Place of assessment finality and territorial receipt of sale proceeds under income tax law

A Rajasthan HC note explains that a determination of the place of assessment under section 64(3) of the Indian Income-tax Act, 1922 is final for the Act's purposes and cannot be reopened in appeal before the Appellate Assistant Commissioner or the Tribunal. It also states that sale proceeds are received in the taxable territory only when money is actually received there by or on behalf of the assessee; mere later realisation through banking channels is insufficient. On the facts discussed, cash receipts and bank deposits in British India were taxable, while one cheque-related item was excluded because receipt in the taxable territory was not adequately established.

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Issues: (i) Whether an objection to the place of assessment could be raised in appeal before the Appellate Assistant Commissioner or the Tribunal after the Commissioner had determined it under section 64(3) of the Indian Income-tax Act, 1922; (ii) whether the sale proceeds under the various items were received in the taxable territory so as to attract tax under section 4(1)(a) of the Indian Income-tax Act, 1922.

Issue (i): Whether an objection to the place of assessment could be raised in appeal before the Appellate Assistant Commissioner or the Tribunal after the Commissioner had determined it under section 64(3) of the Indian Income-tax Act, 1922.

Analysis: Section 64(3) provides a special mechanism for determining the place of assessment by the Commissioner, and the Act does not create a right of appeal against such a determination under the ordinary appellate provisions. The scheme of the Act treats the question as one of administrative convenience rather than a matter open to appellate challenge after assessment. Once the assessee invoked the statutory reference to the Commissioner and the matter was decided, that decision remained final for purposes of the Act.

Conclusion: The objection to the place of assessment could not be reopened in appeal, and the assessee's contention on this point failed.

Issue (ii): Whether the sale proceeds under the various items were received in the taxable territory so as to attract tax under section 4(1)(a) of the Indian Income-tax Act, 1922.

Analysis: Amounts actually deposited or paid in British India, including cash receipts and deposits made in banks in British India, constituted income received in the taxable territory. In the case of cheques or hundis, the decisive question was whether the money was in truth received in the taxable territory or whether the bank merely acted in the ordinary course of its own banking business without the receipt amounting to sale proceeds received by or on behalf of the assessee there. On the facts found, the items represented by cash receipts and bank deposits in British India were taxable, but the item of Rs. 14,919 stood on a different footing because the assumption that the cheques were sent at the assessee's request by post was not adequately supported.

Conclusion: Items (a), (b), (c), (e) and (f) were rightly treated as received in the taxable territory, but item (d) of Rs. 14,919 was not; the assessee succeeded only to that extent.

Final Conclusion: The reference was answered partly against the assessee and partly in its favour, with the jurisdiction objection rejected and only one sales item excluded from taxable receipts.

Ratio Decidendi: A determination of the place of assessment under section 64(3) of the Indian Income-tax Act, 1922 is final and not appealable under the ordinary appellate provisions, and sale proceeds are received in the taxable territory only when money is actually received there by or on behalf of the assessee, not merely because commercial instruments are later realised through banking channels.

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