Receipt versus accrual of income determined taxability where sale proceeds were collected in British India on behalf of a non-resident.

For a non-resident company using mercantile accounts, the Court distinguished accrual from receipt of income and held that book entries alone did not prove receipt outside British India. On the facts, amounts realised by brokers from merchants were sale proceeds received on the assessee's behalf, not mere debts, and the payments tied to delivery of railway receipts were directly referable to the price of goods. The receipts were therefore received in British India and included the profits of the business, with the exact profit quantum left for departmental computation.

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Issues: Whether the sums of Rs. 12,68,480 and Rs. 4,40,878 represented sale proceeds of goods sold to merchants in British India or merely debts due from them, and whether, if they were sale proceeds, they were received in British India so as to be taxable; and whether the profits of the assessee's business were included in those sums.

Analysis: The assessee was a non-resident company maintaining mercantile accounts. The Court distinguished between accrual or arising of income and actual receipt of income, holding that entries in mercantile books may show accrual at Baroda but do not, by themselves, establish receipt there. On the facts of the first item, the amounts realised by the guaranteed brokers from merchants in Ahmedabad were the sale proceeds payable by the buyers, not a mere debt transformed into a different character, and the brokers received the money on behalf of the assessee. On the second item, the merchants obtained delivery of the railway receipts only on honouring the hundis drawn against the goods, so the payments were directly referable to the price of the goods and were received in British India. The profits element necessarily formed part of these sale proceeds, though the exact quantum was for computation by the Department.

Conclusion: The sums of Rs. 12,68,480 and Rs. 4,40,878 were sale proceeds, were received in British India, and included the profits of the assessee's business; the assessee was liable in respect of those amounts.

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