JUDGMENT - Chagla, C.J.

(1) We directed the Tribunal in this reference to submit a supplementary statement of the case, and that statement has now been furnished to us. The question that arises for determination is as to whether a certain sum of money was received by the assessee in British India so as to make it liable to tax.

(2) The assessee is a non-resident company, and it is not disputed that its liability to pay tax depends upon receipt of income within British India. The receipt took the form of cheques being sent by Government to Aundh where the assessee carried on business, these cheques being on a bank in Bombay; and we asked the Tribunal to find as to whether the cheques were received by the assesses in full satisfaction of the debt of the Government of India to them, and whether the Government debt was discharged by the acceptance of these cheques by the assessee. We also asked them to find whether the cheques received by the assessee were sent to their bank for collection and the bank acted as agents for collection and the amounts were collected in British India. Now it is sufficient to dispose of this reference on the first finding.

(3) With respect to the Tribunal, they have not really applied their mind to the question that was submitted to them for a further and supplementary statement of the case. As pointed out by us in KESHAV MILLS CO. v. COMMR. I. T., 52 Bom L R 72 at p. 79, ordinarily the payment of a debt by a cheque never results in the discharge of the debt; but there may be an arrangement between a creditor and a debtor that the receipt of a cheque or a hundi by a creditor may result in an unconditional discharge of the debt, and in the event of the cheque or the hundi not being honoured the creditor would have no right to sue on the original cause of action but only on the cheque or the hundi. Therefore, what we wanted the Tribunal to find was whether, in this particular ease, there was an arrangement between the creditor and the debtor from which it could be said that the acceptance by the creditor of the cheque from the Government resulted in an unconditional discharge of the debt. Now, what the Tribunal has found on this part of the case is (1) that, under the agreement with the Government of India the assesses had undertaken to receive the payment in India, and (2) that the assessee made a specific request to the Government to make the payment of the bill by a cheque drawn on a bank in Bombay. Now, neither of these two findings really touch the question which we have to decide in order to determine the liability of the assessee to pay tax. But, fortunately, the Tribunal has stated all the facts from which the necessary inference can be drawn as to whether there was an arrangement between the debtor and the creditor as to the discharge of the debt by the giving of the cheque; and the relevant facts are that, when the assessee applied for a contract with the Government, they agreed to the conditions operating the working of the contract, and one of the conditions was that the payment for the delivery of the stores would 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 India or on a branch of the Reserve Bank of India or the Imperial Bank of India transacting Government business. Further, when the bills were submitted by the assessee to the Government, there was an endorsement on the bills to the effect, "Kindly remit the amount by a cheque, in our favour, on any bank, in Bombay", and when the cheque was received by the assessee, the assessee sent to the Government an acknowledgment in the following terms:

"The undersigned has the honour to acknowledge cheque No.....dated...........for Rs......... in payment of the bills noted in the first column."

Therefore, on these facts, it is clear that the cheques were not accepted by the assesses subject to their being encashed. It was open to the asse

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