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TMI Blog1975 (7) TMI 55X X X X Extracts X X X X X X X X Extracts X X X X ..... ---------------------------------------------------------------------------------------------- (a) (b) (c) --------------------------------------------------------------------------------------------------------------------------------------------------- Realisations by Sales to British Indian Sales to Textiles cheques drafts merchants. Sale proceeds Directorate (see para. 5 infra by cheques, etc., on British for details) Indian banks --------------------------------------------------------------------------------------------------------------------------------------------------- Rs. Rs. Rs. 1943-44 16,03,437 23,834 4,93,879 1944-45 17,91,959 4,26,681 17,33,334 1945-46 19,828 1,26,172 25,12,274 1946-47 --- 4,69,496 15,02,814 --------------------------------------------------------------------------------------------------------------------------------------------------- Question No. 1 is in reference to the figures which are set out in column (a) of the above table and is as under : " Whether, on the facts of this case, the sums of Rs. 16,03,437, Rs. 17,91,959 and Rs. 19,828 were received by the assessee in British India so as to justi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m with the only difference as to quantity and other similar particulars. Clause 5 of the contract provided as under : " That the delivery to be given to me/us against full payment : the delivery documents including railway receipts, etc., to be sent to me/us by V.P. Post, or through some Bank as I/We may direct, all Banking or remittance charges and Hundawan will be borne by me/us. In case I/We to pay you up the full amount of the goods in advance, you will arrange at my/our request send the R.R. under registered post, direct to the party at my/our risk and account. " The bills in respect of these contracts were forwarded with a note to the forwarding letter reading as under : " The payment ought to be made immediately at Indore in cash. As a special consideration draft drawn on any bank at Indore could be accepted. " In spite of this note in the forwarding letter the purchasers paid the amounts only by cheques, drafts or hundies. The cheques were encashed in the manner indicated in the table given above. So far as item No. 4 in the table above was concerned payments were received from overseas merchants. In those cases the overseas merchants opened letters of credit in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns to British Indian bankers to remit the proceeds to Indore the amounts were sent over to Indore ; that no evidence had been led in to show that it was only at the request of the customer the bank collected the bills and remitted them to Indore and that the bank collected the sale proceeds for the assessee. With reference to category No. 4 in respect of transactions with overseas merchants, the sale proceeds were held to be in British India because their letters of credit were operated by the assessee in Bombay. Regarding category 5, it was held that the assessee was unable to prove, in spite of opportunity being given therefor that the bankers purchased these bills and thereby became holders in due course. On the basis of such evidence on record it was held that the banker of the assessee received the bills only for collection as the assessee's agent. As regards this question Mr. Mehta on behalf of the assessee contended that as under the contract delivery was to be given against payment and as in the note to the forwarding letter it was stated that the payment should be made immediately at Indore in cash or as a special consideration a draft drawn on any bank at Indore could ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee before the Appellate Assistant Commissioner, it was contended on its behalf that the sale proceeds could not be taken as received in British India as immediately on the receipt of such cheques, etc., the bank was debited and the debtor was credited with the amount of the said cheques. It was submitted on behalf of the assessee that such cheques were received in Indore in absolute and final payment by way of unconditional discharge. The Appellate Assistant Commissioner accepted the contention of the assessee and held that the sale proceeds were received by the assessee at Indore as the cheques were received as absolute and final payment by way of unconditional discharge. In an appeal by the revenue before the Tribunal it was urged on behalf of the revenue that the Appellate Assistant Commissioner was in error in taking the view that the sale proceeds were received by the assessee at Indore. The Tribunal found as a fact that the provisions contained in the contract and in the note to the forwarding letter were not adhered to by the contracting parties, namely, the assessee and the merchants, as they had adopted other modes for making payment. The Tribunal held that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view of the decisions of the Supreme Court in Ogale Glass Works' case, Commissioner of Income-tax v. Kirloskar Bros. Ltd. and in Shri Jagdish Mills Ltd. v. Commissioner of Income-tax. In these cases the Supreme Court has laid down the following propositions : (a) when payments is received by cheque the receipt is at the time when the cheque is delivered and not when it is encashed. This would be so even if in the instance provided it is not honoured subsequently on presentation ; (b) If the cheque is sent by post the receipt would be at the place where the cheque is posted provided the mode of sending it by post is adopted at the express or implied request of the addressee, in such cases the post office being the agent of the addressee ; otherwise the receipt would be at the place where the cheque is delivered by the post office to the addressee ; (c) having regard to business, a request to make payment by cheque may in itself imply a request to send it by post, while a request to remit the amount would be tantamount to an express request to send it by post. The terms of the contract clearly provided that delivery will be effected to the purchaser against full payment an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the bills read : "Please pay by cheque to self on bank at Indore". For the amount of the bills the Government of India drew cheques in favour of the assessee on the Reserve Bank of India and these cheques were sent by post to the assessee at Indore the cheques were deposited in the account of the assessee with the Imperial Bank of India, Indore, and on clearance of the cheques the amount was credited to the account of the assessee. The Appellate Tribunal following the decision of the Bombay High Court in the case of Kirloskar Bros. Ltd. (which was later reversed by the Supreme Court in its decision reported in [1954] 25 ITR 547 Commisstoner of Income-tax v. Kirloskar Bros. Ltd.), held that as the assessee unconditionally, received the cheques at Indore, the income was received at Indore. The point whether the post office was the assessee's agent was not considered by the Tribunal. The question referred by the Appellate Tribunal to the High Court was "whether the assessee-company was 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 ?" It was contended on behalf o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e taxable territories by the assessee-mills. The decision of the Bombay High Court in Indore Malwa United Mills Ltd.'s case has been affirmed by the Supreme Court as stated above and it is stated : " We are satisfied that the post office was the agent of the assessee for the purpose of receiving the cheques representing the sale proceeds and the assessee, received the sale proceeds in British India where the cheques were posted, and consequently, the profits in respect of the sales were taxable under section 4(1)(a). " Referring to the cases relied upon by Mr. Mehta, the first case which will have to be considered is the case of Commissioner of Income-tax v. Patney Co. The Supreme Court in this case has taken the view that in the case of payment by cheque sent by post the determination of the place of payment would depend upon the agreement between the parties or the course of conduct of the parties. If it is shown that the creditor authorised the debtor either expressly or impliedly to send a cheque by post the property in the cheque passes to the creditor as soon as it is posted. If there is an express request by the creditor that the amount be paid by cheque to be sen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r which the goods were supplied to the Government was that the contractor must submit the bills in form W.S.B. 166 in duplicate using the prescribed forms. Clause 9 of the prescribed form related to payment and it provided as under : " Unless otherwise agreed between the parties, payment for the delivery of stores will be made on submission of bills in the prescribed form in accordance with the instructions given in the acceptance of tender by cheque on a Government Treasury in British India or on a branch in British India of the Reserve Bank of India or the Imperial Bank of India transacting Government business. " Arrangements were made by the Government for inspection of the goods at the factory premises of the assessee by a special officer posted at Indore. After the goods were ready for delivery, the inspecting officer was informed and he attended the factory premises, inspected the goods and issued an inspection certificate. The goods were sent by rail from Indore and the R.Rs. were made out in the name of the representative of the Government to whom the goods were directed to be despatched. Bills were prepared in the form prescribed by the Government and sent to the Con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rritories for the assessment years 1939-40 to 1942-43 or (b) the total depreciation in arriving at the world profit of which a proportionate part was taxed in the taxable territories ? " The assessee's contention before the Tribunal was that in calculating the written down value depreciation referable to the proportionate profit taxed in the taxable territories for the assessment years 1939-40 to 1942-43 should be deducted and not the total depreciation in arriving at the world profits. That contention of the assessee was rejected by the Tribunal and the Tribunal accepted the plea urged on behalf of the revenue and deducted the total depreciation in arriving at the world profits for calculating the written down value for the relevant assessment years. Before us Mr. Mehta on behalf of the assessee-mills contended that now this question can be regarded as having been concluded by a decision of the Supreme-Court in Commissoner of Income-tax v. Nandlal Bhandari Mills Ltd. He submitted that the majority decision taken by the Supreme Court in this case clearly shows that the view taken by the Tribunal is erroneous. On the other hand. Mr. Joshi, on behalf of the revenue, contended t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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