TaxTMI 
TaxTMI 
1954 (4) TMI 3
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....ues drawn on the Reserve Bank of India, Bombay. The cheques used to be received by the assessee in Aundh and cashed through its bank at Bombay as hereinafter stated. The assessee being a non-resident company its liability to British Indian income-tax depended upon its receipt of income within British India. In the course of proceedings for the assessment of the assessee to income-tax for the five years mentioned above, the assessee contended that its profits on the sales accrued and were received in the Aundh State where it received payment by the receipt of the cheques. The income-tax Officer and, on appeal, the Appellate Assistant Commissioner held that the assessee received income, profits or gains in British India inasmuch as the cheques were drawn on a bank in Bombay and had been cashed in Bombay and accordingly taxed the the assessee under Section 4(1)(a) of the Indian Income-tax Act. On appeal by the assessee the Income-tax Appellate Tribunal upheld the assessment. Being aggrieved by the order of the Tribunal the assessee applied for a reference of the case to the High Court for the determination of the question of law which arose out of the Tribunal's order and the Tr....
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....d___________ in payment of the bills noted below :-- Then followed a tabular statement setting out the number, date and amount of the cheques. On the top of the memo there was a direction that it--"be immediately returned to the Controller of Supply Accounts with the acknowledgement form on the reverse duly signed and stamped when necessary." The acknowledgement form was thus expressed : "The undersigned has the honour to acknowledge cheque No.__________ dated__________ for Rs.___________ in payment of the bills noted in the first column in the reverse." After receipt of the cheques the assessee used to indorse it in favour of Aundh Bank Ltd., Ogalewadi branch, which in its turn used to endorse them in favour of the Bombay Provincial Co-operative Bank Ltd., Bombay. The last named bank cleared the cheques through the Clearing House in Bombay. The supplementary statement of the case further records that the Aundh Bank Ltd., used to credit the assessee's account on the very day the cheques were received from the assessee with the amount of the cheque less the collection charges and that the assessee used to credit the account of the Supply Department and make corresponding....
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....n and in discharge of its claim against the Government under the contracts. The conclusion pressed upon us is that as the cheques were received at Aundh the payment was received there and consequently the assessee which is a non-resident company did not receive any income, profits or gains in British India within the meaning of Section 4(1)(a) of the Indian Income-tax Act and the referred question should be answered in the negative. The contention put forward by the Revenue is two-fold. In the first place it is urged that the question whether the assessee accepted the cheques unconditionally and in full satisfaction of its claims under the contracts is concluded by the Tribunal's findings of facts. This contention is not wholly without force. The passage from paragraph 8 of the supplementary statement of the case and sub-paragraphs 3, 6 and 8 of paragraph 9 do tend to suggest that in the view of the Tribunal no payment was made by the Government by merely issuing the cheques, that when the assessee received the cheques it did not receive the sale proceeds, that it received the sale proceeds subject to the encashment of the cheques, that the bank collected the cheques in Bombay a....
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....v. Gooch, and Maillard v. Duke of Argyle) or "in discharge" (Kemp v. Watt) or "in settlement" of the price (Re Rower and Haslam). In addition to the above English cases referred to in Benjamin on Sale the learned Solicitor-General also relies on the case of Palaniappa Chetty v. Arunachalam Chetty where it was held by the Madras High Court that the execution of a formal receipt for the amount covered by the bill of exchange or hundi was not sufficient to rebut the general presumption that the delivery of a bill of exchange or a hundi for a debt operated only as a conditional discharge of the debt. He insists that on the facts of this case there is nothing from which an agreement may be implied that the cheques were given and received unconditionally in full discharge of the original contractual liability of the Government for the price of the goods supplied by the assessee. Sri Kolah, on the other hand, relied on the following facts in answer to the contentions of the learned Solicitor-General : (i) that there was an arrangement by the contract itself for payment by cheque (clause 15), (ii) that in the bills submitted by him the assessee expressly asked for payment by cheque, ....
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....ques were cashed in Bombay and that such receipts in Bombay became immediately assessable to British Indian tax under Section 4(1)(a). The High Court repelled this line of argument and held that the assessee received payment on the dates the cheques were delivered to it. We find ourselves substantially in agreement with this conclusion. It is to be remembered that there are four modes in which a contract may be discharged, namely (1) by agreement, (2) by performance, (3) by being excused by law from performing it and (4) by breach. In this case clause 15 of the contract provides how the payment of the price is to be made. In short the contract itself, by that clause, prescribes the manner and the time for performance by the Government of its part of the contract and as the Government made the payments in the prescribed manner, i.e., by cheques, it fulfilled its engagement and such payment would, under Section 50 of the Indian Contract Act, operate as a discharge of the contract. It should also be remembered that the assessee sent its formal stamped receipts only after the receipt of the cheques and not along with the bills submitted by it. Therefore, the receipts cannot be regarded....
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.... by not being met ; and I think that that agreement is implied from giving and taking the cheques and bills in question.' The following observations of Lord Maugham in Rhokana Corporation v. Inland Revenue Commissioners, are also apposite :-- "Apart from the express terms of Section 33, sub-section (1), a similar conclusion might be founded on the well known common law rules as to the effect of the sending of a cheque in payment of a debt, and in the fact that though the payment is subject to the condition subsequent that the cheque must be met on presentation, the date of payment, if the cheque is duly met, is the date when the cheque was posted." In the case before us none of the cheques has been dishonoured on presentation and payment cannot, therefore, be said to have been defeated by the happening of the condition subsequent, namely, dishonour by non-payment and that being so there can be no question, therefore, that the assessee did not receive payment by the receipt of the cheques. The position, therefore, is that in one view of the matter there was, in the circumstances of this case, an implied agreement under which the cheques were accepted unconditionally as paym....
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....efer a question of law to the High Court. Nobody at any time contended and even now it is not suggested before us that the question of law referred to the High Court did not arise out of the Tribunal's order or had not been properly referred to the High Court. A question of law arising out of its order having thus been properly referred by the Tribunal under sub-section (1) the High Court had to deal with and answer it in exercise of its jurisdiction under sub-section (5). In support of its contention that the question should be answered in the affirmative the Revenue advanced the argument, based on certain facts, that the cheques had been accepted only conditionally and, therefore, there was no payment until the cheques had been cashed and the cheques having been cashed in Bombay the payment must be regarded as having been received in Bombay. That argument did not find favour with the High Court and that being the position the Revenue sought to raise before the High Court, as it does before us, an alternative argument, also based on facts, that the cheques having, at the request of the assessee, been posted at Delhi, the mere posting of the cheques in such circumstances operated a....
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....y post and that that being the position it could not be said that the cheques had been delivered to the assessee in Delhi. In our opinion, for reasons to be presently stated, this part of the decision of the High Court cannot be supported on facts and its conclusion cannot be sustained in law. Turning to the order of the Tribunal we find the following passages : "All payments for the goods supplied were made by cheques drawn by the Government department at Delhi on the Reserve Bank of India, Bombay Branch. The cheques were received by the assessee company in its office in Aundh State." The finding of fact recorded in the first statement of the case also comprises the following (inter alia) : "These cheques were received by the assessee company at its office in Aundh State by post." The finding of fact in paragraph 3 of the supplementary statement of the case is thus recorded : "3. The assessee company used to submit the bills and on the form of the bill it used to write 'Kindly remit the amount by a cheque in our favour on any bank in Bombay.' " The question for our consideration is as to what, on the legal principles laid down in judicial decisions, these find....
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....ingement. It was held that the post office was the agent of the English buyer and, therefore, the Swiss seller could not be sued. After stating that the seller had sent the goods in pursuance of the order from the buyer to a particular named carrier namely the post office which is after all only a carrier of parcels like any other carrier, Lord Halsbury at page 204 said : "It is not necessary that the carrier should have been named. If, according to the ordinary course of delivery, the carrier would be the person who would receive it, that would be just as good, for the purpose of the argument, as if the carrier had been actually named ; but we have not to consider that question here, because the carrier is named. Then, for what reason am I to depart from the well-known and recognised principle of law that, under these circumstances, when goods are delivered by the order of the buyer to a named carrier, from that moment the goods vest in the buyer ?" The decision in Comber v. Leyland is very important for our purpose in that it explains the meaning and implication of the word "remit" which is the word used by the assessee when it requested the Government Department to "remit"....
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....ys is the basic difference between the postal regulations in England and those in India and he insists that the English decisions laying down the effect of sending cheques by post should not be rigidly followed here. He points out that in England the sender of the cheques has no right to reclaim the same after it is posted, and that, accordingly, immediately upon the posting of the cheques the post office becomes irrevocably the agent of the addressee and that, therefore, the delivery of the cheque to the post office is, in English law, delivery to the addressee. But that, Sri Kolah maintains, is not the position under the Indian Post Office Act, 1898. We have been taken through the different sections of that Act and the rules made thereunder and Sri Kolah contends that under the Indian law the sender has the right to reclaim the letter until it is actually delivered to the addressee and, therefore, until that time the post office remains the agent of the sender and consequently the posting of a cheque cannot in India be regarded as delivery of the cheque to the addressee. We may, however, point out that this right of the sender, on which so much stress and importance are laid by t....