Receipt of sale proceeds through collecting bank, draft, and cheque depends on agency and the place of realization.

Receipt of sale proceeds depended on the mode of remittance and the role of the intermediary. Where hundis and drafts were collected by a bank acting only as collecting banker, the amounts were treated as received in British India when realised and credited to the assessee. By contrast, where payment was made by demand draft without any request by the assessee to use that mode, posting by the Government did not make the post office the assessee's agent, so receipt occurred outside the taxable territories. Where cheques were sent pursuant to an implied request to remit by post, the post office became the recipient's agent and receipt occurred on posting in British India.

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Issues: (i) Whether the sale proceeds collected through hundis and drafts drawn on the Imperial Bank at Ujjain were received in the taxable territories; (ii) whether sale proceeds received by demand drafts drawn on the Imperial Bank at Indore were received in the taxable territories; (iii) whether sale proceeds received by cheques sent by the Government of India in response to the assessee's payment instructions were received in the taxable territories.

Issue (i): Whether the sale proceeds collected through hundis and drafts drawn on the Imperial Bank at Ujjain were received in the taxable territories.

Analysis: The assessee's bank account showed that credit was given only after realisation from the buyers in British India. The bank neither purchased nor discounted the instruments and did not become a holder in due course. The covering instructions required the bank to collect the amounts, recover charges and interest, and credit the assessee's cash credit account, which showed that the bank acted only as a collecting banker. The amounts were therefore received by the bank for and on behalf of the assessee in British India.

Conclusion: This issue was decided against the assessee and in favour of the Revenue.

Issue (ii): Whether sale proceeds received by demand drafts drawn on the Imperial Bank at Indore were received in the taxable territories.

Analysis: There was no express or implied request by the assessee to the Government of India to make payment by drafts. A draft is not shown to be commercially interchangeable with a cheque. The posting of the drafts by the Government could not be treated as delivery to the assessee's agent, and the post office was not constituted the assessee's agent for receiving payment. The receipts were therefore obtained at Ujjain outside the taxable territories.

Conclusion: This issue was decided in favour of the assessee and against the Revenue.

Issue (iii): Whether sale proceeds received by cheques sent by the Government of India in response to the assessee's payment instructions were received in the taxable territories.

Analysis: The payment clause allowed remittance by cheque on a Government Treasury or a named bank in British India. The assessee's instruction to pay by cheque to the Imperial Bank at Indore amounted, in context, to an implied request that payment be sent by post. Applying the principles governing payment by cheque, the post office became the assessee's agent for receipt of the cheques, and the payment was received in British India when posted from Delhi. The request did not amount to an express agreement fixing Indore as the place of payment.

Conclusion: This issue was decided against the assessee and in favour of the Revenue.

Final Conclusion: The reference was answered partly in favour of the Revenue and partly in favour of the assessee, depending on the mode by which the sale proceeds were realised.

Ratio Decidendi: Where payment is collected through a banker acting only as collecting agent, receipt occurs when the amounts are realised in British India; but where payment by cheque is impliedly requested and the cheque is posted in pursuance of that request, the post office is the recipient's agent and receipt occurs on posting.

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