TMI Blog1959 (5) TMI 7X X X X Extracts X X X X X X X X Extracts X X X X ..... . - - - - - Dated:- 12-5-1959 - Judge(s) : BHAGWATI., HIDAYATULLAH., S. R. DAS JUDGMENT The judgment of the court was delivered by BHAGWATI, J.---These two appeals with special leave under article 136 of the Constitution are directed against the order of the Income-tax Appellate Tribunal of India, Bombay Bench "A" (hereinafter referred to as "the Tribunal"), dated August 3, 1954, in Income-tax Appeals Nos. 3756 of 1948-49 and 2161 of 1950-51 whereby the Tribunal held that the amounts of cheques of Rs. 1,98,643 and Rs. 4,96,365 for the assessment years 1943-44 and 1944-45 were received by the appellant from the Government in the taxable territories and were as such liable to tax under section 4(1)(a) of the Indian Income-tax Act (XI of 1922) (hereinafter referred to as "the Act"). At all material times the appellant was a public joint stock company incorporated under the then Baroda State Companies Act and having its registered office at Baroda. The appellant was the owner of a textile mill and carried on business in manufacturing and selling textiles at Baroda. In the accounting years 1942 and 1943 tenders were invited by the Government of India for some of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in payment of the bills noted in the first column on the reverse." The payments made by cheques were accepted by the appellant unconditionally and in full satisfaction of its claim for goods supplied to the Government. On receipt of such cheques, the appellant endorsed the same and sent them either to Bombay or Ahmedabad in the banking account of the appellant at such places. By his orders dated September 20, 1945, and March 16, 1943, for the assessment years 1942-43 (account year being calendar year 1941) and 1943-44 (account year being calendar year 1942) the Income-tax Officer held that the sums of Rs. 1,98,643 and Rs. 4,96,365 being the amounts of the cheques received by the appellant for the goods supplied to the Government of India amounted to receipt of income, profits and gains in British India during the said accounting years inasmuch as the said cheques were drawn on banks in British India and were liable to tax. On appeal to the Appellate Assistant Commissioner from the said orders of the Income-tax Officer, the Appellate Assistant Commissioner confirmed the orders of the Income-tax Officer and dismissed the appeals. From the said decision of the Appellate As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tioned therein were forwarded in payment of the bills noted in the tabular statement setting out the amount, number and date of the bills. The acknowledgment form on the reverse was thereafter duly signed and stamped by the appellant acknowledging the receipt of the cheques in payment of the said bills and was despatched by the appellant to the Government. These payments by cheques were accepted by the appellant unconditionally and in full satisfaction of its claims for the goods supplied to the Government. The case of the Revenue in the first instance was that even though these cheques were received by the appellant in Baroda they were sent by the appellant after duly endorsing the same either to Bombay or Ahmedabad in the banking accounts of the appellant at such places and these cheques were cashed and the proceeds thereof were received by the appellant in either Bombay or Ahmedabad and accordingly the income, profits and gains were received by the appellant within the taxable territories. This contention was really of no avail to the Revenue because on the particular facts of the present case it was common ground that the payments made by cheques were accepted by the appella ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as an express request conveyed to the Government by the assessee to send the cheque by post thus constituting the post office the agent of the assessee. No such words having been used by the appellant in this case the only consequence of the provision contained in the bill form that the payment be made by cheque was that the Government was authorised or entitled to make the payment by cheque ; but how to reach those cheques to the appellant was left to the sweet will and discretion of the Government and if the Government chose to send those cheques by post there was no request, express or implied, emanating from the appellant to send the cheques by post so as to constitute the post office the agent of the appellant for the purposes of receiving the same. It is true that in Commissioner of Income-tax v. Ogale Glass Works Ltd., the words " kindly remit the amount by a cheque in our favour on any bank in Bombay " were specifically used by the assessee and these words were construed to be an express request by the assessee to the Government to send the cheques by post. The various authorities which were discussed, viz., Thairlwall v. Great Northern Railway Co. ; Badische Anilinun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on, who tried the case without a jury, held [(1885) 2 T.L.R. 607] that the sending of the cheque was payment and gave judgment for the defendant. The plaintiffs appealed and the appeal was dismissed by the Court of Appeal consisting of Lord Esher, M.R., Lindley and Lopes, L.JJ. The Master of the Rolls said that if a debtor had to pay his creditor money, as a general rule the debtor must come and pay his creditor. But if the creditor asked him to pay in a particular way, the debtor might do so. If asked to pay through the post, the putting the letter in the post with the money was sufficient. The only question here was whether the plaintiffs asked the defendant in effect to send the money through the post. 'An express request to send through the post was not necessary. If what the plaintiffs said amounted to a request to send the cheque by the post, then there was payment. To answer that question the existing circumstances must be looked at. A milliner in London wrote to a lady in Suffolk asking for a cheque. Did that letter reasonably lead the lady to suppose and did she suppose that she might send the cheque by post? She could not suppose that she was to send a messenger with it o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he parties had agreed that the payment should be made by cheque, and that the posting of the cheque amounted to payment, and accordingly gave judgment for the defendants. The Court of Appeal reversed this decision. The Master of the Rolls in his judgment distinguished the case of Norman v. Ricketts, stating that in that case there was what amounted to a request to send a cheque by post and the court held that the posting of the cheque was payment. There was no such request here. The course of business between the plaintiff and the defendants was not taken to mean that there was a request to the defendants to send the cheque by post and that the plaintiffs would run the risk of the cheques miscarrying in the transit. The defendants sent to the plaintiff cheques by post on the various sales, together with a form of receipt to be signed by him independently of any arrangement. There was nothing in the circumstances to warrant the conclusion that putting the cheque in the post was to be taken as the delivery of the cheque to the plaintiff, the only facts being that the defendants always sent cheques by post and that when the plaintiff received them he sent back the receipt duly signed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of Income-tax v. Ogale Glass Works Ltd., and it was held that these provisions did not help the assessee. The position as it obtains was thus summarised at page 204 : " There can be no doubt that as between the sender and the addressee it is the request of the addressee that the cheque be sent by post that makes the post office the agent of the addressee. After such request the addressee cannot be heard to say that the post office was not his agent and, therefore, the loss of the cheque in transit must fall on the sender on the specious plea that the sender having the very limited right to reclaim the cheque under the Post Office Act, 1898, the post office was his agent, when in fact there was no such reclamation. Of course if there be no such request, express or implied, then the delivery of the letter or the cheque to the post office is delivery to the agent of the sender himself. " In our opinion the principle which has been enunciated by us in Commissioner of Income-tax v. Ogale Glass Works Ltd., is applicable to the facts of the present case, even though the words " to remit the amount by cheque " have not been specifically used herein. Non-user of those words does not ..... X X X X Extracts X X X X X X X X Extracts X X X X
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