TMI Blog1959 (9) TMI 68X X X X Extracts X X X X X X X X Extracts X X X X ..... s - (i) the purchase war order, and (ii) bulk purchase order. On the reverse of the form of the purchase war order certain conditions were printed. It was recited therein that the price to be paid for the quantity specified in the order shall be that agreed upon between the Government and the standing Sub-Committee of the Cotton Textile Panel; and the first W.S. B. 116 in duplicate, using the prescribed forms. On the bulk purchase order forms also certain conditions and important instruction were printed and condition No. 9 which related to payment, provided : Unless otherwise agreed between the parties, payment for the delivery of stores will be made on submission of bills in the prescribed form in accordance with the instruction given in the Acceptance of Tender by cheque on a Government Treasury in British India or on a branch in British India of the Reserve Bank of India or the Imperial Bank of India transacting Government business. In the prescribed bill form there was a column for the contractor's signature for receipt of payment with the following printed statement : please pay by cheque to.........on Bank/Treasury at......... 2. Arrangement were made by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e instance of the Commissioner of Income Tax referred the following question to the court under section 66(I) of the India Income Tax Act : Whether the assessee-company is liable to pay tax in the taxable territories on the ground that the sale proceeds, which included the profits elements therein, were received in the taxable territories ? 4. It may be observed that since the date of the order passed by the Income Tax Appellate Tribunal negativing the claim of the Revenue, their Lordships of Supreme Court, by their judgment in Commissioner of Income Tax v. Ogale Glass Works Ltd., reversed the judgment of this court in Kirlosker's case, holding that when cheques were sent to a non-resident assessee to a place outside British India, in pursuance of instructions from the assessee to remit the amount of bills submitted, the income, profit or gain must be deemed to have been received at the place where the cheques were put in transmission by post. 5. In this reference, Mr. G. N. Joshi for the Revenue contends this case is covered by the principal of the judgment of their Lord-ships of the supreme court in the case of Ogale Glass Works Ltd. It is necessary to set out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transmitted by the Government of India were unconditionally accepted by the assessee at Aundh and accordingly the income was received outside the taxable territories, and in the circumstances it was unnecessary to consider the question whether the assessee's bankers acted as agents of the assessee and cleared the proceeds of the cheques. Counsel for the Revenue then attempted to raise a contention which had not been raised before the taxing authorities or before the Income Tax Appellate Tribunal that the delivery of the cheques to the post office at Delhi at the request of the assessee amounted to payment of the amount to the assessee at Delhi, and accordingly the income was received by the assessee in British India and not in Aundh. That contention was rejected and the question submitted to this court was answered in the negative. In appeal against that decision, it was held by the Supreme Court that on the facts taken cumulatively the cheques were received in complete discharge of the claim and the assessee received payment on the dates on which the cheques were delivered; that the request by the assessee to remit the amount due amounted to a request to remit the amount by po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 4(I)(a) of the Act. The argument is that as the cheques were posted at Delhi at the request of the assessee payment was received by it in British India. It is said that although the language in which the question has been framed is wide enough to include this branch of the argument, the question should, nevertheless, be read as circumscribed by the facts on which the Tribunal's decision was made and should not be regarded as at large. This suggestion means that the question must be read as limited only to those facts on which alone reliance was placed in support of the argument actually advanced before the Tribunal and on which the Tribunal's decision was founded, leaving out all other facts appearing on the record and even referred to in the Tribunal's order and the statements of the case. There is no warrant for such suggestion. The language of the question clearly indicates that the question of law has to be determined 'on the facts of this case'. To accede to the contention of the assessee, will involve the undue cutting down of the scope of the question by altering its language. Seeing that the High Court permitted this argument to be advanced before them ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the hearing of the reference in the High Court. Their Lordships, on the materials in the statement of the case, held, especially having regard to the amplitude of the question submitted, that the post office was constituted by the request made by the assessee its agent for receiving the cheques, and therefore, income, profits or gains were received at the place where the cheques were posted. 8. Mr. Kolah for the assessee in this case has strenuously contended that there is no evidence on the record to show that the cheques were in fact sent by post. But the contention is, in our judgment, wholly without force having regard to the admitted statement of the case submitted by the Tribunal. In the second paragraph of the statement of the case the Tribunal has observed that on receipt of the bill the Government drew cheques in favour of the assessee on the Reserve Bank of India, Bombay, and these cheques were sent by post to the assessee at Indore, and in the last paragraph it is recited that the parties had agreed that all the facts were correctly stated. It is evident, that before the Tribunal it was conceded that the cheques were drawn by the Government of India in favour of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was not the agent of the assessee but was the agent of the Government. After referring to the cases cited at the Bar, their Lordships observed that where an implied request by the creditor to send the cheque by post can be spelt out from the facts and circumstances of the case the post office will be constituted the agent of the addressee for receiving such payment. Their Lordships, therefore, held that the principle of the case of Ogale Glass Works Ltd., was applicable to the facts of the case before them even though the words to remit the amount by cheque were not specifically used in the bills. 10. The principle of these two cases is, in my judgment, decisive of the present case. In the case before us, there was a request expressly made by the assessee to the Government of India to pay the amount of the bills by cheques to self on bank at Indore. That pursuant to this request the cheques drawn by the Government of India were received by the assessee is not, in the circumstances of the case, denied. There was a request expressly made by the assessee to send the amount due to it by cheque; and as the normal agency for transmission of cheques is the post office, the cheques ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atter of the cheques, should be remitted to Bhavnagar by post. 13. Against this order calling for a supplementary statement of the case, an appeal was preferred to the Supreme Court, and the primary question which the Supreme Court was called upon to decide was whether the procedure followed by the High Court was correct. Their Lordships set out the facts in detail and examined the scheme of section 66 of the Income Tax Act and observed : Section 66(4) does not enable the High Court to raise a new question of law which does not arise out of the Tribunal's order and direct the Tribunal to investigate new or further facts necessary to determine this new question which had not been referred to it under section 66(I) or section 66(2) and direct the Tribunal to submit a supplementary statement of the case. This power and jurisdiction which is vested in the High Court is to be exercised within the four corners of section 66... The jurisdiction of the High Court under section 66 is a consultative or advisory jurisdiction. In order to satisfactorily discharge that advisory jurisdiction the High Court must have before it all the facts which are admitted and/or found by the Trib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sale proceeds in British India ever mooted before the Income Tax authorities or the Tribunal before the Tribunal made its order on July 17, 1952, or even in the reference applications field on September 15, 1952, nor was that question ever mooted before the Tribunal when it heard the reference and drew up the statement of the case on November 8, 1954. They then observed that if the argument whether the post office was constituted the agent of the assessee for the purpose of receiving the payment was allowed to be entertained, the question would have to be wholly recast and it would be quite distinct and separate from the question of law actually referred by the Tribunal to the High Court in the statement of the case originally drawn up. 16. Evidently their Lordships were dealing in that case with the question whether the High Court has jurisdiction under section 66(4) to direct an enquiry on question of fact which did not arise out of the order of the Tribunal and which necessitated ascertainment of fresh facts which were never canvassed at any time before the Income Tax authorities or the Tribunal. There is, however, nothing in the judgment which, in my opinion, seeks to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een canvassed before the Income Tax authorities or before the Tribunal, such a request could not in view of the judgment in New Jehangir Vakil Mills' case be entertained. But the Revenue asks us, on the facts found in the four corners of the reference. To decide whether the post office was constituted an agent of the assessee in that the assessee had requested the Government of India to send the amount due to it by cheques and pursuant to the request the cheques were sent. It may be pertinent to note that in all the three cases decided by their Lordships of the Supreme Court, which we have referred to, viz., the case of Ogale Glass Works Ltd., Shri Jagdish Mills Ltd., and New Jehangir Vakil Mills Ltd., two of the learned judges who constituted the Bench were the same, and the judgments in the cases of Shri Jagdish Mills Ltd., and New Jehangir Vakil Mills Ltd., were delivered on the same day. It is in the circumstances difficult to uphold the argument of Mr. Kolah that by making the observations relied upon from the judgment in the New Jehangir Vakil Mills' case it was intended to modify-without expressly so stating-the view expressed in the other two cases. Assuming that, d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts before it though that ground was not presented before the Tribunal. The test, in my judgment, is whether the new ground set up before the High Court can be adjudicated upon without opening up a fresh line of enquiry upon fresh facts which are not on the record. In the present case, the question as to the liability of the assessee to pay tax arises on the facts which were before the Tribunal. It is true that the Tribunal was not asked to decide the question of liability of the assessee on the ground which is now submitted before us; but the mere circumstance that the ground which on the facts could have been set up was not set up will not prevent the Revenue from relying upon that ground before this court. 19. On that view of the case, I am of the view that the assessee was liable to pay tax in the taxable territories on the ground that the sale proceeds, which included that profit element therein, were received in the taxable territories. I would accordingly answer the question referred in the affirmative. S.T. Desai , J. 20. I has the advantage of reading the judgment just delivered by my learned brother and have given it careful consideration. I feel loath to d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tain the new contention which is now for the first time sought to be raised by Mr. Joshi. As I read that decision it leads directly to the solution of this crucial question strenuously debated before us. But before I turn to it I shall succinctly state the facts which are relevant for the purpose of this reference. 23. The six relevant assessment years are 1943-44 to 1948-49. The assessee is a limited liability company to which I shall refer as the company . The company was non-resident and carried on the business of manufacturing textiles at Indore (then in an Indian State). It supplied goods to the Stores Department of the Government of India. The Department placed orders for purchase of goods with the company at Indore. All the purchase orders were received and accepted by the company at Indore. The delivery was to be f.o.r. Indore and the freight from the railway station at Indore was borne by the Department. On receipt of information that the goods were ready the inspection officers of the Department were to inspect the goods at the mills at Indore. When this was done inspection certificates were issued under their signature at Indore and the goods were dispatched by r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before us by Mr. Kolah, learned counsel for the assessee, that there was in fact nothing on the record of the case or in the order of the Tribunal to show that the cheques were sent by post to the assessee at Indore and we should, therefore, ignore that fact. It is true that there is nothing said in the order of the Tribunal about the posting of the cheques but I do not think we can accede to this submission. I have already included this fact in the synopsis above. 26. On these facts the Tribunal set aside the order passed by the Income Tax authorities and allowed the assessee's appeal and the Commissioner of Income Tax has come to this court on this reference. It is clear from the order of the Tribunal and the statement of the case that it was at no stage the contention of the Revenue that there was any request express or implied by the assessee to send the cheque by post so as to constitute the post office the agent of the assessee. It is also clear from that order and the statement of the case that one feature of the matter to which the Tribunal has expressly drawn attention was the fact that the assessee in the present case had expressly requested the Supply Departmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... drawn on the Bombay branch of the Reserve Bank of India along with a memo containing an acknowledgment form which was thus expressed : The undersigned has the honour to acknowledge cheque No.... dated..... for Rs.... in payment of the bills noted in the first column in the reverse . The assessee endorsed the cheques in favour of the Aundh Bank, Ogalewadi branch, which in its endorsed them in favour of a Bombay bank. The Bombay bank cleared the cheques through the clearing house in Bombay. The Aundh bank credited the assessee's account on the very day the cheques were received from the assessee with the amount of the cheques less the collection charges, and the assessee credited the account of the Supply Department and made corresponding debits to the bank's account and bank charges account. The assessee, it may be observed, sent its formal stamped receipts to the Government of India only after the receipt of the cheques and not along with the bills submitted by it. The Department contended that the assessee received income, profits or gains in British India within the meaning of section 4(1)(a) of the Indian Income Tax Act, 1922, on the ground that the encashment of the ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rger question so raised by learned counsel for the assessee. But that question has very recently been decided by the Supreme Court in the; case of New Jehangir Vakil Mills Co. Ltd. v. Commissioner of Income Tax. The greatest reliance has been placed by Mr. Kolah, learned counsel for the assessee, on the law on the subject as now laid down by their Lordships on that case. It will be necessary for me to refer to that decision in the context of the point relating to the scope, meaning and import of the words any question of law arising our of the Tribunal's order, which are to be found in section 66(1) of the Act. It will also be necessary for me to refer to certain observations of their Lordships in the case of Ogale Glass Works Ltd., made in the course of examination of the first submission on behalf of the assessee to which I have already made some reference. It will be convenient, however, to deal with this wider aspect of the matter after referring to the decision of the Supreme Court in Commissioner of Income Tax v. Ogale Glass Works Ltd., on the merits of that case. I have already given a synopsis of that case and also stated the facts on which the alternative contention ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the crucial point of difference, be it noted, is that there was here an express request to pay by cheque to self on Bank/Treasury at Indore . In view of all these it is extremely difficult for me to see how it can be said that in the case before us there was an express request by the assessee constituting the post office the agent of the assessee for the purpose of receiving payments. I must, therefore, hold that on merits, the present case is not ruled by that authority. It has been my endeavour to point out that it is clearly distinguishable on facts. 30. But it was urged on behalf of the Revenue that in any case the words of request Please pay by cheque to self on Bank/Treasury at Indore were sufficient to amount by necessary implication to and establish an implied request by the assessee to send the cheque by post from New Delhi, thus constituting the post office the agent of the assessee for the purpose of receiving payments. Mr G. N. Joshi sought to rely in the main on this aspect of the; matter and leaned heavily in support of the same on the decision of the Supreme Court in Shri Jagdish Mills Ltd. v. Commissioner of Income Tax, delivered on May 12, 1959. In that cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Supreme Court on special leave to appeal against the order of the Tribunal being granted by that court. It is clear from the judgment of their Lordships of; the Supreme Court that the conclusion reached was that the cheques were posted by the Government of India at New Delhi at the implied request of the appellant and it was held that the cheques must be held to have been received by the appellant in New Delhi, the post office thus constituted the agent of the assessee for the purpose of receiving the same. It is also clear from that judgment that their Lordships reached that conclusion about implied request on the facts and circumstances of that case. 31. The contention of the Revenue has rested principally on this decision. It has been argued that there are on the record of the case before us sufficient facts from which must arise the necessary inference that the assessee constituted the post office its agent for the purpose of receiving payments and the cheques having been posted at New Delhi taxable territories. The argument ran that on a comparison of the facts of the case before us with the facts of the case of Shri Jagdish Mills Ltd., there should be all the greater ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Government . Now, there are in the case before us these express words requesting payment to be made by cheque on a bank or at the treasury at Indore. It seems to me humbly that they cannot be overlooked. Nor can their significance and importance be minimised in the present context of implications which may reasonably be fastened on that request. In my judgment it would require a good deal of wresting with these express words of request, showing that it was the unmistakable intention of the assessee to receive the payments by cheques at Indore, that is outside the taxable territories, to read in them by implication the further request to send the cheques by post so as to constitute the post office an agent of the assessee for the purpose of receiving payment. Expressum facit tacitum cessare. Where parties have entered into express stipulations or made express requests it is manifestly not desirable to extend them by implications. For all these reasons, it is not possible for me to accede to the contention of the Revenue that there was in this case an implied request of the nature so strongly pressed for our acceptance. 33. I now come to the crucial question whether it is open t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no evidence that the cheques from Government were received in Bhavnagar. It is not the Department's case that the assessee company has a registered office elsewhere. The presumption is that the letters containing the cheques were addressed to the assessee company at Bhavnagar. We therefore hold taut the cheques were received from Government at Bhavnagar and that the money was also received in Bhavnagar. 34. I may observe that neither before the Income Tax authorities nor before the Tribunal was it contended by the Revenue that there was any request express or implied by the assessee in the matter of the cheques as would constitute the post office the agent of the assessee for the purpose receiving the payments. The only ground urged by the Revenue at all material stages was that because the amounts were received by cheques drawn on banks in British India and were ultimately encashed in British India, the moneys could not be said to have been received in Bhavnagar, though the cheques were in facts received at Bhavnagar. At the instance of the Commissioner of Income Tax, a reference was made by the Tribunal to the High Court. On of the two questions referred to the High Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f these cheques were received by post,... whether there was any request by the assessee, express of implied, that the amounts which are the subject matter of these cheques should be remitted to Bhavnagar by post. Mr. Joshi concedes that to the cheques were not received by post but by hand, the receipt will be for the purposes of tax at Bhavnagar. 38. The matter was carried by the assessee mills company to the Supreme Court. After setting out the provisions of sub-section (1), (2) and (4) of section 66, Bhagwati, J., observed : It is clear on a plain reading of the terms of section 66(1) that the only question of law which the assessee or the Commissioner can require the Tribunal to refer to the High Court is 'any question of law arising out of the order of the Tribunal' so that if the question of law which the assessee or the Commissioner requires the Tribunal to so refer to the High Court does not arise out of its order the Tribunal is not bound to refer the same. What has, therefore, to be looked at in the first instance is whether the question of law thus required to be referred arises out of the order of the Tribunal. The Tribunal no doubt has got before it th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ituted the post office their agent to received, on their respective behalves, the said cheques which were posted by the Government at Delhi having addressed them to the assessee outside British India. 41. In spite of the said decisions, the Revenue did not urge before the Tribunal that the said aspect of the matter should in the present case also be referred to the High Court for its decision and the reference applications were heard on the materials which were on record before the Tribunal when it made its orders dated July 17, 1952. The said order of the Tribunal was based on the facts admitted and/or found by the Tribunal as stated in the reference applications made by the Revenue as aforesaid and this aspect of the case, viz., whether any portion of these cheques were receive by; post and if so whether there was any request by the appellant express or implied that the amounts of those cheques should be remitted to Bhavnagar by post, had certainly not been canvassed before any of the Income Tax authorities or before the Tribunal... and any question of law appertaining thereto could not be said to arise out of the said order of the Tribunal. 42. The pivotal argument of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he form indicated by their Lordships of the Supreme Court as quoted by me above. And if we were to do so, we would, indubitably, be permitting a new contention and a new mixed question of fact and law being raised on this reference. The mere fact that in the statement of the case it is mentioned that cheques were posted at New Delhi cannot alter the position since at no stage was the attention of the assessee drawn to this new contention of the Revenue and which was not even mooted before the Income Tax authorities or the Tribunal. 45. Now, let me see what the Revenue has to say on this crucial question and this decision of the Supreme Court. Little could be said by learned counsel for the Revenue about the legal position as to the scope and ambit of the authority of this court to entertain any new contention raising a mixed question of fact and law as emerges from this latest pronouncement of the Supreme Court. All that was said in the course of the arguments at the Bar was that a similar new contention was allowed to be raised by the High Court for the first time at the hearing of the reference in the case of Ogale Glass Works Ltd., and the Supreme Court also entertained tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng any opinion on the larger question which they have now considered in the case' of New Jehangir Vakil Mills Co. Ltd. Then again at the end of those observations they added the significant remark, Seeing that the High Court permitted this argument to be advanced before them we are not prepared to shut it out. But it was said that there is nothing in the recent judgment of the supreme Court which would show that the view expressed in the case of Ogale Glass Works Ltd., and quoted above was modified or altered. The answer to this seems humbly to me, firstly, that the case of Ogale Glass Works Ltd., was decided by the Supreme Court on its particular facts, one of them being that there was, on construction of the word remit , held to be an express request : secondly, that the High Court had permitted the contention to be raised and their Lordships did not deem it necessary to shut it out; and lastly that their Lordships expressly refrained from giving any opinion on the larger question which they ultimately decided in the case of New Jehangir Vakil Mills Co. Ltd. The decision in the case of Ogale Glass Works Co. Ltd., is, in my opinion, therefore, clearly distinguishable both o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not depend for its validity upon facts and circumstances. If these are not investigated because the plea was not raised at any stage not even before the Tribunal - it is not competent to this court to treat the plea as implicit in or covered by the question simply because the question is couched in words of amplitude. The new plea in any such case would raise a new contention; involving a new question of law which can only properly be brought out by reforming the question referred to the High Court. It would not be a matter of merely advancing a new argument on a question of law arising out of the order of the Tribunal. 48. For all these reasons, I have reached the conclusion that it is not open to the Revenue to raise before us or for us to entertain this new contention about an implied request of the assessee whereby the post office was constituted an agent of the assessee to receive from the Government of India payments by cheques in the taxable territory. The point, in my judgment, is covered by the decision of the Supreme Court in the case of New Jehangir Vakil Mills Co. Ltd. I may in passing observe that while examining the scope and ambit of section 66(4) their Lordshi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ervations made in the context of section 66(1) which according to their Lordships of the Supreme Court amply bear out the view taken by them in the case of New Jehangir Vakil Mills Co. Ltd. This was while examining the scope and ambit of sub-sections (4), (1) and (2) of section 66. It is obvious that these observations in the decision of the Calcutta High Court lend great support to the main contention of the assessee. But I rest my judgment on this aspect of the case, as indeed I am bound to do, on the view expressed by the Supreme Court in the case of New Jehangir Vakil Mills Co. Ltd. 49. I would answer the question in the negative. 50. In view of the differences of opinion. The papers will be submitted to the learned Chief Justice for orders under section 66A of the Income Tax Act read with section 98 of the Civil Procedure Code. K.T. Desai , J. 51. A difference of opinion having arisen between Mr. Justice J. C. Shah and Mr. Justice S. T. Desai as regards the answer to the question raised in this reference, the matter has now come before me under the provisions contained in the proviso to section 66A(1) of the Indian Income Tax Act, 1922. 52. The refere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt of the company in their books at Indore. 53. It is admitted by counsel for the applicant as well as counsel for the respondent that one of the terms on which all the goods were supplied was term No. 9, which ran as follows : Payment : Unless otherwise agreed between the parties payment for the delivery of the stores will be made on submission of bills in the prescribed form in accordance with the instructions given in the Acceptance of Tender by cheque on a Government Treasury in British India or on a branch in British India of the Reserve Bank of India or the Imperial Bank of India transacting Government business. 54. There was no other agreement arrived at between the parties as regards payment. The prescribed form in which the bills were agreed to be submitted by the assessee contained inter alia the following clause : Received payment One Anna Receipt stamp on original copy only. Please pay by cheque to Self/Bank on Bank/Treasury at .. Contractor's signature. Contractor s singnature. 55. Amongst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 57. It has been urged on behalf of the Revenue that the request made by the assessee in the bill about the cheque being drawn on a bank at Indore is contrary to the express terms of the agreement arrived at between the parties. Mr. Kolah, the learned counsel for the respondent, urged that the request which the assessee had made was one which he was entitled to make under clause 9 of the agreement between the parties. According to him, under clause 9 of the Government was under an obligation to pay by cheque drawn (i) on a Government Treasury in British India or (ii) on a branch in British India of the Reserve bank of India or (iii) on the Imperial Bank of India transacting Governmental business. He urges that as the assessee had requested payment to be made by cheque on a bank at Indore and as there was a branch of the Imperial Bank of India at Indore, his instruction fell within the ambit of clause 9. In my view, Mr. Kolah's argument is not borne out by the language used in clause 9 of the agreement between the parties. The words therein used, on a true construction, mean that the Government was under an obligation to give cheques (i) on a Government Treasury in Britis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y remit the amount by a cheque, in our favour, on any bank, in Bombay . When the cheque drawn on a bank in Bombay was received by the assessee, the assessee sent to the Government an acknowledgment in the following terms : The undersigned has the honour to acknowledge cheque No. dated for Rs. in payment of the bills noted in the first column. 60. The question was whether the income was received by the assessee in British India where the cheque was cashed or in the State of Aundh where the cheque was received. It was held by the Bombay High Court that as the assessee accepted the cheque itself as an unconditional discharge of the Government's liability, the income was received by the assessee in the State of Aundh and not in British India. It was further held that even assuming that the cheque was posted in Delhi, the posting of the cheque in Delhi did not constitute the receipt by the assessee of the cheque in Delhi inasmuch as the assessee had not requested the Government to send the cheque by post. Following that decision, the Income Tax Tribunal in the present case held that the receipt of the cheques by the assessee at Indore was not subject to any condition and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pay the amounts of the bill by cheque drawn on a bank at Indore and, therefore, the question of paying the amount in British India does not at all arise. The question is as to the construction and as to the meaning that has to be given to this expression. 61. The Tribunal thereafter proceeds to state that the point with regard to the post office being the agent of the sender or the receiver was not argued by either side. On these facts and circumstances of the case, the Tribunal has referred to the High Court for its decision the question of law following : Whether the assessee company is liable to pay tax in the taxable territories on the ground that the sale proceeds which included the profit element therein were received in the taxable territories ? 62. It is stated in the statement of the case that the parties agreed that all facts had been correctly stated and that there was no omission of any material fact. 63. When this reference came up for hearing on February 24, 1956, the same was adjourned sine die on the application of counsel for the respondent, on the ground that there was an appeal pending before the Supreme Court in the case of Shri Jagdish Mill ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt. The court of first instance held that the sending of the cheque was payment and gave judgment for the defendant. The plaintiffs appealed therefrom. The appeal court dismissed the appeal. Lord Esher, the Master of the Rolls, in the course of his judgment observes as under : ... if a debtor has 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 of 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 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 reasonable 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 or come up to London herse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve been followed in this case, the parties must have intended that the cheques should be sent by post which is the usual and normal agency for transmission of such articles. If that were so, there was imported by necessary implication an implied request by the appellant to send the cheques by post from Delhi thus constituting the post office its agent for the purposes of receiving those payments. 67. The words please pay be cheque to self used by the assessee in the circumstances of the present case import a request to send payment by cheque and where the request is made by on party at Indore and is communicated to the other party at New Delhi, it would amount to a request to the other party to send the moneys by cheque through the post and would constitute the post office the agent of the party making the request for the purpose of receiving the cheques posted by the other party, and the cheques would be deemed to the received by the party making the request at the place where the cheques were posted, in the present case British India. This conclusion is further supported by the fact that along with such request even a duly signed receipt is forwarded in advance to the par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y bank in Bombay. 70. At page 545 of that report, Mr. Justice S. R. Das, as he then was, who delivered the judgment of the Supreme Court, observes as follows : 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... 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. Apart from this principle of agency there is another principle which makes the delivery of the cheque to the post office at the request of the addressee a delivery to him and that is that by positing the cheque in pursuance of the request of the creditor the debtor performs his obligation in the manner prescribed and sanctioned by the creditor and thereby discharges the contract by such performance (see sanction 50 of the Indian Contract Act and illustration (d) - thereto). 71. Towards the end of the judgment the learned judge observes as follows : Applying the above principles to the facts found by the Tribunal the position appears to be this. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s drawn, which is determinative of the question whether the post office in a particular case is constituted the agent of the sender or the receiver for the purpose of receiving the cheque. It is no doubt true that in Ogale's case the word remit appears and that word has been interpreted to imply a request to send the cheque by post. The question that will have to be considered will be whether the words please pay by cheque which occur in the present case are equally capable of being constructed to imply a request to send the cheque by post. To that extent there is a difference between the two cases. The judgment in Ogale's case has been based on two distinct grounds (i) the implication of an agreement arising from business usage and (ii) the express request to be inferred from the use of the word remit . The first ground given in that judgment applies to the facts of the present case. 74. As regards the distinction sought to be drawn by reason of the fact that the receipts on the present case were sent duly signed in advance, the view which I take is, that the; matter before me stands on a much stronger footing than in Ogale's case where receipts were subseque ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed form in accordance with the instructions given in the acceptance of the tender by a cheque on a Government Treasury or a branch of the Reserve Bank of India or the Imperial Bank of India transacting Government business. The company after effecting deliveries of the goods, submitted bills in the prescribed printed form which contained a request that the Government should pay; the amount due to the company by cheque. After submission of the bills the company received at Baroda in payment of its bills cheques through post from the Government. In the course of the judgment, which was delivered by Mr. Justice Bhagwati, it has been observed as follows : On the facts narrated above it is clear that the mode of payment agreed upon between the appellant and the Government of India, as specified in clause 21 in the printed form of tender, was that the payments for the delivery of the goods were to be by cheques drawn on a Government Treasury or on a branch of the Reserve Bank of India or Imperial Bank of India transacting Government business. The mentioned that the Government should pay the amounts due to the appellant by cheque. In payment of these bills the appellant used to receive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were received by the assessee company at Secunderabad. The same were credited in the assessee company's account books and were sent to its bankers for collecting and crediting the same to the account of the assessee company. The question was whether the amounts of commission received by the assessee company but cheques were received in British India. The assessee company filed an affidavit stating that it was verbally agreed that the commission would be paid at Secunderabad in cash or by cheque, as the case may be. The judgment of the Supreme Court in that case was delivered by Mr. Justice Kapur. In dealing with Ogale's case, the learned judge observes last page 491 as follows : In that case there was an express request of the assessee to remit the amount of the bills outstanding against the debtor, that is, the Government of India, by means of cheques. But it was observed by this court that according to the course of business usage in general which has to be considered as a part of the surrounding circumstances the parties must have intended that the cheques should be sent by post which is the usual and normal mode of transmission and, therefore, the posting of cheque ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is not possible to say that there was any agreement to pay moneys at Indore or that any request was made to pay the moneys at Indore. The decision in Patney Co.'s case is not applicable to the facts of the present case in the way in which Mr. Kolah seeks to apply it. 84. The next argument which has been urged before me by Mr. Kolah is based on the provisions contained in section 66(1) of the Indian Income Tax Act, 1922. That section provides as follows : Within sixty days of the date upon which he is served with notice of an order under sub-section (4) of section 33 the assessee or the Commissioner may, by application in the prescribed form, accompanied where application is made by the assessee by a fee of one hundred rupees, require the Appellate Tribunal to refer to the High Court any question of law arising out of such order, and the Appellate Tribunal shall within ninety days of the receipt of such application draw up a statement of the case and refer it to the High Court. 85. It is rightly urged that under the provisions contained in section 66(1) the Commissioner can only require the Appellate Tribunal to refer to the High Court any question of law ari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e High Court. A question of law arising out of its order having thus been properly referred by the Tribunal under sub-section (1) the High Court had to deal with and answer it in exercise of its jurisdiction under sub-section (5). In support of its contention that the question should be answered in the affirmative the Revenue advanced the argument, based on certain facts, that the cheques had been accepted only conditionally and, therefore, there was no payment until the cheques had been cashed and the cheques having been cashed in Bombay the payment must be regarded is having been received in Bombay. That argument did not find favour with the High Court and that being the position the Revenue sought to raise before the High Court, as it dies before us, an alternative argument, also based on facts, that the cheques having, at the request of the assessee, been posted at Delhi, the mere posting of the cheques in circumstances operated as payment in Delhi. Here no new question of law is sought to be raised. The question of law still is, whether on the facts of this case, income, profits and gains of sales made to the Government of India was received in British India within the meaning ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal is a general one and what is to be determined is whether the loss of the previous year can be set off against the income of the assessment year within the provisions of section 24(2) of the Act. The question is wide enough to cover the point raised before us. In the circumstances of this case the third point, raised by counsel for the assessee, is open to be canvasses before us. 89. In view of these judgments of the Supreme Court, it is not necessary for me to refer to or deal with the observations of the Bombay High Court in the case of Scindia Steam Navigation Co. Ltd. v. Commissioner of Income Tax, and the remarks to a somewhat different effect of the Calcutta High Court in the case of Commissioner of Income Tax v. State Bank of India. 90. Mr. Kolah, however, has relied upon the decision of the Supreme Court in the case of New Jehangir Vakil Mills Ltd. v. Commissioner of Income Tax. The judgment in that case has been delivered by Mr. Justice Bhagwati the same day on which he delivered the judgment in Shri Jagdish Mills' case. As strong reliance has been placed upon this case, it is necessary for me to set out briefly the facts of that case. The assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e moneys could not be said to that been received in Bhavnagar though the cheques were in fact received at Bhavnagar. 91. The Commissioner of Income Tax, Bombay North, Kutch and Saurashtra, applied for a reference under the provisions contained in section 66(1) of the Income Tax Act. In the course of the application, the Commissioner suggested the raising of the following two questions of law : (1) Was there any evidence on the record to justify the Tribunal 's finding that the mere receipt by the assessee of cheques of ₹ 2,58,987 and ₹ 13,08,980 in Bhavnagar amounted to receipt of above amounts in Bhavnagar even though the said cheques had actually been cashed in British India and the proceeds thereof were credited to the assessee's accounts with certain banks in British India ? (2) Whether in the circumstances of this case, the income, profits and gains in respect of the sales amounting to ₹ 15,67,967 made to the Government of India and other customers were received in British India within the meaning of section 4(1)(a) of the Indian Income Tax Act ? 92. The Tribunal did not raise any of the questions suggested by the Commissioner. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitted to Bhavnagar by post. The matter came up before the Supreme Court on special leave granted. In dealing with the matter, Mr. Justice Bhagwati observes as follows : The appeal raises an important question as to the nature, scope and extent of the jurisdiction vested in the High Court under section 66(4) of the Act.... 96. The learned judge thereafter refers to the provisions contained in sections 66(1), 66(2) and 66(4) of the Indian Income Tax Act and then proceeds to observe as follows : But section 66(4) does not enable the High Court to raise a new question of law which does not arise out of the Tribunal's order and direct the Tribunal to investigate new or further facts necessary to determine this new question which had not been referred to it under section 66(1) or section 66(2) and direct the Tribunal to submit a supplementary statement of case. 97. He further observes : Even though the terms of section 66(4) are wide enough to comprise 'such additions thereto or alterations therein as the court may direct in that behalf' the scope of such directions has got to be read in the context of and in conjunction with the provisions of section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... question of law which was referred by the Tribunal to the High Court for its decision was 'Whether the receipt of the cheques at Bhavnagar amounted to receipts of sale proceeds in Bhavnagar' and it was only based on the facts admitted and/or found by the Tribunal which had relevance only to that question and not to the question which was sought to be mooted by the High Court in its judgment under appeal. If the latter question was allowed to be entertained the question would have to be recast as under 'Whether the posting of the cheques in British India at the request, express or implied, of the appellant, amounted to receipt of sale proceeds in British India ?' 100. The court set aside the order of the High Court and remanded the matter to the High Court to arrive at its decision on the question of law referred to it in the statement of the case already submitted to it by the Tribunal. 101. This decision is clearly a decision on the provisions contained in section 66(4) of the Indian Income Tax Act and the only point laid down by this judgment is that the High Court cannot, in the exercise of its jurisdiction under section 66(4), raise a new question of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ins in respect of the sales amounting to ₹ 15,67,967 made to the Government of India and other customers were received in British India within the meaning of section 4(1)(a) of the Indian Income Tax Act ?' 104. With respect to the learned judge, I may point out that the question referred by the Tribunal to the High Court in the New Jehangir Vakil Mills Ltd.'s case was not the wider question referred to by the learned judge, but the limited question whether receipts of the cheques at Bhavnagar amounted to receipts of sale proceeds in Bhavnagar which could not cover the question whether the posting of the cheques in British India at the request, express or implied, of the appellant amounted to receipt of sale proceeds in British India . Mr. Kolah frankly stated that this is an obvious inaccuracy which has crept in, in the judgment of the learned judge. 105. In my view, the question of law that has been raised by the Tribunal in the present case is sufficiently wide to cover the aspect of the case sought to be raised by the learned counsel for the Revenue. He seeks to confine himself to the facts as set out in the statement of the case and I do not see any ..... X X X X Extracts X X X X X X X X Extracts X X X X
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