Territorial jurisdiction and receipt of sale proceeds by post governed taxability under the 1922 Income-tax Act.

An objection that an Income-tax Officer lacked territorial jurisdiction was treated as an objection to the place of assessment under section 64(3) of the Income-tax Act, 1922, and it failed because it was raised out of time. On receipt of sale proceeds, amounts covered by bills directing payment by demand draft on Rajkot were treated as received in British India because an implied request to transmit the drafts by post made the post office the assessee's agent. In transactions lacking any agreement on payment mode or any express or implied request to remit by post, receipt in British India was not established, so only the profit relatable to the identified receipts was taxable.

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Issues: (i) Whether the objection to the Income-tax Officer's jurisdiction was in substance an objection as to the place of assessment falling under section 64(3) of the Income-tax Act, 1922 and therefore barred when raised out of time; (ii) whether the profit embedded in the sale proceeds received from British Indian buyers was received in British India and was assessable under section 4(1)(a) of the Income-tax Act, 1922, and if so to what extent.

Issue (i): Whether the objection to the Income-tax Officer's jurisdiction was in substance an objection as to the place of assessment falling under section 64(3) of the Income-tax Act, 1922 and therefore barred when raised out of time.

Analysis: The statutory scheme treated the place of assessment as determining which Income-tax Officer had jurisdiction to assess the assessee. An objection that a particular officer lacked jurisdiction was therefore, in substance, an objection as to the place of assessment. Since the objection was raised long after the period prescribed by section 64(3), it was not entertainable.

Conclusion: The objection was barred by section 64(3) and was rightly not entertained.

Issue (ii): Whether the profit embedded in the sale proceeds received from British Indian buyers was received in British India and was assessable under section 4(1)(a) of the Income-tax Act, 1922, and if so to what extent.

Analysis: Where the bills required payment by demand draft on Rajkot, the direction indicated the mode of payment, and an implied request to send the drafts by post was established from the course of business, so the post office acted as the assessee's agent and receipt occurred where the drafts were posted. That part of the sale proceeds was therefore received in British India. In the remaining sales, however, there was no agreement as to place or mode of payment, no express request to remit by post, and the circumstances did not justify an implied request. The mere fact that advance payments were sent by cheque through post was insufficient to show receipt in British India.

Conclusion: The profit relatable to Rs. 5,30,460 was taxable as received in British India, but the profit relatable to the remaining sale proceeds was not so taxable.

Final Conclusion: The jurisdictional objection failed, but the assessability issue was answered only in part, resulting in taxation of one category of receipts and exclusion of the balance.

Ratio Decidendi: An objection to the assessing officer's territorial jurisdiction is an objection as to the place of assessment under section 64(3), and receipt of payment by negotiable instrument through post occurs where the instrument is posted only if the creditor expressly or by necessary implication requested transmission by post.

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