1950 (6) TMI 14 - HC - Income Tax

Summary

Issues Involved:
1. Whether the profit made by the assessee from contracts executed in the Bhopal State was received or deemed to be received in British India under Section 4(1)(a) of the Income-tax Act.

Detailed Analysis:

1. Determination of the Place of Receipt of Income:

The primary issue revolves around whether the profits made by the assessee from contracts executed in the Bhopal State were received or deemed to be received in British India under Section 4(1)(a) of the Income-tax Act. The facts indicate that the assessee obtained contracts for the supply of vegetables and other items to the Italian Prisoners' Camp at Bairagarh in Bhopal State. The tender forms were issued from Mhow, and the contracts were executed there. Payments for these contracts were made via cheques issued by the Controller of Military Accounts, Meerut, drawn on the Reserve Bank of India, Bombay.

The Income-tax Appellate Tribunal found that although the profits accrued outside British India, the payments were received in British India because:
1. The terms of the contract stipulated payments at the Reserve Bank, Bombay.
2. The bills were paid by cheques issued on the Reserve Bank, Bombay.
3. These cheques, received at Bairagarh, were sent for collection to the Imperial Bank of India, Bhopal, and credited to the assessee's account after deducting commission.
4. The Imperial Bank of India, Bhopal, acted as an agent for the assessee, thus the sale proceeds were received in British India, making them taxable under Section 4(1)(a) of the Income-tax Act.

2. Contractual Obligations and Place of Payment:

The counsel for the assessee argued that the contractual implication was that payments should be made where the contract was performed, i.e., Bairagarh, referencing the Privy Council judgment in Soniram Jeetmul v. R.D. Tata and Co. Ltd. However, the Tribunal's findings were based on the terms of the contract and the actual receipt of payments in British India, which were agreed upon by the parties.

3. Collection vs. Discounting of Cheques:

Another contention was whether the cheques were given to the Imperial Bank of India for collection or discounting. The Tribunal found no evidence to suggest the cheques were discounted. The assessee did not produce accounts before the Income-tax Officer, and it was not alleged during the proceedings that the cheques were discounted. The Tribunal's finding that the cheques were sent for collection stands unchallenged.

4. Jurisdiction and Scope of High Court under Section 66:

The High Court's jurisdiction under Section 66 of the Income-tax Act is advisory and confined to the questions referred by the Tribunal. The High Court cannot go behind the Tribunal's findings of fact or entertain new questions not raised before the Tribunal. The assessee's request to send back the case for a supplemental statement was denied as it would circumvent the statutory provisions and established precedents.

Conclusion:

On the statement of the case, it is clear that the payments were made via cheques drawn on the Reserve Bank of India, Bombay, and sent for collection to the Imperial Bank of India, Bhopal. This constitutes receipt in British India. Thus, the High Court answered the question in the affirmative, holding that the profit made by the assessee from the contracts executed in the Bhopal State was received or deemed to be received in British India under Section 4(1)(a) of the Income-tax Act.

Separate Judgments:

Soni, J. concurred with the judgment.