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SUPREME COURT OF INDIA
A.K. SARKAR, J.R. MUDHOLKAR AND R.S. BACHAWAT, JJ.
The Indore Malwa United Mills Ltd. (In all the Appeals), Appellant
Versus
The Commissioner of Income-tax (Central) Bombay (In all the Appeals), Respondent.
Civil Appeals Nos. 1006 to 1011 of 1963.
Advocates appeared
Mr. G. S. Pathak, Senior Advocate, (M/s. B. Dutta, and R. J,. Kolah, Advocates, and Mr. J. B. Dadachanji, Advocate of M/s. J. B. Dadachanji and Co., with him), for Appellant (In all the Appeals); Mr. Niren De, Addl. Solicitor-General of India, (M/s. Gopal Singh and R. N. Sachthey, Advocates, with him), for Respondent (In all the Appeals).
INCOME TAX - Receipt of sale proceeds - Whether post office was agent of assessee to receive cheques representing sale proceeds - Whether assessee received sale proceeds through its agent in British India - Whether Revenue authorities could raise this contention for the first time at the hearing of the reference before the High Court.
Fact of the Case:
The assessee, a non-resident, supplied goods to the Indian Stores Department, Government of India, under purchase orders placed by the latter with the assessee at Indore. The goods were inspected at Indore by an inspecting officer of the Government and the inspection certificates were issued at Indore. The delivery was F.O.R., Indore, and the freight from Indore was borne by the Government of India. The goods were despatched by railway from Indore station and the railway receipts were made out in the name of representative of the Government. The assessee used to make out bills in the prescribed form. The receipt clause in the completed bill used to be in the following terms: "Please pay by cheque to self on a bank at Indore . The bills with the signed receipts of the assessee then used to be sent to the Controller of Supplies, New Delhi after the latter was debited with the amounts of the bills in the books of the assessee. On receipt of the bills, the Government of India used to draw cheques on the Reserve Bank of India, Bombay in favour of the assessee and used to send them by post to the assessee at Indore. On receipt of the cheques, the assessee used to credit the Controller of Supplies in its books with the amount of the cheques, and then used to deposit the cheques in their account with the Imperial Bank of India, Indore, and thereupon, the Bank used to credit the assessee in the aforesaid account with the amount of the cheques.
Finding of the Court:
The post office was the agent of the assessee to receive the cheques representing the sale proceeds and the assessee received the sale proceeds in British India where the cheques were posted. The Revenue authorities could raise this contention for the first time at the hearing of the reference before the High Court.
Issues: 1. Was the post office the agent of the assessee to receive the cheques representing the sale proceeds on its behalf, and did the assessee consequently receive the sale proceeds through its agent in British India? 2. Whether the Revenue authorities could raise this contention for the first time at the hearing of the reference before the High Court, though this contention was not raised by it before the Tribunal or at any stage of the assessment proceedings?
Ratio Decidendi: 1. If by an agreement, express or implied, between the creditor and the debtor or by a request, express or implied, by the creditor, the debtor is authorised to pay the debt by a cheque and to send the cheque to the creditor by post, the post office is the agent of the creditor to receive the cheque and the creditor receives payment as soon as the cheque is posted to him. 2. Where, as in this case, the question of law in issue between the parties and referred to the High Court is the broad question whether or not the assessee is liable to pay tax on the ground that the sale proceeds including the profits of the sale were received by the assessee in British India, the Revenue authorities may be permitted to argue for the first time at the hearing of the reference that on the facts found by the Tribunal, 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, though this aspect of the question was not argued before the Tribunal and though the only point there argued was that the sale proceeds were received at Bombay where the cheques were encashed.
Final Decision: The appeals are dismissed with costs, one set.
Judgement
BACHAWAT, J.: These appeals arise out of proceedings for assessment of income-tax of the appellant Company (hereinafter referred to as the assessee) for the assessment years, 1943-44, 1944-45, 1945-46, 1946-47, 1947-48 and 1948-49, the relevant accounting years being the Calendar years, 1942, 1943, 1944, 1945, 1946 and 1947 respectively.
2. During the relevant accounting years, the assessee was a non-resident. It carried on the business of manufacturing textile goods at Indore then situated in an Indian State, and had officers at Indore and Bombay. The assessee supplied goods to the Indian Stores Department, Government of India, under purchase orders placed by the latter with the assessee at Indore. Duplicate copies of the purchase orders signed on behalf of the assessee at Indore used to be sent to the Government of India in British India. The goods used to be inspected at Indore by an inspecting officer of the Government and the inspection certificates were issued at Indore. One of the conditions of the contract was that the delivery would be F.O.R., Indore, and the freight from Indore would be borne by the Government of India. The goods used to be despatched by railway from Indore station and the railway receipts used to be made out in the name of representative of the Government. There were two types of purchase orders, namely, (1) purchasewar order and (2) bulk purchase order. Clause 9 of the bulk purchase order was in these terms:
"9. Payment: Unless otherwise agreed between the parties, payment for the delivery of the stores will be made on submission of bills in the prescribed form in accordance with the instructions given is 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.
From the judgment of K. T. Desai, J. it appears that in the High Court both parties agreed that the aforesaid Cl. 9 was one of the terms of which all the goods were supplied by the assessee. In paragraph 2 of the petition for leave to appeal to this Court and Para. 3 of the appellant s statement of case also, the assessee stated that the contracts between the parties were subject to the aforesaid Cl. 9. The prescribed form of the bill (Form No. WSB. 116) which the assessee was required to submit to the Government of India, Department of Supply, contained inter alia, the following receipt clause:
"Received payment one anna receipt Stamp on original only Please pay by cheque self Bank to on Bank Treasury
Contractor s at .........................
Signature Contractor s signature."
Instructions Nos. 13 and 14 with regard to payment were as follows:
"13. If payment is desired to be made to the Contractor s Bankers or other parites, the endorsement must be completed on the Bill Form (W. S. B. Form No. 116) and signed separately and the word Self scored out; in addition, a power of attorney will be necessary in such cases, except when payment is desired to a Bank mentioned in the second schedule to the Reserve Bank Act.
14. Payment in all cases will be made to the Contractors by the Accounts Officer named in the Acceptance of Tender by means of crossed cheques, unless a specific request is made to the contrary for the issue of an open cheque on the bill.
The assessee used to make out bills in the prescribed form. The receipt clause in the completed bill used to be in the following terms: "Please pay by cheque to self on a bank at Indore .
3. The receipt clause in the bill used to be signed in advance on behalf of the assessee on an one anna stamp. The bills with the signed receipts of the assessee then used to be sent to the Controller of Supplies, New Delhi after the latter was debited with the amounts of the bills in the books of the assessee. On receipt of the bills, the Government of India used to draw cheques on the Reserve Bank of India, Bombay in favour of the assessee and used to send them b
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