Bank discounting of negotiable instruments did not amount to receipt by the assessee in the taxable territory.

Where a bank purchases or discounts hundis and railway receipts, gives immediate credit to the customer, and later realises the amounts on its own behalf, the bank acts as holder for value rather than a mere collecting agent. On the facts found, the Tribunal's finding that the bank had purchased or discounted the documents and collected the proceeds for itself was ative and had to be accepted. Because receipt by the bank in the taxable territory was not receipt by the assessee in that territory, the sale proceeds of cloth were not treated as received by the assessee in British India.

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Issues: Whether the sale proceeds of cloth were received by the assessee in British India when the assessee handed over hundis and railway receipts to the bank, which credited the assessee immediately and later realised the amounts from the allottees.

Analysis: The decisive question was the character in which the bank received payment of the negotiable instruments. Where a bank purchases or discounts bills and gives immediate credit to the customer before realisation, it acts as holder for value and not as a mere collecting agent. On the facts found, the Tribunal held that the bank had actually purchased or discounted the documents, gave full credit on presentation, and collected the amounts on its own behalf. That factual finding had to be accepted. The distinction from cases where the bank merely collects on behalf of the customer was material, because only in that situation would the receipt by the bank amount to receipt by the assessee in the taxable territory.

Conclusion: The amounts realised by the bank in the taxable territory were not receipts by the assessee there, and the question was answered in the negative in favour of the assessee.

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