TaxTMI 
TaxTMI 
1967 (2) TMI 25
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....ad not given any finding as to whether the cheques, with which we are concerned in this case, were sent to the assessee by post and whether the assessee had given any directions in that regard to the Government of India. They, accordingly, called for a supplementary statement. The assessee, aggrieved by the order of the High Court, calling for a supplementary statement, took up the matter in appeal to the Supreme Court in Zoraster & Co. v. Commissioner of Income-tax. The Supreme Court dismissed that appeal on August 17, 1960. Thereafter, the Appellate Tribunal submitted the supplementary statement called for, on March 18, 1961. On receipt of the supplementary statement, the case was numbered as Income-tax Reference No. 7 of 1961. The facts material for the purpose of answering the question submitted to this court are these : The assessee is a firm consisting of three partners, namely, Sohanmal, Mehtabchand and Allahdin. Sohanmal and Mehtabchand are the two coparceners of a Hindu undivided family. That Hindu undivided family has got its own business firm, and that firm is also known by name, S. Zoraster & Co. Both the assessee-firm as well as the business concern of the Hindu ....
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.... (to be made out to the nearest rupee) -------------------------------------------------------------------------------------------------------------------------------------------------- One anna receipt Please pay by stamp on original cheque to Self Bank Received copy only --------- on ----------------- payment Bank Treasury at ........................... Contractor's Contractor's signature. name in full. " -------------------------------------------------------------------------------------------------------------------------------------------------- After the receipt of the goods, the Government of India made payments to the assessee by means of cheques. Those cheques were received by the assessee at Jaipur. Those cheques were drawn on the Reserve Bank of India at Bombay. S. Zoraster & Co. collected the moneys due under those cheques at Bombay. It is not established how those cheques were sent to the assessee by the Government of India. Now, on the basis of these facts we have to see whether the payments in question were received within the taxable territory. Admittedly, at the relevant point of time, Jaipur was outside the taxable territory. ....
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....d the cheques in full and unconditional discharge of its claims for the price of goods sold and delivered by it to the Government and not conditionally subject to realisation. That a sum of money may be received in more ways than one cannot be doubted. It may be received by the transfer of coins or currency notes or a negotiable instrument which represents and produces cash and is treated as such by businessmen. (See per Lord Lindley in Gresham Life Assurance Society v. Bishop). Reference in this connection may also be made to the decisions in Commissioner of Income-tax v. Kameshwar Singh ; Raghunandan Prasad v. Commissioner of Income-tax ; and Commissioner of Income-tax v. Maheshwari Saran Singh. Learned Solicitor-General does not dispute this proposition but he argues that, in the absence of any agreement, express or implied, to the contrary, a payment by a negotiable instrument is always understood to be conditional. He refers us to Benjamin on Sale, 8th edition, page 787, in support of the proposition that the intention to take a bill in absolute payment for goods sold must be clearly shown, and not deduced from ambiguous expressions, such as that the bill was taken 'in payment....
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....heques. These two circumstances, so submits the Solicitor-General, are not sufficient to establish the fact of the acceptance of the cheques as unconditional discharge. He contends that, in the absence of an express agreement, it is only when the creditor elects to take a bill or cheque having it in his power to obtain payment in cash, that is to say, takes a bill or cheque by choice or preference instead of cash that an agreement may be implied that he took it as an unconditional and absolute payment of the debt. (Robinson v. Henry Reid and Anderson v. Hillies). Such cases must be rare, for the creditor is not ordinarily likely to give up the advantage of having a double remedy, namely, one on the bill or cheque and the other, on dishonour of the bill or cheque, on the original cause of action. He points out that in this case there is no finding of any special agreement in this behalf and, therefore, submits the learned Solicitor-General, the assessee must be taken to have received the cheques conditionally, i.e., subject to realisation. The learned Solicitor-General concludes that, in the circumstances, no payment was received by the mere receipt of the cheques and that payment w....
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....ble to accept that contention. In that case, all that the Supreme Court had to consider was, whether the High Court was justified in calling for a supplementary statement on the facts of the case. It negatived the contention of the assessee that the High Court erred in law in calling for the supplementary statement in question. For pronouncing on the question before it, it had to go into the facts of the present case as well as on the law bearing on the subject. We do not think that in that case the Supreme Court, in any manner, differed from the views expressed in Ogale Glass Works' case. Shri Kapur next placed reliance on a decision of the Supreme Court in Commissioner of Income-tax v. Patney & Co. We fail to see what assistance the revenue can get from the said decision. Therein, it was found as a fact that the assessee had required its customers to make all payments at Secunderabad, which was outside the taxable territories. On the basis of that fact, the court came to the conclusion that no income, profit or gain was received within the taxable territories. In the course of the judgment in that case, the Supreme Court observed : " In the case of payment by cheque sent by....
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....own by the Supreme Court in Shri Jagdish Mills' case has any bearing on the point under consideration. It may be, or we may go further and say, it is likely that the Government of India was sending cheques to the assessee through post. But the fact remains that there is no such finding by the Tribunal. The revenue has failed to place any material before the Tribunal to prove that the cheques in question were being sent by the Government through post. The burden of proving that the assessee received any income, gain or profit, within the taxable territories is on the revenue. It cannot ask the court to presume facts and circumstances in its favour. The factum of the cheques having been sent through post must be proved. The contention of Shri Gopal Singh, learned counsel for the assessee, that the circumstance that the cheques were cashed at Bombay is irrelevant, is well founded. The realisation of the cheques at Bombay does not alter the fact that the payments were made at Jaipur. That conclusion receives support from the decisions in Keshav Mills Ltd. v. Commissioner of Income-tax, Turner Morrison & Co. Ltd. v. Commissioner of Income-tax and Zoraster & Co. v. Commissioner of ....