Judgement

N. H. BHAGWATI J. : This appeal with special leave arises out of a judgment and order of the High Court of Judicature at Bombay dated 23-9-1955, delivered in Income-tax Reference No. 19 of 1955 made by the Income-tax Appellate Tribunal (hereinafter referred to as "the Tribunal") to the High Court under S. 66 (1) of the Indian Income-tax Act (XI of 1922) (hereinafter referred to as "the Act ) whereby the High Court directed the Tribunal to submit a supplementary statement of case on the points mentioned therein.

2. The appellant is a limited liability company manufacturing textile goods at Bhavnagar which was an Indian State during the assessment years 1943-44 and 1944-45. For the said assessment years the appellant was held to be a non-resident, its years of account being calendar years 1942 and 1943. For the assessment years 1943-44 and 1944-45 (account years 1942 and 1943), the Income-tax Officer computed the British Indian Income of the appellant on a proportionate basis under S. 4 (1) (a) of the Act. In the account year 1942 its total sales amounted to Rs. 66,14,852 out of which sale proceeds amounting to Rs. 35,92,157 as detailed below were held by the Income-tax Officer to have been received in British India:

Cheques on the Imperial Bank issued by the Supply Department of the Government of India Rs. 2,58,987

Sale proceeds received through Trikamlal Mahasukhram Rs. 20,24,190

Other cheques received at Bhavnagar but drawn on Banks in British India Rs. 13,08,980

Rs. 35,92,157

3. The Income-tax Officer computed the income of the appellant at Rs. 27,11,136 on a proportionate basis i. e., proportionate to the sales in and outside British India. He held that the income amounting to Rs. 14,72,267 was received in British India under S. 4 (1) (a) of the Act. There was no dispute in regard to the sale proceeds received through Trikamlal Mahasukhram.

4. In respect of the assessment year 1944-45 corresponding to the account year 1943 the Income-tax Officer held that sale proceeds amounting to Rs. 16,72,693 received by the appellant by cheques from the Supply Department of the Government of India on British India Banks were taxable under S. 4 (1)(a) of the Act. The figure of Rs. 16,72,693, according to the appellant, was a mistake for Rs. 12,97,631.

5. The appellant had contended that the amounts had been received at Bhavnagar, by cheques drawn on banks in British India. The Revenue had not disputed the fact that the cheques had been actually received at Bhavnagar but had contended that payments by cheques, though such cheques were received at Bhavnagar, were received in British India at the time and the place where the cheques were ultimately cashed and honoured by the banks on which the cheques were drawn and that until such encashment of the cheques, the monies could not be said to have been received by the appellant.

6. The appellant preferred appeals to the Appellate Assistant Commissioner, Ahmedabad Range, against this order of the Income-tax Officer for the said two assessment years. The Appellate Assistant Commissioner by his two separate orders confirmed the orders of the Income-tax Officer and held that the cheques were not legal tender and were not monies or monies worth as such and that the receipt of cheques at Bhavnagar was not receipt of money. The receipt of money, according to the Appellate Assistant Commissioner, took place on actual payments by the drawee Banks and he therefore held that the said amounts were taxable under S. 4 (1) (a) of the Act.

7. A further appeal was taken by the appellant to the Tribunal against the said orders of the Appellate Assistant Commissioner and the Tribunal by its consolidated order for both the years, dated 17-7-1952, held that the cheques for the said amounts of Rs. 2,58,987 and Rs. 13,08,987 in respect of the assessment year 1943-44, were received at Bhavnagar and that the sale proceeds were also received in Bhavnagar. The Tribunal stated inter alia as follows:

"There is no ev