Accrual of export profits outside British India where property passed in London and bank advances were only security loans.

Profits from sales of unascertained goods to European and American buyers accrued outside British India because property passed only when the goods were ascertained and unconditionally appropriated, and the seller retained control through the bill of lading until the bill of exchange was accepted in London. The Madras bank's advance was only a loan on the security of the shipping documents, not payment of the sale price, so it did not constitute receipt in British India. The actual sale proceeds were realised through the London bank, and the later adjustment of the Madras advance merely reduced the assessee's liability. On these facts, the income neither arose nor was received in British India.

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Issues: (i) Whether the profits from sales to European and American buyers arose in British India or outside British India; (ii) Whether the profits were received in British India.

Issue (i): Whether the profits from sales to European and American buyers arose in British India or outside British India.

Analysis: The sales were of unascertained goods, and under the Sale of Goods Act property passes only when the goods are ascertained and unconditionally appropriated to the contract. On the facts, the seller retained control over the goods through the bill of lading until the buyer's bank accepted the bill of exchange and obtained the documents in London. The advance paid by the Madras bank was only a loan on the security of the documents and did not amount to payment of the purchase price. The sale was completed only in London when the bill of exchange was accepted and the bill of lading was released, so the place of accrual was outside British India.

Conclusion: The profits arose outside British India and the answer to this question was in favour of the assessee.

Issue (ii): Whether the profits were received in British India.

Analysis: The amount advanced by the Madras bank was not receipt of sale proceeds but only an advance against the documents of title. The actual sale price was first received by the London bank from the buyer's bank on behalf of the seller, and the later adjustment of the Madras advance merely reduced the assessee's liability in British India. Such adjustment did not amount to receipt of income in British India.

Conclusion: The profits were not received in British India and the answer to this question was in favour of the assessee.

Final Conclusion: Both questions were answered against the Revenue, as the income neither arose nor was received in British India on the facts found.

Ratio Decidendi: In a sale of unascertained goods, income accrues only where property passes under the Sale of Goods Act, and an advance against shipping documents is a loan, not receipt of sale proceeds, until the price is actually realised.

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