Transfer of Property: profits taxed where buyer accepts and obtains bill of lading, not on bank advances.

Profits from exports of unascertained goods arise when property passes on ascertainment and delivery of the bills of lading; under the contracts property and receipt of price occurred when the buyer or buyer's bank accepted the seller's draft and obtained the bills in London, so the profits arose outside British India and in favour of the assessee. Advances by the negotiating bank in Madras were loans secured by shipping documents and did not constitute receipt of sale proceeds in British India; subsequent London adjustments merely reduced liability and did not amount to commercial receipt in the seller's country.

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

Issue (i): Whether on the facts the profits derived by the assessee from sales to European and American buyers arose outside British India.

Analysis: The sales were of unascertained goods; property passes only when goods are ascertained and the parties intend transfer. Under the contract the bills of lading (documents of title) were retained until acceptance of the buyers' bill of exchange in London and delivery of the documents. The advance payments by the sellers' negotiating bank at Madras were loans secured by the documents and did not effect transfer of property. The contract conditions (payment on acceptance and subsequent weighment/assay) show that property and effective receipt of price first occurred when the buyers' bank paid and obtained delivery of the bills of lading in London.

Conclusion: The profits arose outside British India; accordingly this issue is decided in favour of the assessee.

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

Analysis: The negotiating bank in Madras advanced 80%-90% as a loan on security of shipping documents; the first receipt of the sale proceeds was by the Eastern Bank, London, from the buyers' bank. Subsequent adjustment in London to account for the Madras branch advance only lessened the assessee's liability in British India and does not constitute a receipt of income in British India within commercial modes of receipt recognised for tax purposes.

Conclusion: The profits were not received in British India; accordingly this issue is decided in favour of the assessee.

Final Conclusion: Both referred questions are answered for the assessee, with the legal effect that the profits neither arose in nor were received in British India for the assessment years in question.

Ratio Decidendi: For sales of unascertained goods under contracts providing delivery of shipping documents against acceptance/payment, property and taxable accrual arise where and when the buyer (or buyer's bank) accepts the sellers' draft and obtains the bill of lading (document of title); interim bank advances secured by those documents are loans and do not constitute receipt of sale proceeds in the seller's country.

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