Agency for cheque receipt by post determines place of income receipt under a broadly framed tax reference.

Where contractual terms and course of dealing show that payment was to be made by crossed cheque sent by post, an implied agreement may treat the post office as the creditor's agent for receipt. On that basis, receipt occurs when the cheque is posted in British India, not when it is later encashed or credited through banking channels, and the sale proceeds are taxable as income received in British India. A broadly framed reference question may also allow the revenue to rely on that agency basis before the High Court even if the point was not specifically argued before the Tribunal.

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Issues: (i) Whether, on the contractual terms and course of dealing, the post office was the assessee's agent for receiving the cheques representing the sale proceeds so that the assessee received the money in British India; (ii) Whether the revenue authorities could raise that contention for the first time before the High Court on reference.

Issue (i): Whether, on the contractual terms and course of dealing, the post office was the assessee's agent for receiving the cheques representing the sale proceeds so that the assessee received the money in British India.

Analysis: The contract, the prescribed bill form, and the payment instructions showed that the parties contemplated payment by crossed cheques to be sent from New Delhi to the assessee at Indore. From the arrangement and the regular practice of sending the cheques by post, the Court inferred an implied agreement that the Government would dispatch the cheques by post and that the post office would act as the assessee's agent for receipt. Receipt occurred when the cheques were posted in British India, not when they were later encashed at Bombay or credited at Indore through banking channels.

Conclusion: The assessee received the sale proceeds in British India, and the profits were taxable under section 4(1)(a) of the Indian Income-tax Act, 1922.

Issue (ii): Whether the revenue authorities could raise that contention for the first time before the High Court on reference.

Analysis: The question referred to the High Court was broad enough to cover the source and place of receipt of the sale proceeds. On that footing, the revenue could support the answer by urging that the post office acted as the assessee's agent, even though that particular aspect had not been argued before the Tribunal. The Court distinguished cases where the reference question was too narrow or where fresh evidence had to be collected through a supplementary statement of case.

Conclusion: The revenue authorities were entitled to raise the contention before the High Court.

Final Conclusion: The appeals failed because the sale proceeds were held to have been received in British India through the assessee's agent, and the reference court was competent to consider that basis of liability.

Ratio Decidendi: Where a debtor is authorised by contract, express or implied, to pay by cheque and send the cheque by post, the post office is the creditor's agent for receipt and payment is received when the cheque is posted; a broadly framed reference question may permit reliance on that basis even if the precise contention was not advanced before the Tribunal.

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