Place of payment agreement controls receipt of income, defeating tax treatment based on receipt in British India.

Where parties expressly or impliedly agree that payment is to be made at a particular place, that agreement governs the place of receipt for income-tax purposes. The note distinguishes cheque-payment cases based on remittance through post, explaining that such authorities do not apply where the parties have fixed the place of payment by agreement. On the stated facts, the goods were supplied and inspected at Indore, the assessee insisted on payment there, and the protest against payment elsewhere was accepted. Accordingly, the sale proceeds were not treated as received in British India and were not brought to tax on that footing.

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Issues: (i) Whether there was an express or implied agreement between the parties that payment would be made at Indore, and whether the post office became the agent of the Government of India for receipt of payment; (ii) whether the sale proceeds of goods supplied to the Government were received in British India within the meaning of section 4(1)(a) of the Indian Income-tax Act, 1922.

Issue (i): Whether there was an express or implied agreement between the parties that payment would be made at Indore, and whether the post office became the agent of the Government of India for receipt of payment.

Analysis: The material on record showed that the assessee had no branch in British India, the goods were supplied and inspected at Indore, and the correspondence indicated that the assessee insisted on payment being made at Indore. When the Government sought to alter the arrangement and require payment in British India, the assessee protested and the protest was accepted. On those facts, the place of payment was governed by agreement between the parties, and the situation was not one where payment by cheque sent through post could be treated as received at the place of posting merely by implication from mode of remittance.

Conclusion: There was an implied, if not express, agreement to pay at Indore, and the post office became the agent of the Government of India.

Issue (ii): Whether the sale proceeds of goods supplied to the Government were received in British India within the meaning of section 4(1)(a) of the Indian Income-tax Act, 1922.

Analysis: Once the agreement regarding place of payment at Indore was accepted, the receipt of the sale proceeds could not be treated as having taken place in British India. The authorities dealing with payment by cheque were distinguished because they turned on cases where no contrary agreement as to place of payment existed. The Tribunal's finding was therefore not based on a misdirection in law and was supported by relevant material.

Conclusion: The sale proceeds could not be brought to tax as having been received in British India.

Final Conclusion: The references were answered against the department, affirming that the assessee was not chargeable on the footing that the receipts arose in British India.

Ratio Decidendi: Where the parties have an express or implied agreement fixing the place of payment, that agreement governs the place of receipt of income, and payment by cheque through post cannot be treated as receipt at the place of posting in the face of such agreement.

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