LexINDORE MALWA UNITED MILLS versus COMMISSIONER OF INCOME-TAX, (CENTRAL) BOMBAY
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• • • A B c D E F G INDORE MALWA UNITED MILLS v. COMMISSIONER OF INCOME·TA:X, (CENTRAL) BOMBAY November 19, 1965 [A. K. SARKAR, J. R. MUDHOLKAR AND R. S. BACHAWAT, JJ.] Income-tax Act, 1922, s. 4(1) (9)-Assessee a non-resident-Receiv- ing cheques by post from Government of India-Post office whether agent of assessee or of Government of India-Income whether taxable in British India. The appellant-company carried on the business of manufacturing textile goods at Indore and had offices at Indore and Bombay. During its account years 1942 to 1947 it supplied goods to the Indian Stores Department, Government of India. The purchase orders were placed by the latter with the appellant at Indore which was !hen in an Indian State. On receipt of bills from the appellant the Government of India used to draw cheques on the Reserve Bank of India, Bombay, in favour of the appellant and used to send them by post to the appellant at Indore. The appellant used to deposit the cheques with the Imperial Bank of India Indora for the purpose of realisation from the Reserve Bank of India. In connection with the assessment years 1943-44 to 1948-49 the question that arose in 'income-tax proceedings was whether the profits of the appellant-a non-resident-in respect of the supplies were received by the appellant in British India and therefore taxable under s. 4(1) (a) of the Indian Income-tax Act, 1922. The departmental authorities held that the payment was received by the appellant at Bom- bay where the cheques were e11cashed but the Appellate Tribunal took the view that the payment was received at Indore. In reference the High Court held on the basis of this Court's decision in Commissioner of Income-tax v. Kirloskar Bros. Ltd. (1954) 25 I.T.R. 547 which had meanwhile been delivered that the cheques \Vere received by the assessee through its agent, the post office in British India and further held that the Revenue authorities were entitled to raise the contention for the llr!t time in the High Court. With certificate the appellant came to this Court. HELD: (i) Whereas in the present case the question of law in issue bet- ween the parties and referred to the High Court is the broad question whether or not the assessee is liable to pay tax on the ground that the sale pro- ceeds including the profits of the sale were received by the assessee in British India, the Revenue authorities may be. permitted to argue for the first time at the hearing of the reference that on the facts folllld by the Tribunal, the post office was the. agent of the assessee for the purpose of receiving the cheques repre'>enting the sale proceeds and the asscssee received the sale proceeds in British India where the cheques! were posted though this aspect of the question was not argued before the Tribunal and though the, only point the_-e argued was that the proceeds we:~ received at Bombay where the cheques were encashed. (655 HJ Commissioner of Income-tax v. Mis. Ogale Glass Works Ltd. [1955] 1 S.C.R. 185, Zorasw & Co. v. Commissioner of Income-tax, [1961] 1 S.C.R. 210 and Commissioner of Income-tax, Bombay v. Scindia Steam H Navigation Co. Ltd., [1962] 1 S.C.R. 788, referred to. The New lahanglr Vakil Mills Ltd. v. Commission.r of Income-tax [1960] 1 S.C.R. 249 and Keshav Mills Co. Ltd. v. Commissioner of Income-tax, [1965] 2 S.C.R. 908, di•tinguished. 652 SUPREME COURT .R.EPOllTS (1%6] 2 S.C.R. (ii) If by an agreement, express or implied, between the creditor A and the debtor or by request, express or implied, by the crediior, the debtor is authorised to pay the debt by a cheque and to send the cheque to the creditor by post, the po•t office is the agent of the creditor to receive tlte cheque and the creditor receives payment as soon as the cheque is posted to him. (656 G] Commissioner of Income-tax v. Mis. Ogale Glass Works Ltd., (1955) I S.C.R. 185, Jagdish Mills Ltd. v. The Commissioner of Income-tax, [1960) I S.C.R. 236, Norman v. Ricketts, ( 1886) 3 Times Law Reports 182 and Thairlwa/l v. The Great Northern Railway, [1910) 2 K.B. 509, relied on. (iii) In the in.slant case cl. 9 of the terms and conditions of the con- tract read with the prescribed form of the bills and the instructions regarding payment showed that the parties had agreed that the assessee would submit to the Government of India, Department of Supply, New Delhi, bills in the prescribed form requesting payment of
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