TMI Blog1980 (2) TMI 11X X X X Extracts X X X X X X X X Extracts X X X X ..... The facts, which are material for these references, briefly are as follows: The assessee is an unregistered firm consisting of two partners, the Kalyanmal Mills Ltd. (hereinafter referred to as the " Mills Company "), and one Shri Walia. The assessment years in question are from 1942-43 to 1947-48. At the material time, the assessee carried on business at Indore, which was a Native Indian State, outside what was then known as British India. The status of the assessee has been held to be that of non-resident association of persons. It is not necessary to refer to the chequered history of the assessment proceedings because the only fact material for the purpose of these references is that the ITO and, on appeal, the AAC held that the sale proceeds in respect of tents, supplied by the assessee to the Govt. of India were received by the assessee in British India as payments were made to the assessee by cheques posted in British India. When the matter came up for consideration before the Tribunal, on appeal, the Tribunal first proceeded to consider the question as to whether there was any agreement between the parties, express or implied, as regards the place of payment. The Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g in this office have been paid by cheque drawn on the Reserve Bank of India, Bombay, in favour of the Imperial Bank of India, Indore. If no reply is received from you regarding; the place of payment your future bills against contracts placed on or after 2-12-43 will be paid by cheque drawn on the Reserve Bank of India, Bombay." The Tribunal then referred to the letter dated 14th February, 1945, from the Secretary to the Resident, Central India, to the Prime Minister of Holkar State, communicating the acceptance of the Government of India to omit the condition about payment in British India in future contracts executed by the supply department with the local mills. The Tribunal then noted the contention advanced on behalf of the department and observed as follows : " The D.R. submitted that at least before 14-2-45 we should presume that the payments were made in British India and that the Resident's letter only made it clear that the condition of payment in British India would be omitted for the future. This was also the view expressed by the Appellate Assistant Commissioner. We were, therefore, inclined to examine whether the material on record would justify that inference as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... determine the place where the negotiable instrument can be said to have been received by the creditor, the court must first inquire whether there is any agreement between the parties as regards the place of payment. If there is an agreement between the parties, it must determine the place of payment and in such a case there is no room for implication. Such was the case in Commissioner of Income-tax v. Patney Co. [1959] 36 ITR 488 (SC). If there is no agreement between the parties in regard to the place of payment the court must see whether the negotiable instrument was posted by the debtor pursuant to a request made by the creditor. If it is shown that the creditor authorised the debtor to send the negotiable instrument by post, the post office would be the agent of the creditor for the purpose of receiving payment and the property in the negotiable instrument would pass to the creditor as soon as it is posted with the result that the payment would be received by the creditor at the place where the negotiable instrument is posted by the debtor. The request which would constitute the post office the agent of the creditor may be express or it may even be implied from the facts and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Tribunal only on the basis of endorsement on the bill presented by the assessee requesting the Government to pay by cheque to the Imperial Bank of India, Indore, and the finding was, therefore, based on a fact which was not relevant for determining the place of payment. It is true that the request by the assessee to the Government to make payment by cheque to the Imperial Bank of India, Indore, would not by itself be determinative of the question as regards the agreement as to the place of payment. That request merely indicated the mode of payment desired by the assessee, and an inference that the attention of the parties was focussed on the question of the place of payment could not be drawn from that fact. But, in the instant case, it cannot be held that the finding given by the Tribunal regarding the place of payment is based only on the basis of the bill presented by the assessee to the Government requesting that payment be made by cheque to the Imperial Bank of India, Indore. We have referred to the letters on record, which are referred to by the Tribunal in its order. These letters unmistakably indicated that the attention of the parties was focussed on the question about ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... never payment was made by cheque, then the place of posting of the cheque would be, according to law, the place of payment, irrespective of any agreement to the contrary between the parties. As observed in Dhrangadhra Trading Co. (P.) Ltd v. CIT [1966] 60 ITR 674 (Guj), if there is an agreement between the parties regarding the place where payment would be made, that agreement must determine the place of payment and, in such a case, there is no room for implication. Only in a case where there is no agreement between the parties regarding the place of payment, the court has to see whether the cheque was posted by the debtor pursuant to a request, express or implied, made by the creditor, and if there was such an express or implied request, then the post office would be the agent of the creditor for the purpose of receiving the payment. But if, as observed by the Supreme Court in CIT v. Patney Co. [1959] 36 ITR 488 (SC), it was found that the assessee had expressly required the amount to be paid at a particular place, the rule in Ogale Glass Works' case [1954] 25 ITR 529 (SC) would not be applicable. In view of this decision of the Supreme Court, the Tribunal cannot be said to have ..... X X X X Extracts X X X X X X X X Extracts X X X X
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