1965 (11) TMI 36 - SC - Income Tax

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. ... Was the post office the agent of the assessee to receive the cheques representing the sale proceeds on its behalf, and did the assessee consequently receive the sale proceeds through its agent in British India? Whether the revenue authorities could raise this contention for the first time at the hearing of the reference before the High Court, though this contention was not raised by it before the Tribunal or at any stage of the assessment proceedings ? Held that:- We are satisfied that the post office was the agent of the assessee for the purpose of receiving the cheques representing the sale proceeds and the assessee received the sale proceeds in British India where the cheques were posted, and consequently, the profits in respect of the sales were taxable under section 4(1)(a). The High Court, therefore, rightly answered the question in the affirmative. As the assessee was not prevented from adducing any material evidence by reason of the omission of the revenue authorities to argue the new point before the Tribunal. We do not, therefore, think it necessary to express any opinion on the question whether the court should refuse to allow the revenue authorities to raise a new contention where, by reason of their omission to raise the contention before the Tribunal, the assessee had been prevented from adducing material evidence on the point. Appeal dismissed. 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.