiles Ltd's. case (Supra). The emphasis which the Supreme Court put upon the decisions in these cases on the question that the goods were delivered to buyers only when they paid the price and obtained the railway receipts, shows that the Supreme Court emphasised the fact of the passing of the property in the goods as being at the place where the goods were delivered and paid for, and they held that the facts of the present case were similar. Therefore, upon that discussion it must be held that the Supreme Court came to the conclusion that the property in the goods in the present case passed at Bombay where the payment of the price of the goods also took place. That is why they also held that the income accrued within British India. In the face of these findings, it is impossible to hold that the question as to where the property in the goods passed in the present case, is still open for our consideration, even though the question as to the apportionment of the profits between British India and the Native State was left over. We cannot, therefore, accept this contention of counsel on behalf of the assessee.

The next point which Mr. Mehta has argued is as to the apportionment of the profits between British India and the Native State. He has referred to the decision of the Supreme Court in Anglo-French Textile Company Ltd. v. Commissioner of Income-tax [1954] 25 ITR 27 ; [1954] SCR 523 and urged that the profits accrue where the business operations are carried on and, therefore, in judging the quantum of the profits which accrued in British India, we must have regard to the quantum of the operations which the assessee carried on in British India in effecting the sales. He has also urged that in their judgment in this case the Supreme Court has itself said that the question of the formation of the contract and its complete performance may perhaps be relevant to the answering of question No. 2. Therefore, Mr. Mehta urged that we must have regard to the formation of the contract and the nature of its performance and that we should take into account the extent of the operations carried on in British India and only to that extent and proportion would it be permissible to tax the profits.

In view of this decision it must now be taken as settled law that only to the extent that profits are attributable to manufacturing operations, can the profits accrue at the place where the business operations are carried on and so we must look to the nature of the business operations that the assessee carried on in British India in making its sales in question.

Now, Mr. Mehta has emphasised that the only operation which the assessees carried on in Bombay was that they maintained a canvassing agent at Bombay who canvassed business for them. If the formation of the contract took place at Indore, and that part of the finding of the Division Bench in the present case has not been set aside by the Supreme Court, it was urged, then there was no other activity carried on in British India except the maintenance of a canvassing agent. Mr. Mehta referred to a finding of the Appellate Assistant Commissioner in that respect: "Though on these two items operations in India are not extensive as regards items Nos. 3 and 5 contracts were canvassed in British India and contracts were signed in British India and as per item No. 5 contract was signed in British India." He has pointed out that so far as the formation of the contract is concerned, the earlier finding of the Division Bench in this case is to the effect that the formation of the contract took place at Indore. Therefore, the only remaining fact which survives for consideration is that the contracts were canvassed in British India.

There is nothing before us to show what was the nature of the operations of the canvassing agent of the assessee in British India. So far as the Tribunal is concerned, it gave the following finding:

"We mentioned above that the assessee maintained an organisation in British India, that the organisation was interested in bringing to the notice of the British Indian merchants, brokers and consuming public the goods manufactured by the assessee-company, that the assessee-company through its brokers canvassed the sale of goods either through the organisation or independently and that the groundwork for sales effected in those groups was done in British India. The contracts were only the culminating feature of that work."

The Tribunal also took into account the fact that it is quite possible that in respect of sales regarded as effected in Indore also some operations were carried on in British India, but we do not think that that consideration has influenced the finding of the Tribunal.

The assessments of the proportion of the profits by the Appellate Assistant Commissioner and the Tribunal have been concurrently made at 33 1/3% of the profits in British India as being attributable to operations in British India as against 66 2/3% being attributable to operations in Indore State. This assessment of the proportion of the profits is made only on the analogy of the principle laid down in rule 33. Rule 33 as such does not apply because these are actual profits and not profits deemed to be so. Counsel for both the parties conceded that position. Therefore, ultimately and in essence the finding on the question of proportion of profits is an estimate made concurrently by the Appellate Assistant Commissioner and the Tribunal and there does not appear to be anything on the record or in their findings to show that that estimate was erroneous or grossly improper. They have taken into account the relevant facts and come to the conclusion that in their estimate one-third of the profits should be held attributable to operations in British India. In a reference we can hardly interfere with such a finding. Moreover, it was a finding reached in their discretionary powers and we can find nothing wrong with the exercise of that discretion. Some of the decided cases show that in the absence of positive evidence, apportionment of profits in the ratio of 2/3rd to l/3rd has been made in a number of cases. Instances may be found in Mohamadali Sarafali & Co. v. Commissioner of Excess Profits Tax [1952] 21 ITR 369 and in Mysore Glass and Enamel Works Ltd. v. Commissioner of Income-tax [1963] 47 ITR 841 . In the latter case the proportion fixed was as much as 50%. No doubt the former case was a case under the Excess Profits Tax Act, but on principle we can see no distinction between the assessment of excess profits and the assessment of income-tax. So long as the department has taken into account all the relevant facts and circumstances and come to a fair estimate, we cannot interfere with their estimate.

Mr. Mehta relied upon the decision of the Supreme Court in Commissioner of Income-tax v. R.D. Aggarwal & Co. [1965] 56 ITR 20 (SC) to urge that a canvassing agent must be held to play a very insignificant part in the making of a contract and in the earning of the profits. The case before the Supreme Court was upon altogether different facts and the question there decided was whether a canvassing agent of a non-resident maintained in British India would come within the words used in section 42(1) "business connection". They were merely interpreting the provisions of section 42(1) which deals with income which is deemed to be the income of the assessee and not the actual income assessable under section 4, but apart from that, the case turned upon the interpretation of the expression "business connection" in section 42(1). We do not think, therefore, that what was stated in that context can be authority in the present case where the question is what was the nature of the operations carried on by the assessee within British India.

Mr. Mehta next relied on the decision in Annamalais Timber Trust and Co. v. Commissioner of Income-tax [1961] 41 ITR 781 to urge that we should hold that the assessment of the proportion of the profits in British India—33 1/3% in the present case—,is arbitrary and excessive, because it was so held in that case. That was a case where the only fact which took place in British India was that the contract was entered into within the taxable territory and in that context the Madras High Court said that the apportionment of profits was arbitrary and not on any rational basis. Moreover, the Madras High Court itself has pointed out in that case that they were deciding that case only with reference to the particular facts of that case and they emphasised that it should not be treated as a precedent. At page 789 they have observed:

"The contract that the assessee obtained had special features. We should like to guard ourselves at this stage by emphasising that all our observations are only with reference to the contract before us. We are not to be understood as laying down as a proposition of law of general application to all cases where a contract for execution of works takes place within the taxable territories and all the other operations take place outside the taxable territories."

In view of these remarks which the Division Bench itself made, we can hardly hold that that case lays down any proposition of law. We are surprised that it should have been reported at all.

These were the only submissions made on behalf of the assessee to challenge the apportionment of the profits at 33 1/3% for British India and 66 2/3% for Indore. We cannot see anything wrong with the estimate which the Appellate Assistant Commissioner and the Tribunal have concurrently made having regard to all the circumstances that have been placed before us. The assessee, it appears, had attempted before the Appellate Assistant Commissioner to put in a number of additional documents which are incorporated in the paper book, but these were rightly not referred to in the arguments before us.

In the result, we uphold the decision of the Tribunal and answer the question No. 2 in the affirmative. The assessee will pay the costs of the Commissioner.

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*Here printed in italics.