Post office as agent makes sale proceeds taxable; Revenue can raise new contentions

The court affirmed that the post office acted as the agent of the assessee for receiving cheques, making the sale proceeds taxable in British India. Additionally, the revenue authorities were allowed to raise new contentions in the High Court. As a result, the appeals were dismissed with costs.

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Issues Involved:
1. Whether the post office was the agent of the assessee to receive the cheques representing the sale proceeds on its behalf.
2. Whether the revenue authorities could raise the contention for the first time at the hearing of the reference before the High Court.

Issue-wise Detailed Analysis:

1. Agency of the Post Office:
The primary issue was whether the post office acted as the agent of the assessee for receiving cheques representing the sale proceeds, thereby making the receipt of sale proceeds taxable in British India under section 4(1)(a) of the Indian Income-tax Act, 1922. The court examined the contractual terms and the established practice between the parties. Clause 9 of the contract indicated that payment would be made by cheque on a Government Treasury in British India. The prescribed bill form and instructions also supported this arrangement. The court inferred that there was an implied agreement for the Government to send the cheques by post, as the assessee was located in Indore and the Government's supply department was in New Delhi. This inference was further supported by the fact that the cheques were indeed sent by post. The court concluded that the post office acted as the agent of the assessee, and the assessee received the sale proceeds in British India when the cheques were posted.

2. Raising New Contentions:
The second issue was whether the revenue authorities could raise the contention that the post office acted as the agent of the assessee for the first time at the hearing of the reference before the High Court. The court noted that the broad question of law referred to the High Court was whether the assessee was liable to pay tax on the ground that the sale proceeds were received in British India. The court held that under such broad questions, the revenue authorities could argue new contentions based on the facts found by the Tribunal, even if these contentions were not raised earlier. The court distinguished this case from the New Jehangir Vakil Mills case, where the referred question was narrow and did not cover the new contention. The court concluded that the revenue authorities were permitted to raise the new contention in the High Court.

Conclusion:
The court affirmed that the post office was the agent of the assessee for receiving the cheques and that the assessee received the sale proceeds in British India, making the profits taxable under section 4(1)(a). The court also allowed the revenue authorities to raise the new contention in the High Court. Consequently, the appeals were dismissed with costs.

Appeals Dismissed.

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