1959 (5) TMI 16 - SC - Income Tax

Commission payments to non-resident agents not taxable in British India based on payment agreement.

The Supreme Court affirmed the High Court's decision that commission payments received by non-resident assessees acting as agents for the supply of goods ... Whether the amounts of commission paid by cheques, drawn respectively on banks at Madras and Bombay and respectively posted from Madura and Bombay, can in the circumstances of this case be held to have been received in what was British India or at Secunderabad? Held that:- Whatever may be the position when there is an express or implied request for the cheque for the amount being sent by post or when it can be inferred from the course of conduct of the parties, the appellant in this case expressly required the amount of the commission to be paid at Secunderabad and the rule of Ogale Glass Works' case [1954 (4) TMI 3 - SUPREME Court] would be inapplicable. Appeal dismissed. Issues:- Jurisdiction of income tax assessment- Interpretation of receipt of income in British IndiaJurisdiction of income tax assessment:The case involved a dispute regarding the jurisdiction of income tax assessment over amounts received by non-resident assessees acting as agents for the supply of goods. The Commissioner of Income-tax contended that the amounts received by the assessees were taxable income as they were received in British India. The High Court of Orissa initially held in favor of the assessees, stating that the amounts were not received in British India and thus not liable to income tax. The dispute arose from the differing interpretations of where the income was deemed to have been received, whether in British India or at Secunderabad, where the assessees were based.Interpretation of receipt of income in British India:The crux of the issue revolved around the interpretation of the receipt of income in British India. The Appellate Tribunal found that the cheques received by the assessees from Madura and Bombay were treated as payments and received at Secunderabad. The High Court of Orissa emphasized that the crucial factor was whether the cheques were received as absolute and final payments or as conditional payments on realization. The Tribunal's supplementary statement indicated that the cheques were received as full discharge of the debt due on account of commission. The High Court, considering the precedent set by a previous judgment, concluded that the income was not received in British India, as there was an agreement that the commission would be paid at Secunderabad, making the rule in the previous case inapplicable.In conclusion, the Supreme Court dismissed the appeal, affirming the High Court's judgment that the amounts of commission paid by cheques from Madras and Bombay were not received in British India but at Secunderabad. The decision hinged on the specific agreement between the parties regarding the place of payment, which dictated the interpretation of where the income was received.