Place of receipt for negotiable instruments depends on prior acceptance and holder for value status.

A negotiable instrument taken without prior acceptance by the drawee does not, by itself, assign the drawee's funds or establish receipt at the place of drawing. On the findings recorded, the Bombay firm had not accepted the hundies in advance, and the person negotiating them was treated as collecting on behalf of the assessee rather than acquiring them as an absolute holder for value. The payment was therefore referable to receipt at Bombay, not in Gwalior State. The assessee was accordingly held not entitled to the Part B States (Taxation Concessions) Order, 1950 benefit.

---

---

Issues: Whether the sum of Rs. 1,58,537 represented income received in Gwalior State or at Bombay for the purpose of the Part B States (Taxation Concessions) Order, 1950.

Analysis: The amount could be treated as received at Pachhar only if the hundies were purchased by Thakersey Murarji so that he became an absolute holder for value. On the findings recorded, there was no prior acceptance by the Bombay firm, and the hundies therefore did not operate as an assignment of the funds in the drawee's hands. A bill of exchange by itself does not create liability between drawer and drawee until acceptance, and in the absence of such acceptance the person negotiating the instrument was treated as taking it for collection on behalf of the assessee rather than as a transferee for value. The Bombay payment was thus referable to receipt by the assessee at Bombay.

Conclusion: The sum of Rs. 1,58,537 was not received by the assessee in Gwalior State and the assessee was not entitled to the benefit of the Part B States (Taxation Concessions) Order, 1950.

Final Conclusion: The reference was answered against the assessee on the place of receipt of the amount, with the consequence that the income was held taxable outside Gwalior State.

Ratio Decidendi: Where a negotiable instrument is taken without prior acceptance by the drawee and the transferee is not shown to be an absolute holder for value, the instrument does not assign the drawee's funds and the receipt is treated as occurring where the amount is ultimately collected.

---