Unconditional appropriation under c.i.f. contracts determined that title did not pass outside India on shipment alone.

Sales under c.i.f. contracts for unascertained goods turn on unconditional appropriation under the Sale of Goods Act. Where the seller retains control over the shipping documents and reserves rights if the buyers do not accept or pay against properly submitted documents, or if disputes arise over quality or moisture, property does not pass merely on shipment. On the facts stated, those contractual terms negatived immediate and unconditional transfer of title outside India, so the sales were held not to have taken place outside India and the profits from them were treated as arising within India.

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Issues: Whether the sales covered by the bills of lading in the name of the buyers in five cases took place outside India so that the profits from those sales arose outside India.

Analysis: The contracts were for unascertained goods and the governing test was when there was an unconditional appropriation of the goods to the contract within the meaning of the Sale of Goods Act. Although the contracts were on c.i.f. terms and contemplated shipment from Pakistan, the seller retained control over the shipping documents and the contract reserved rights in the seller if the buyers failed to accept or pay against properly submitted documents or if disputes regarding quality or moisture were raised. Those terms negatived any immediate and unconditional passing of property merely on shipment. The title, therefore, did not pass outside India on the facts found.

Conclusion: The sales did not take place outside India and the profits from the sales did not arise outside India; the issue was decided against the assessee.

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