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AI Drafter - (New and Powerful) ✕ Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter.
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Issues: Whether the profits embedded in the sale proceeds remitted by British Indian merchants by cheque were received by the assessee in the taxable territories under section 4(1)(a) of the Indian Income-tax Act, 1922.
Analysis: The governing principle is that where payment is made by cheque, receipt may occur on delivery of the cheque, and if the cheque is honoured the payment relates back to that date. The decisive inquiry is whether there was an agreement between the parties fixing the place of payment; if so, that agreement governs, and the post office is not to be treated as the creditor's agent merely because cheques were sent by post pursuant to a request. Reading the contract as a whole, the relevant clause stipulated that the cheque or cash consideration was to be paid at Wankaner. That specific agreement displaced any inference that the post office acted as the assessee's agent for receipt of payment.
Conclusion: The profits embedded in the sale proceeds were not received in the taxable territories; they were received by the assessee in Wankaner. The question was answered in the negative, in favour of the assessee.
Ratio Decidendi: Where the contract specifically fixes the place where cheque payments are to be made, that stipulation governs receipt of income and excludes the implication that transmission by post constitutes receipt by the creditor in the place of posting.
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