1959 (9) TMI 68 - HC - Income Tax

Summary

Issues Involved:
1. Whether the assessee-company is liable to pay tax in the taxable territories on the ground that the sale proceeds, which included the profit element therein, were received in the taxable territories.
2. Whether the post office was constituted the agent of the assessee for receiving the cheques.

Issue-wise Detailed Analysis:

1. Liability to Pay Tax in Taxable Territories:

The primary issue revolves around whether the sale proceeds received by the assessee-company, a non-resident entity, were taxable in British India. The assessee, a limited company with offices in Bombay and Indore, supplied textile goods to the Government of India during the relevant accounting years. The purchase orders were placed and accepted at Indore, and the goods were delivered f.o.r. Indore. The Income Tax Officer at Bombay sought to tax the profits made by the assessee on these sales. The Tribunal, following the Supreme Court's decision in Commissioner of Income Tax v. Ogale Glass Works Ltd., held that the income was received in British India when the cheques were posted in Delhi at the request of the assessee.

2. Post Office as Agent of the Assessee:

The second issue is whether the post office was constituted the agent of the assessee for receiving the cheques. The Tribunal noted that the cheques were sent by post to the assessee at Indore, and the parties had agreed that all facts were correctly stated. The Supreme Court's decision in Ogale Glass Works Ltd. established that the posting of cheques at the request of the assessee amounted to payment in the taxable territories. The Tribunal observed that the assessee had requested payment by cheque to self on a bank at Indore, which constituted an implied request to send the cheques by post, thus making the post office the agent of the assessee.

Analysis:

1. Liability to Pay Tax:

The Tribunal's decision was influenced by the Supreme Court's ruling in Ogale Glass Works Ltd., which held that the posting of cheques at the request of the assessee constituted payment in the taxable territories. The Tribunal noted that the assessee had requested payment by cheque to self on a bank at Indore, and the cheques were sent by post from Delhi. This implied that the post office was the agent of the assessee, and the income was received in British India. The Tribunal's decision was based on the facts found and the legal principles established in Ogale Glass Works Ltd.

2. Post Office as Agent:

The Tribunal's finding that the post office was the agent of the assessee was based on the request made by the assessee for payment by cheque to self on a bank at Indore. The Tribunal noted that the cheques were sent by post from Delhi, and the assessee had agreed to this arrangement. The Tribunal's decision was consistent with the Supreme Court's ruling in Ogale Glass Works Ltd., which held that the posting of cheques at the request of the assessee constituted payment in the taxable territories.

Judgment Delivered:

The Tribunal referred the question to the High Court, which had to determine whether the sale proceeds were received in the taxable territories. The High Court, following the principles established in Ogale Glass Works Ltd., held that the income was received in British India when the cheques were posted in Delhi at the request of the assessee. The High Court answered the question in the affirmative, confirming that the assessee was liable to pay tax in the taxable territories.

Conclusion:

The judgment establishes that the sale proceeds received by the assessee were taxable in British India, as the posting of cheques at the request of the assessee constituted payment in the taxable territories. The post office was deemed to be the agent of the assessee for receiving the cheques, and the income was received in British India. The High Court's decision was based on the legal principles established in the Supreme Court's ruling in Ogale Glass Works Ltd.