My question is - because of sun's movement around the milky way, Earth never reaches at the same point where it started from. Then how can we say that it circles around the sun in 365 1/4th days.
That is the orbital period in a frame in which the Sun is considered fixed.
Have you ever told your children to sit still while you are driving a car? How could they comply if you were driving at 100km/h?
Have you ever stood still? How is that possible when the Earth is rotating as well as orbiting the Sun?