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1959 (5) TMI 7 - SC - Income TaxWhether 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? Held that - The appellant could not have intended that the cheques would be sent otherwise than by post and it was not the case of the appellant that the cheques received from the Government were delivered by hand on behalf of the Government to the appellant at Baroda and following the decision of this court in Commissioner of Income-tax v. Ogale Glass Works Ltd. 1954 (4) TMI 3 - SUPREME Court the Tribunal correctly held that the amounts of the cheques referred to above were received by the appellant in the taxable territories and as such the appellant was liable to tax under section 4(1)(a) of the Act. Appeal dimissed.
Issues Involved:
1. Taxability of income received by the appellant through cheques. 2. Determination of the location of income receipt for tax purposes. 3. Role of the post office as an agent for receiving payments. Detailed Analysis: 1. Taxability of Income Received by the Appellant Through Cheques: The appellant, a public joint stock company based in Baroda, received cheques from the Government of India for goods supplied. The Income-tax Appellate Tribunal held that these amounts were taxable under section 4(1)(a) of the Indian Income-tax Act, 1922, as they were received in the taxable territories. 2. Determination of the Location of Income Receipt for Tax Purposes: The appellant argued that the cheques were received at Baroda, outside British India, and thus not taxable. The Revenue contended that since the cheques were cashed in Bombay or Ahmedabad, the income was received within the taxable territories. The Tribunal found that the payments were accepted unconditionally and in full satisfaction at Baroda. The key issue was whether the cheques, sent by post from Delhi, constituted receipt of income in the taxable territories. 3. Role of the Post Office as an Agent for Receiving Payments: The Tribunal concluded that there was an implied request by the appellant to send the cheques by post, constituting the post office as the appellant's agent. This was based on the course of business usage and the fact that the cheques were drawn in Delhi and sent to Baroda by post. The case of Commissioner of Income-tax v. Ogale Glass Works Ltd. was cited, where a similar situation was interpreted as an implied request to send cheques by post. Judgment Summary: The Supreme Court upheld the Tribunal's decision, emphasizing the following points: 1. Mode of Payment: The contract stipulated payment by cheques drawn on a Government Treasury or a branch of the Reserve Bank of India or the Imperial Bank of India. The cheques were received at Baroda, along with an acknowledgment memo, and were accepted unconditionally. 2. Revenue's Argument: Initially, the Revenue argued that the income was received in the taxable territories since the cheques were cashed in Bombay or Ahmedabad. However, this was dismissed as the payments were accepted in Baroda, and the cheques were not dishonored. 3. Implied Request for Postal Delivery: The Tribunal and the Supreme Court found that there was an implied request by the appellant for the cheques to be sent by post, making the post office the appellant's agent. This was inferred from the business usage and the practicalities of sending cheques from Delhi to Baroda. 4. Legal Precedents: The court referenced several cases, including Norman v. Ricketts and Pennington v. Crossley and Sons Limited, to support the principle that an implied request to send cheques by post constitutes the post office as the agent of the recipient. 5. Final Decision: The Supreme Court concluded that the income, profits, and gains were received in the taxable territories when the cheques were posted in Delhi. Thus, the appellant was liable to tax under section 4(1)(a) of the Act. The appeals were dismissed with costs, affirming the Tribunal's decision.
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