Receipt by cheque occurs where the cheque is posted when payment by post is authorised by the creditor's request.

Where the reference question was broad enough and the supporting facts were already on record, the Revenue was permitted to rely on a ground not earlier urged before the tax authorities or Tribunal. The majority also held that, when the creditor requests payment by cheque and the surrounding terms show posting as the authorised mode of transmission, the post office acts as the creditor's agent and receipt occurs where the cheque is posted. On the facts, the Government cheques posted from New Delhi were treated as receipt in the taxable territories, so the receipts were taxable there.

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Issues: (i) Whether the Revenue could support the reference by raising a ground that the cheques were posted at the assessee's request, although that ground had not been urged before the income-tax authorities or the Tribunal. (ii) Whether, on the facts found, the sale proceeds were received in the taxable territories when the Government's cheques were posted from New Delhi pursuant to the assessee's request to pay by cheque.

Issue (i): Whether the Revenue could support the reference by raising a ground that the cheques were posted at the assessee's request, although that ground had not been urged before the income-tax authorities or the Tribunal.

Analysis: The majority held that the reference question was wide enough to permit reliance on a ground supported by the facts already on record, so long as no fresh line of inquiry or new evidence was required. The decision distinguished a case where the High Court had sought to reopen facts never canvassed before the Tribunal. The dissent took the opposite view, treating the new contention as a fresh mixed question of fact and law not arising out of the Tribunal's order.

Conclusion: The new contention was held to be open to the Revenue.

Issue (ii): Whether, on the facts found, the sale proceeds were received in the taxable territories when the Government's cheques were posted from New Delhi pursuant to the assessee's request to pay by cheque.

Analysis: The majority applied the rule that where the creditor authorises or requests payment by cheque and the surrounding circumstances show that posting is the normal mode of transmission, the post office becomes the creditor's agent and receipt occurs where the cheque is posted. The express request to pay by cheque, coupled with the contractual terms and the admitted posting of cheques from New Delhi, was treated as sufficient to constitute receipt in the taxable territories. The dissent held that the express wording to pay by cheque to self on a bank at Indore negatived any implied request to post the cheques and that receipt occurred at Indore.

Conclusion: The sale proceeds were held to have been received in the taxable territories and were taxable there.

Final Conclusion: The reference was answered in favour of the Revenue, and the assessee's receipts by cheque were treated as income received in the taxable territories.

Ratio Decidendi: Where the question referred is wide enough and the deciding facts are already on record, a party may rely on a supporting ground not previously urged, and payment by cheque is received where the cheque is posted if the payer's request or the surrounding circumstances make posting the authorised mode of transmission.

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