1964 (10) TMI 98 - HC - Income Tax

Summary

Issues Involved:
1. Jurisdiction of the Income-tax Officer, Surendranagar.
2. Assessability of profit embedded in sale proceeds received from British Indian buyers.
3. Validity of proceedings under section 34(1)(a).

Detailed Analysis:

1. Jurisdiction of the Income-tax Officer, Surendranagar:
The first issue concerns whether the objection raised by the assessee to the jurisdiction of the Income-tax Officer, Surendranagar, was valid. The court held that the objection was essentially about the place of assessment, which falls under sub-section (3) of section 64. Since the objection was raised beyond the prescribed time-limit, it could not be entertained. The court stated, "The objection raised in the present case, though styled as an objection to the jurisdiction of the Income-tax Officer, Surendranagar, was, therefore, in reality and substance an objection as to the place of assessment and being covered by sub-section (3) of section 64, it could not be raised beyond the time-limit prescribed by that sub-section." Therefore, the Tribunal was correct in not entertaining the objection.

2. Assessability of Profit Embedded in Sale Proceeds:
The second issue pertains to the assessability of profit embedded in the sale proceeds of Rs. 33,94,900 received from British Indian buyers. The court analyzed two categories of sales separately:

Category 1: Sales with Instructions for Payment by Demand Draft on Rajkot (Rs. 5,30,460):
The court found that these sales fell within the ratio of the Supreme Court decision in Shri Jagdish Mills Ltd. v. Commissioner of Income-tax. The instructions to pay by demand draft on Rajkot implied that the post office acted as the agent of the assessee, and hence, the sale proceeds were received in British India. "We are, therefore, of the opinion that so far as the sale proceeds to the extent of Rs. 5,30,460 are concerned, they were received by the assessee in British India where the demand drafts were posted by British Indian buyers."

Category 2: Sales with No Specific Instructions (Remaining Rs. 28,64,440):
For these sales, the court found no express or implied request from the assessee to send the sale proceeds by cheques through post. The court stated, "The mere posting of cheques by British Indian buyers from British India is in our opinion not sufficient to justify an inference that there was an implied request by the assessee to British Indian buyers to send the sale proceeds by means of cheques through post." Therefore, the profit embedded in these sale proceeds could not be regarded as received in British India.

3. Validity of Proceedings under Section 34(1)(a):
The court did not address this issue as the assessee's counsel stated that they were not pressing questions Nos. 8 and 9. Thus, it was not necessary for the court to go into those questions.

Conclusion:
The court concluded that the objection to the jurisdiction of the Income-tax Officer, Surendranagar, was not valid as it was essentially an objection to the place of assessment and was raised beyond the prescribed time-limit. Regarding the assessability of profit, the court held that the sale proceeds of Rs. 5,30,460 were received in British India and hence taxable, but the remaining sale proceeds were not received in British India and thus not taxable. The court did not address the validity of proceedings under section 34(1)(a) as it was not pressed by the assessee.