THE COMMISSIONER OF INCOME-TAX BOMBAY SOUTH BA,Y BOMBAY versus MESSRS OGALE GLASS WORKS LTD OGALE WADL

s~C.R.

SUPREME C0UR:'J1 REPORTS

185

THE COMMISSIONER OF INCOME-TAX · · :. BOMBAY SOUTH; .B.OMBA,Y .·

.

1954

April ~9

..

•

... ,-

.,

ti •. MESSRS: OGALE GLAS·s· WORKS LTD.,. '·

&,

.

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•

· _, ·

OGALE WADL [SuoHI RANJAN· DAS, N. ·H. BHAGWATI ·and · }AGANNADHADAS JU . · Indian Income-tax Act· (XI of 1922), sectirm· 4(1)(a)-Non-resi dent company-Payment of sale-proceeds to the company (assessee), by Government of India by means of cheques drawn and posted in British India-Whether income, profits and gains received by ·~he assessee ·in British India within the meaning of section 4(J.)(a):....:... Indian Contract Act, 1872 (Act IX of 1872), section 50, illustration (d)~Addressee requesting sender to send c/ieque by-post-.:.Post-office acting as agent of addressee. ·The assessee,. a limited

· artd carrying on business in ·an Indian State (outside British India) was a non-resident company for the purposes ·of the •Indian .Incomectax Act and therefore its liability fo British Indian income-tax depend ed upon its receipt of income within British India. On the express request of the . amount· of ·the 'bills by means of cheques in respect of. the· goods ·supplied by the -asses-see to the Government of India the latter agreed· to make payments by cheques which were drawn in Delhi and received by the asses- · see in the Indian State.

•' liability.. company, incorporated

the assessee·

to remit

· ·

·

. Held, that according to the cour>r of business usage in• general the parties must have intended that cheques should be sent by post and therefore the posting of cheques in Delhi amounted to payment in Delhi to the post-office which was constituted the agent of the assessee.

Therefore on the facts of -the case, income, profits and gains in .received 'in

respect of sales , made to the Government of India was Briti.sh India within the meaning of section 4( 1) (a) of the .Act..

• Held, also, that as between the sender and the _addressee it is the 't-- request of the addressee that. makes the post-office the agent of the the addressee cannot be· heard the post-office was not his agent. On t.he other . hand implied, letter or the cheque to the post-o'flice by

addressee and after such to say . that if there is no such request by then on delivery of the sender, the post-office acts as the agent of the sender.

the addressee, express or

request

'.

.

the

Apart from the principle of agency, section 50, illustration ( d) of the Indian Contract Act (IX of 1872) lays down the well-known principle that a contractual obligation is discharged by the · perfor ~ mance of the engagement or promise in the manner prescribed ·or Indian Post-Office Act 1898 (Act VI of 1898), does not nullify illustration· (cl) to section 50 of the Inc:lian Contract Act, or the above 'proposition of law.

~sanctioned by the promisee.

·

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Tht Commissiontr of Income-tax, Bombay South, Bombay v. Mtssrs. Ogalt Glass Works Ltd., Ogalt Wadi.

18.6

SUPREME COURT REPORTS

[1955]

Gresham Life "Assurance Society v. Bishop (L.R. (1902] A.C. 287 at p. 296). Commi;sioner of Income-tax v. Kameshwar Singh, ([1933] 1 I.1'.R. J.07), Raghunandan Prasad v.'Commiiiioner of Income-tax,. (60 I.A. 133: [1933] 1 I.T.R. 113), Commissioner of Income-tax v. Maheswari Saran Singh, (.[1951 J 19 l.T.R. 83), Stedman v. Gooch, ( (1793) I Esp. 5), 'Maillard v. Duke of Argyle, ((1843) 6 M. & G. 40), Kempt v. Watt, ((1846) .15 M. & W. 672), Re. Rower and Haslam, (L.R. (1893) 2 Q.B. 286), Palaniappa Chetty v. Arunachalam Chetty ((1911) 21 M.L.J. 432), Robinson v. Henry Reid, ((1829) 9 B. & C. 449), Anderson v. Hi/lies, ((1852) 21 L.J.C.P. (N.S.) 150), Kodarmal v. Sagormal, ((1907) 9 Born. L.R. 903 at p. 911), Felix Hadley & Co. v. Hadley, (L.R. (1898) 2 Ch. D. 680), Rhokana Corporation v. In land Revenue Commissioners,. (L.R. (1938) A.C. 380 at p. 399), Com missioner of Excess Profits Tax, West Bengal v. /eewanlal Ltd., 20 I.T.R. '39 at p. 47), Chainrup Sampatram v. · C.1.T., ([ 1951] West Bengal, ([1951] 20 l.T.R. 484 at pp. 493, 496), Allahabad Bank Ltd .. v. C.1.T., West Bengal), l.T.R. 169), Mohan/al Hiralal v. C.1.T., C.P. & Berar, ([19521 22 l.T.R. 448), Hira Mills Ltd., Cawnpore v. Income-tax Officer, Cawnpore, ([1946] 14 I.T.R. 417), Madan/al Dharnidharka v. Commissioner of Income-tax, Bombay. City, ((1948.1 16 232), Commissioner of Income-tax, Delhi v. Punjab National Bank Ltd. ( f 1952] 21 l.T.R. 526), Norman v. Rickets. ( (1886) 3 T.L.R. 182), Thairlwal v. The G1-eat Northern Railway Co. (L.R . .[1910] 2 K.B. 509), Badische Anilin Und Soda Fabrik v. Basie Chemical Works, (L.R. (1898] A.C. 200), Comber v. Leyland, (L.R. (1898] A.C. 524), Mitchell Henry v. Norwhich Union Life Insurance Society Ltd. (L.R. (1918) 2 K.B. 67), Thm·appa v. Umedmalii, ((1923) 25 Born. L.R. 604), (Ex parte Cote L.R. (1873) 9 Ch. App. 27), The Indian Cotton Company Ltd. v. Hari Poonjoo, (I.L.R. (1937) Born. 763) referred to. CIVIL

JuRisoicTmN : Civil Appeal No.

APPELLATE

l.T.R. 227

([1952]

21

at

p.

19 of 1953.

the Appeal from the Judgment and Order dated 17th day of September, 1951, of the. High Court of .Tendolkar J.) Judicature at Bombay in Income-tax Reference No. 19 of 1949. M: C. Setalvad, Attorney,General

(Chagla C.J. and

India, and ·

for

C. K. Daphtary, Solicitor-General A. Mehta, with them) for the appellant.

for

India

(Poru;

R. /. Kolah, Y. D. Pandit and Rajinder Narain

for respondents.

1954. April 19. The Judgment of the Court was

delivered by

DAs J.-This appeal arises out of proceedings for respondent .income-tax of

assessment

the

to

the

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S.C.R.

SUPREME COURT REPORTS

187

Messrs. Ogale Glass Works Ltd., (hereinafter referred to as "the assessee") for the five -assessment years 1941-42 to 1945-46.

The assessee

is a limited

incor porated anu carrymg on business in Aundh which in those days was an Indian State outside British India. It was accordingly a non-resident company the purposes of the Indian Income-tax Act.

liability company

for

' 1954 ! - The Commission.,:;: of lneome-tax, Bombay South, Bombay v. Messrs. Ogale Glass Works Ltd., Oga/e Wadi.

Das].

' for

the assessee secured

income-tax depended upon

wares at its works accounting years

the supply of lanterns and other glasswares

The assessee manufactures lanterns and other glass in Aundh State. In the relevant some contracts to the Government of India. The price of the goods supplied under .the .contracts were paid by cheques drawn on the Reserve Bank of India, Bombay. -The cheques used to be received by the assessee m Aundh and cashed through its bank at Bombay as hereinafter. stated. The assessee being a non-resident company to British Indian

its liabi lity its the course receipt of income within British India. to of proceedings for income-tax the assessee contended that its profits on the sales accrued and were received in the Aundh State where it received payment by the receipt of the cheques. The Income tax Officer and, on appeal, the Appellate Assistant Commissioner held that income, received profits or gams m British the inasmuch . as cheques were drawn on a bank m Bombay and had the been cashed m Bombay and accordingly assessee under section 4(1) (a) of the Indian Income-tax Act. On appeal by the assessee the Income-tax Appel late Tribunal upheld the assessment.

the assessment of the assessee the five years mentioned above,

the assessee India

taxed

for

In

the determination of

Being aggrieved by .the order of the Tribunal the assessee applied for a reference of the case to the High Court for law which arose out of the Tribunal's order and the Tribu nal agreeing that a question of law did arise out of its order referred the following question to the High Court along with a statement of the case :

the question of

"whether on the facts of the case,

income, profits and gains in respect of sales made to the Government

13-86 S. C. Indiaf59.

195+

.

T ht Coinmiisioner o.f lncome-t~~ &nn~tfl Soulh1 v. Messrs. Ogah Glau Works Ltd., . Ogak Wadi.

Das]:

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188

SUPREME COURT REPORTS

[1955}

of India was received in British India witliin the mean ing 0f: section 4(1) (a) of the AJ:.t."

At the hearing of the reference by the High COurt for the assessee contended, inta- alia, learned advocate received by the assessee in full tl\.at the checiues were satisfactfon of the debt due to it by the Government of fodia and that the debt of the Government of India had the cheques by been discharged by the acceptance of in Aundh. The High Court felt that in the assessee order to determine this· contention it would be neces sary for the Tribunal to find certain further facts and according! y the Hig)l Court reference to submit a sup back to the Tribunaf with a request plementary statement of the case on the lines indica ted in the order dated the 15th September, 1949. The Tribunal submitted a supplementary statement of · the case on the 8th June, 1951.

remanded the

In the supplementary statement of the case reference is made to clause 15 of the conditions of ·the contract governing supplies made by the assessee to the Govern ment of India. The system of payment under that clause was that 90% of the price of each consignment would be paid on proof of despatch of the stores from a Railway Station or port in India after inspection and the balance of 10%. would be paid on the receipt of also in good condition. That dause consignment provided: · ''Unless otherwise agreed between the parties, pay ment for the delivery of the stores will be made on sub mission of bills ·in the prescribed form · in· accordance in the Acceptance of Tender by with instructions given- India or on a cheque on a Government Treasury branch of the :Reserve Bank of India1 or Imperial the Bank of India tiansacting Government business."

in

. The assessee used

to . submit bills in prescribed form

and ori the form used to write : · .. '~Kindly iemit, the amount by a,. cheque in our favour on any. bank.in Bombay."

·

·

After the submission of,.the bills .. the. assessee: used' to receive from the Govern.ment · cheques drawn· ·on the Bombay branch of the Reserve · Bank · of India along with a memo stating : ·

·

S.C.R.

SUPREME COURT REPORTS

.

189

"The undersigned has the honour

with cheque No. the bills noted below" :-

dated'

to forward · here in payment of

Then followed a tabular statement setting out the the top

number, date and amount of the cheques. On of the memo there was a direction that it-

returned

"be immediately Supply Accounts with the reverse duly·· signed and stamped when necessary." The acknowledgement form was thus expressed: "The undersigned has

the Controller of the acknowledgement form on

to

the honour for Rs.

to acknowledge in payment

cheque No. of the bills noted in the first column in the reverse."

dated

1954

The Commisrioner of Income-taJC, Qombay South, Bomb4y v. Messrs. Ogak Glass Works Ltd., Ogale Wadi.

Das].

them

in its

further

After receipt of the cheques

through the Clearing House case statement of the

the assessee used to indorse it in favour of Aundh Bank Ltd., Ogale Wadi Branch which in turn .used to endorse the Bombay Provincial Co-operative Bank favour of Ltd., Bombay. The last named bank cleared the in Bombay. The cheques supplementary records the A.undh Bank Ltd., used to credit the asses that see's account on the very clay the cheques were receiv ed from the assessee with the amount of the cheque less the collection charges and that the assessee used· to credit the account of the Supply Department and make corresponding debits the bank charges account. A case was sought to be made by for the Tribunal that the cheques used to be discounted by the Aundh Bank Ltd., presumably that the assessee actually got payment in cash in Aundh. This casl;! was repelled by the . Tribunal which held that the bank only allowed. the assessee to draw money on the security of the cheques but did not . discount them. Our attention has 'been drawn to the following passage in paragraph 8 of ·the supplemen;ary statement . of, .the case:

to the bank's account and

the learned advocate

the assessee before

implying thereby

"By merely

issuing . a. cheque

to. the assessee .. no payment as such was made by the Government. The payment was only made when the Government's account in the books of the bank was debited."

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190

SUPREME COURT REPORTS

[·1955]

1954

Paragraph 9 of the supplementary statement of the

The Commissiorut of Income-tax, Bombay South, Bombay v. Mf:ssrs. Ogale Glass Works Ltd., Ogale Wadic

Das].

case thus summarises the Tribunal's findings :

"9. On the above facts our findings are : (1) Under the agreement with the Government of the pay

India . the assessee had undertaken ment by cheque drawn on a bank in India.

to receive·

(2) The assessee company made a specific· request the sale pro

to the Government to make payment of ceeds by cheque drawn on a bank in Bombay.

•

(3) When the assessee

not receive the sale proceeds ; ceeds subject to the encashment of the cheque.

received the cheque, it did it received the sale pro

(5) The assessee's bankers

( 4) The assessee' s bankers allowed the assessee to draw money against the security of the cheque on the very day the cheque was sent for collection to the bank. realised the payment of from the Reserve Bank of India, Bombay, this service for

the cheque as agents of the assessee. For rendering the bank charged collecting an outstation cheque.

the usual commission charged

(6) The sale proceeds were received in Bombay. (7) The

,cheque was encashed on behalf of the

assessee at Bombay.

(8) The profits on

ment of India were received by Bombay."

the sales made to the Govern the assessee in cash in

· The supplementary statement of the case concludes to the correct that both parties agreed

with the remark ness of the facts.

The main argument advanced before us, as before the High Court, by the learned advocate for the asses see is that the assessee received payment for the goods supplied by it when it received the cheques at Aundh. the assessee accepted the cheques in full In other . words satisfaction and in discharge of its claim against the Government under the contracts. The conclusion press the cheques · were received at ed upon us 1s there and consequent Aundh the payment was received ly the assessee which is a non-resident company did not income, profits ·or gains in British India receive any

that as

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-,. f.

.,.

1954

The Commissiorur of Income-tax. Bombay South, Bombay v. Musrs. Ogale Glass Works Ltd., Ogale Wadi .

Das] .

S.C.R.

SUPREME COURT REPORTS

191

within the meaning of section 4 (I) (a) of the Indian Income-tax Act and should the be answered in the negative.

referred question

the cheques,

is urged that

the agent of

in Bombay as

it did not receive

from paragraph 8 of

the sale proceeds subject

is not wholly without

issuing the cheques that it received

The contention put forward by the Revenue is two the question fold. In the first place it whether the assessee accepted the cheques uncondition- ally and in full satisfaction of its claims under the con tracts is concluded by the Tribunal's findings of facts. force. The This contention the supplementary state passage ment of the case and sub-paragraphs 3, 6 and 8 of that in the view of the paragraph 9 do tend to suggest Tribunal no payment was made by the Government by merely that when the assessee · the sale pro received to the ceeds, that the bank collected the encashment of the cheques, the assessee and cheques in cash that the sale proceeds were, language used in the in view of in Bombay. But supplementary statement of the case there is ample the portions referred to above scope for the view that do not amount to findings of fact by the Tribunal but, on the contrary, are only inferences drawn by it from the Indeed the High Court was of facts found by it. opinion that the Tribunal had not in terms come to a that the assessee accepted the cheques finding of fact in complete discharge of its claim for the price of goods supplied by it but on a consideration of the facts actu the High Court came to ally found by the Tribunal the conclusion that the necessary inference to be drawn from there was an arrangement that beitween the assessee and the Government from which it could be said that the acceptance by the assessee of the cheques from the Government resulted in an uncon .circumstances ditional discharge of the debt. the Tribunal we have which have a bearing on this point.

In the to examine the facts found by

therefore, received the

those facts was

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, } -""" Tribunal it must be held that it received

The assessee contends

in full and unconditional discharge of its claims to the price of goods sold and delivered by

it

that on the facts found by the the cheques for the

·1 954

Thi Commissiontt vf lncomeptax, ,Bombay South, Bombay v. Messrs. ·Ogale Glass Works Ltd., ·Oga[e Wadi.

.Vos].

192

SUPREME:COURT. REPQRTS

} .[1955}

'-fl

that

.of coins or currency notes

·Government and not conditionally subject to realisation. 1'hat a sum of money lllay be received in more ways than one cannot be doubted. It may .be received by the transfer .or a negotiable instrument which· represents and produces cash and is treated as such by businessmen. (.See per Lord Lind iB Gresham Life Assurance Society v. Bishop(')). ley the in this connection may also be made .to Reference .decisions in Commissioner of Income-tax v. Kameshwar Singh(• ), R~ghunandan Prasad v. Commissioner of Income-tax(' ) and Commissioner of Income-tax v . . Maheswari Saran Singh(•). Learned Solicitor-General that, in does not dispute this proposition but .he .argues to the absence of any agreement, e~press or implied, is the contrary, a payment by a negotiable instrument to .conditional He refers us .always under,stood to be Benjamin on Sale, 8th Edition, page 787, in support of the proposition to take a bill in ab the intention solute payment for goods sold must be clearly shown, .and not deduced from ambiguous expressions, such as that for the goods the bill was Stedman v. Gooch(5 ), and Maillard v. Duke of Argyle(") or "in ,discharge" Kemp v. Watt('), or "in settlement" .of the price Re Rower and Haslam('). the abo"<e English cases in Benjamin on ,Sale relies on the .case of Palaniappa Chetty v. Arunachalam Chetty( 0 ) where it was held by the Madras High Court that the amount the execution of a .covered by the bill of exchange or hundi was not sufficient to rebut the the general presumption deliverey of a bill of exchange or a hundi operated only as a conditional discharge of the debt. there is nothing He insists that on the facts of this case from which an '1greement may be implied the that in full .cheques were given ,and received unconditionally discharge of the .original contractual the Government for the price of the goods supplied by the

learned Solicitor"General also

taken "in payment"

liability of

receipt for

referred

formal

that

the

to

In addition to ""'

for. a debt (.

(1) .L.R. [~902] A. C. 287.at p. 296;

' '(2) [1933] l LT.R. 107 . . . r3J 60 r.A. 13~·; {1933J, r.'.J:.R .• •113.

(4) (1g51j.19 LT.R. 83. (5) (1793) l Esp. 5.

-

1954

T heCommissioatr of lncomt•llJJC, Bombay South, Bomhtg v. Messrs. Ogale Glass Works .Ltd., Ogale Wadi.

DasJ .

S.C.R.

SUPREME COURT REPORTS

l93

assessee. Sri Kolah following facts i~ answer iearned Solicitor-Gerreral :

·on the other hand, .relied

the to the contentions of the

.on

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(i) that there was an arrangement by the contract

itself, for payment by cheque (clause 15),

(ii) that ,in the bills submitted by him the assessee

expressly asked for payment by cheque,

(iii) that the Government sent cheques in payment

of the !bills,

(iv) that on

receipt of returned the acknowledgement stamped as a formal receipt,

the cheques the assessee form duly signed and

(v) that the ;drawer of the cheques was the Govern the Reserve Bank there could be no appre

ment of India and of India for whose solvency ·hensian at all in the mind of the assessee.

the drawee was

says

that

that

facts

to establish

1s clearly enough

Sri Kolah contends

to pay the matter no further, for the undertaking

the .cumulative effect of these the unconditionally as payment. received cheques were Learned Solicitor:General points out that the assessee's the amount of the bills by cheques request carnes to pay by cheque was already there. The point of the request w.as that the cheques · should ;be issued, on some bank in Bombay. The insistence on a stamped receipt in advance of payment was, the Solicitor-General, the usual practice of Government m keeping with departments. Therefore, we have in this ·case, accord ing to the learned Solicitor-General, nothing more than a term in the ·contract for payment by cheques and the status of the drawer and drawee of the ·cheques. These two circumstances, the Solicitor-General, so submits are not suffic'ient to establish the fact of the acceptance of the cheques as unconditional dischai:ge. He contends in the absence of an express agreement, it is only that, when the creditor elects to ·take a bill or cheque having it in his power that is to to obtain payment in cash, takes a bill or cheque by choice or preference say, that instead of cash that an agreement may be implied he took it as an unconditional and absolute payment

r954

The Commissioner of 1ncome·tax, Bombay South, Bomb<fl v. Messrs. Ogafr Glass Work.s Ltd., Ogale Wadi.

Das].

194

SUPREME COURT REPORTS

[1954]

and

Indian

repelled

receipt of

the cheques conditionally,

the assessee must be taken

learned Solicitor-General concludes

receipts m Bombay to British

of the.debt: Robinson v. Henry Reid( ') and Anderson v. Hi/lies('). Such cases must be rare, for. the credi tor IS not ordinarily likely to give up the advantage of remedy namely one on the bill or having a double cheque and the other, on dishonour of the bill or cheque, on the original ca\Jse of action. He points out that in this case there is no finding of any special agree therefore, submits the learned ment in this behalf and, Solicitor-General, to have i.e., subject to reali received sation. The that, the circumstances, no payment was received by the m the cheques and that payment was mere the cheques were cashed in Bom received only when became bay that such immediately assessable tax under section 4(1)(a). The High Court this line that the assessee received pay of argument and held the cheques were delivered to it. ment on the dates this We find ourselves substantially conclusion. four It is modes in which a contract may be discharged, namely (1) by agreement, (2) by performance, (3) by being excused by law from performing it and ( 4) by breach. In this case clause 15 of the contract provides how the payment of the price is to be made. In short the con tract itself, by that clause, prescribes the manner and the time for performance by the Government of its part of the contract and as the Government made the payments in the prescribed manner, it fulfilled its engagement and such payment would under section 50 of Indian Contract Act, operate as a It should also be remem discharge of the contract. bered that the assessee sent has formal stamped receipts only after the receipt of the cheques and · not along with the bills submitted by it. Therefore, receipts cannot be regarded as having been sent in advance; The status of the drawer and the drawee of the cheques IS also a material consideration. Finally IS no suggestion that any of the cheques was dishonoured on presentation. We, therefore, agree with Sri Kolah that· (2) (1852) 21 L. J. C. P. (N.S. 15 o.

in agreement with to be remembered that there are

i.e., by cheques,

\r) (r829) g B.&C. +49·

there

the

the

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1954

The Commissioner ef lncome·tax, Bombay South, Bombay v. Messrs. Ogale Glass Works Ltd., Ogale Wadi.

Das].

S.C.R.

SUPREME COURT REPORTS

195

the several facts relied on by him and alluded to above, lead us to the conclusion that taken cumulatively, must the cheques were received in complete discharge of the claim for the price of the goods.

1s

the

facts

raise

instrument

implication

conditional on

that if in terms of clause 15 or at

Learned Solicitor-General, however, contends, on the author.ity of the decision in Kodarmal v. Sagormal(1), that the request by to send a cheque does the creditor not imply any variation of the rule that payment by a negotiable its being honoured on presentation within due time. Even if we referred to above accept his contention that the the are not sufficient to the cheques were accepted as payment and even the sending of the cheques special request of the assessee did not operate as an liability unconditional discharge of the Government's the assessee's position will be no better. even then When it is said that a payment by negotiable instru is that ment is a conditional payment what 1s meant such payment is subject that if the negotiable instrument is dishonoured on present ation the creditor may consider it as waste paper and resort to his original demand : Stedman v. Gooch(2). It 1s said m Benjamin on Sale, 8th Edition, page 788 :-

to a condition subsequent

"The payment

the delivery of the bill, but is defeated by the happening of the condi tion, i.e., non-payment at maturity."

takes effect from

In Byles on Bills, 20th Edition, page 23, the position

is summarised pithily as follows :

"A cheque, unless dishonoured, is payment." To the same effect are

to be found in In Hart on. Banking, 4th Edition, Volume I, page 342. ), Byrne J. expressed Felix Hadley & C. v. Hadley( 3 the same idea in the following passage m his judgment at page 682:

the passages

l

•

y

)

"In this case

to a conditional payment of the debt;

I think what took place amounted the condition

(1) \r9<>7) 9 Born. L.R. 903 at p. 9II. '(2) (1793) I Esp. 5.

(3) L.R. (1891) 2 Ch. D. 680.

196

SUPREME COURJ'. REPORTS

)1955}

, I . .,.

1954

The Cornmissi011tT of lncoTM·tax, Bombay South, B.omluty v. Messrs. Ogale ~lass W arks Ltd., Ogali Wadi.

Das].

the position

that the cheque · or bill should be duly met or being If ·that be the true view• honoured at the proper date. if an agreement then I think had been expressly made that the bill or cheque should operate as payment unless defeated by dishonour or by is im not being met ; and I think that that agreement in plied from giving and taking the cheques and bills question."

is exactly as

The following observations of Lord Maugham m. Rhokana Corporatirm v. Inland Reuenue Commis sioners( 1 ) are also opposite :

"Apart from the express terms of section 33, sub section 1, a similar conclusion might be founded on the· well known common law rules as to the effect of the in payment of a debt, and in the· sending of a cheque the the payment fact subject the cheque must be met· condition subseqµent · that on presentation, the cheque· is the cheque was duly met, posted.'.'

the date of payment, if the date when is

though

that

to

is

that

In the case before us none of the cheques has been on presentation and payment cannot,..

dishonoured therefore, be said to have been defeated by the happen the condition subsequent, namely dishonour by ing of non-payment and that being so there can be no ques-. tion, therefore, the assessee did· not receive pay-. ment by the receipt of the cheques. The position, there is that in one view of the matter there was, in the .. fore, circumstances of this case, an implied agreement under· which the cheques were accepted unconditionally as· if the cheques payment and on another view, even the cheques not having been were taken conditionally, dishonoured but having beea cashed, the payment related back to the dates of the receipt 'of the cheques and in law the dates of payments were the dates of the delivery of the cheques,

On

the footing,

then,

ed . payment as soon as the question still to it the assessee where

recei¥ed

that

receiv the assessee the cheques were delivered remains as to when and payment. The

such

(1) L.R. [1938] A.C. 380 at p. 399.

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1954

T ht Commi.rsioner of Income-tax, Bombay South, Bomb'!'! v. Messrs. 0 gale Glass Works Ltd., Ogale Wadi.

Das ] .

•

SUPREME COURT .RE;t'.ORTS

197

it is said that this

the assessee, namely

that it answer is obvious, says in Aundh where the cheques were received payment it. The ·learned Solicitor-General, how delivered to to him the that argument. According ·ever, contests ·cheques were delivered to the assessee as soon a.s they were posted. The rejoinder of the assessee is two-fold. Jn the first place IS an entirely new question of law which was never raised or argued before the Tribunal and was not dealt with by it and, therefore, ·cannot be said to arise out of the Tribunal's Order and the Court .has no jurisdiction, while exer consequently the jurisdiction under section 66 of cising its advisory Indian Income-tax Act, to permit such a new question of law to be raised at this stage. Learned Counsel for the assessee relies on the cases of Commissioner of Ex cess Profits Tax, . West Bengal v. Jeewanlal Ltd.( 1 ), Chainrup Sampatram v. C. I. T., West Bengal( 2 ), Alla habad Bank Ltd. v. C. 1. T., West Bengal(3), Mohan/al Hiralal v. C. I. T., C. P. & Berar(~), and Hira Mills Ltd., Cawnpore v. Income-tax Officer, Cawnpore("), refers us to the deci while the learned Solicitor-General sions in Madan/al Dharnidharka v. Commissioner of In come-tax, Bombay City( 8 ), and Commissioner ofi Income tax, Delhi v. Punjab National Bank Ltd.( 7 In the for us, on this view we have taken it is not necessary to express any opinion on the larger question occasion, as to the scope, meaning and import of the words "any the Tribunal's order on question of law arising out of" there exists a wide diver the interpretation of which It should be noted that this gence of judicial opinion. is not a case where .the Tribunal having refused to refer .a question of law an applica~ion was made to the High (2) Court to exer.cise its jurisdiction under sub-section of section 66. Here the Tribunal in exercise of its powers under sub-section (1) of that section did refer a question of law to the High Court. Nobody at any time contended

).

(1) [1951] 20 I.T.R. 39 at p. 47. (2) [1951] 20 I.T.R. 484 at pp. 492, 496. (3) [1952] 21 I.T.R. 169. {4) [1952] 22 I.T.R. 448. t.5) [1946] 14 I.T.R. 417. (6) [1948] 16 I.T.R. 227 at p. 232 .

. fa) [1952] 21 .LT.R. 526.

The Commissioit.er of lncomt·tox, Bombay South, Bombay .V· Messrs. Ogall Glass Works Ltd., Ogal1 Wadi.

Das].

198

SUPREME COURT REPORTS

[1955]

its

the Revenue sought

the Revenue advanced

and even now it is not suggested before us that the ques tion of law referred to the High Court did not arise out of the Tribunal's order or had not been properly refer red to the High Court. A question of law arising out of its order having thus been properly referred by the Tribunal under sub-section (1) the High Court had to deal with and answer it in exercise of jurisdiction In support, of its contention under sub-section (5). that the question should be answered m the affirma tive the argument, based on certain facts, that the cheques had been accepted only therefore, there was no payment un conditionally and, til the cheques had been cashed and the cheques having been cashed in Bombay the payment must be regarded as having been received in Bombay. That argument did not find favour with the High Court and that being the position to raise before the High Court, as it does before us, an alternative argu that the cheques having, at ment, also based on facts, the request of the assessee, been posted at Delhi, the mere posting of the cheques m such circumstances operated as payment in Delhi. Here no new question to be raised. The question of law still of law is sought this case, mcome, profits is, whether on the facts of and gains in respect of sales made to the Government of India was received in British India within the mean ing of section 4(1)(a) of the Act. The argument is that as the cheques were posted at Delhi at the request of received by it m British the assessee payment was It is said that although the language in which India. the question has been framed is wide enough to include this branch of the question should, nevertheless, be read as circumscribed by the facts on which the Tribunal's decision was made and should not be regarded as at large. This suggestion means that the question must be read as limited only to those facts on which alone reliance was placed in support of the argu ment actually advanced b~fore the Tribunal and on which the Tribunal's decision was fotinded, leaving out all other facts appearing on the record and even refer statements ·of red to in the Tribunal's order and the the case. There 1s no warrant for such suggestion.

the argument,

..i€-

i

•

1954

The Commissioner ef Income-tax, Bombay South, Bombay v. Messrs. Ogat. Glass Works Ltd., Ogale Wadi.

Das J.

S.C.R.

SUPREME COURT REPORTS

199

Sri Kolah

its language. Seeing

that the The language of the question clearly indicates question of law has to be determined "on the facts of to the contention of the assessee, this case". To accede the scope of will involve the undue cutting down of the that the question by altering High Court permitted this argument to be advanced before them we are not prepared to shut it out. then contends

in the order of the Tribunal and therefore,

that the requisite facts, on which this branch of the argument may be based, are not to be found the statements of the case and, this argument should not be entertained. There would have been in this contention if the facts neces considerable force sary to support the new argument advanced by the Revenue were not on the record. But such is not the cases here as will be presently shown. The High Court conceded that if tl1e assessee had requested the Govern it wouH have ment to send the cheques by post made the post-office its agent and the the Government at Delhi posting of the cheques by the asses would have been deliverey of the cheques that see m Delhi. The High Court, however, held there was no finding by the Tribunal that it point of fact the assessee had ever requested the Government to send the cheques by post and that the position it could not be said that the cheques had been in Delhi. In our opinion, for delivered reasons to be presently stated, this part of the decision of the High Court cannot be supported on facts and its conclusion cannot be sustained in law.

then in that event

to the assessee

that being

to

Turning to following passages :

the order of the Tribunal we. find

the

"All payments for the goods supplied were made by cheques drawn by the Government department at Delhi on the Reserve Bank of India, Bombay Branch. The cheques were received by the assessee Company in its office in Aundh State."

The finding of fact recorded in the first statement of

the case also comprises the following (inter- alia) :

-

"These cheques were

received

by

the

assessee

Company at its office in Aundh State .by post."

1954-

Thf Commtssiontr of l~orne-tax~ Bombay South, Bombay v. Messrs. Ogal1 Glas,s Works Lld., O&all Wadi.

Das].

200

SUPREME COURT REPbRTS -

[1955].

The finding of fact m paragraph 3 of the Supple

mentary Statement of the case is thus recorded :

"3. The assessee company u"sed

to · submit · the bills and on the form of the bill it used to write "Kindly the amount by a cheque in our favour on any remit bank in Bombay".

The question for our consideration is as to what, on the legal principles laid down in judicial · decisions; these findings of fact amount to."

In Norman v. Rickets(' ), the creditor carrying on business as milliner in Bond Street wrote to one of the customers who resided in Suffolk saying "the favour of a cheque within a week will oblige". The customer upon such request sent a cheque for the amount by transit and was post. The cheque was, stolen in the paid by the Bank to the theif. It will be noted that the cheque by there was no express request the post, but nevertheless it was held that the sending· of .the cheque by post was payment. On appeal the Court of Appeal upheld the trial Court and observed :

to send

'

+

•

;-

that question

in Suffolk asking

that -she might send

"An express request If what

to send through the post was not necessary. the plaintiffs said amounted then there to a_ request to send the cheque by the post, was payment. To answer the existing circumstances must be looked at. A milliner in London wrote to a lady for a cheque. Did lead the lady to suppose, and did that letter reasonably the cheque by post ? she suppose to send a messen She could not suppose ger with it or come up to London herself. The only reasonable and proper meaning to be attached to it; whatever Madame Phillipe · might have intended ,.was there that she was fore, to send her cheque 'by post, and she did what she Was , asked to· ifo; Consequently what she did amounted to pay- ment."

the . cheque by post. She, that she was invited

reasonably believed

that she was

to send

-

•

t

• , .

ft..

' .

'

'

...

•'

-

.

In Th{lidwalv. The Great Northern R,ailway Co.,(•) . the the --J

the directors' by their declaration of dividend at certain

report · recommended (a) (b) rates, and ' co) LR: (tg10). K..B. 509:" '

(1) (1886) 3 T.L.R. t8il.

'

1954

The Commissiont of lncornz..tax, Bombay South, Bombay v. Messrs. 0 gale Glass Works Ltd., Ogale Wadi.

DasJ.

S.C.R.

SUPREME ·couRT REPORTS

201

in

that

to pay

the company

the amount due

the half despatch of dividend warrants by post. At the shareholders passed a reso yearly general meeting that dividends be declared at certain altered lution rates but said nothing about sending the same by post. Dividend warrants were sent to a stock-holder by post but it was lost in the post. Bray J., held the circumstances there was a request by the stock-holder to to him by means of a warrant sent by post. The case of Badische Anilin Und Soda Fabrik v. Basie Chemical Works( 1 ), was concerned with a Swiss seller who was asked to send the goods by post to England which he did. The invention goods were manufactured according protected by an English Patent. The question was as liable to who brought the goods to England so as to be to an action for infringement. the post-office was the agent of the English buyer . and, the Swiss seller could not be sued. After therefore, stating that the seller had sent the goods in pursuance of the buyer to a particular named ·carrier namely the post-office which is after all only a carrier of parcels like any other carrier Lord Halsbury at p. 204 said :

the order from

It was held

to an

that

-

.P

If, according

"It is not necessary that to

the carrier should have been named. the ordinary course of the carrier would be the person who would delivery, that would be receive it, just as good, for the purpose of the argument , as if the carrier had been actually named ; but we have not to consider that question here, because the carrier is named. Then, for what reason am I to depart from the well-known and recog nised principle of law that, under these circumstances, when goods are delivered by the order of the buyer to a named carrier, from that moment the goods vest in the buyer?"

The decision in Comber v. Leylqnd( 2

) , is very import- ant for our purpose in that it explains the meaning and implication of the word "remit" which is the word used by the assessee when it requested the Government to "remit" the amount by cheque. There

f ~ Department

(1) L.R. (1898] A.C. 200.

(2) L.R. f1898] A.C. 5li4.

1 954

The Commissiontr of Income-tax, Bombay South, Bombay v. Messrs. Ogal1 Glass Works Ltd., Ogalt Wadi.

Das J.

202

SUPREME COURT REPORTS

[1955]

was in that case no · express reference at all. Said Lord Herschell, at p. 530 :

to the post-office

that

"remrt"

this-that

the word

"I cannot doubt

there means this and nothing beyond the bank the plaintiffs, post bills, when obtained in favour of should be sent in the ordinary course and the ordinary manner in which such documents are sent by commer cial men, namely, by mail, and that as soon as that had been done all obligation and all the 1 liability of defendant ceased. impossible on these there was an obligation and a words to maintain that liability those bank post bills had reached the hands of the plaintiffs in England.

incumbent upon him until

I think

it

is

to

the

remitting"

the · defendants had

the plaintiff the post

impropriety of sending a

In Mitchell Henry v. Norwich Union Life Insurance Society Ltd.('), the defendants sent a written notice to the plainiff stating that the ssum of £ 48-5-Sd which would shortly become due should be paid at their office return and asking the plaintiff "when the notice. There was no express request to send the amount by post.. Bailhache J. held that by the use of the word "remitting" impliedly to pay them by sending the authorised money through in the ordinary way in which money was remitted by post, but that it was not usual to send so large a sum in Treasury notes by post. Apart from large amount in this case does support the view Treasury notes by post, that the request by the· creditor "to remit" the amount to send due, without more, is tantamount the amount by post. This decision was upheld by the if there be no Court of Appeal. On the other hand express or implied request by to send the the creditor amount by post the mere posting of a hundi duly in favour of the addressee does not operate as endorsed delivery of the hundi to the addressee so as to pass the for the post-office the addressee, title in the hundi to in such circumstances does not become the agent of the addressee. The case of Thorappa . v. Umedmalji( 1 ) is an In the case of ex parte Cate{ • ) also there was no request by the addressee to

instance on this point.

to a request

(1) ·L.R. [1918] 2 K.B. 67. (2) (1923) 25 Bom. L.R. 604.

(3) L.R. (1873) 9 Ch. App. 27.

' -J/

..

/-

/·

••

<J,

1954

The Commissioner of Jru;ome,tax, Bombay South, Bombay v. Messrs. Ogale Glass Works Ltd., Ogalt Wadi.

Das :J.

' .

~'*

t •

- \

S.C.R.

SUPREME COURT REPORTS

203

judicial send the bills by post. The result of the various · decisions are -summarised in Benjamin on Sale, 8th Edition, pp. 769-771, and in Chalmer's Bills of Exchange, 12th Edition, pp. 51-52.

rigidly

therefore,

A good deal of stress is laid by Sri Kolah on what he says is the basic difference between the postal regula tions in England and those in India and he insists that the English decisions laying down the effect of sending cheques by post should not be followed here. He points out that in England the sender of the cheques has no right to reclaim the same after it is posted, and the posting of the that, accordingly, immediately upon cheques the post office becomes irrevocably the agent of the addressee and that, the delivery of the cheque to the post-office is, in English law, delivery to the addressee. But that, Sri Kolah maintains, is not the position under the Indian Post Office Act, 1898. We have been taken through the different sections of that thereunder and Sri Kolah Act and the rules made law the sender has the contends that under the Indian right to reclaim the letter until it is actually delivered to the addressee and, the post-office remains the agent of the sender and conse- in India be regarded as delivery of the cheque the addressee. We may, however, point out that this right of the sender, on which so much stress and importance are laid by the learned advocate, is by no means an abso lute right, for it to to the authorities decide whether a letter once posted should be returned to the sender. This very narrow and qualified right can hardly be regarded as bringing about a position so to make different rom that prevailing in England as the English decisions wholly inapplicable. It may also be mentioned that the English decisions have been adopted by the Courts in India, e.g., Thorappa v. Umedmalji the ). It is, Indian Cotton Company Ltd. v. Hari Poonjoo(1 this line of reasoning however, not necessary the English any further for the principles underlying the provisions of

the posting of a cheque cannot

in spite of such contention

therefore, until

is left entirely

(supra) and

to pursue

time

that

to

f

. .J.. ...i.. decisions are dearly consonant with

(1) I.L.R. 1937 Born. 763.

14-86 S. C. India/59

~ quently

-

:..· .,

1954

·The Commissioner ·of Income-taX, Bombay South, Bombqy v.

, _~Messrs. OgaU ~Glass Works Ltd., •Ogale Wadi.

•DasJ.

204

SUPREME COURT REPORTS

[1955]

fall on

it is the

the very

therefore,

request of

that the sender having

the addressee cannot_ be heard to say that

the Indian law. There can be no doubt that as between the sender and the addressee the addressee that the cheque be sent by post that makes the post-office the agent of the addressee. After such request the the loss of post-office was not his agent and, the sender on the . the cheque in transit must specious plea limited right to r.eclaim the cheque under the Post-Office Act, 1898, there the post-office was his agent, when in fact was no such reclamation. Of course if there be no such request, express or the implied, to the to the post-office letter or the cheque agent of the sender himself. Apart from this principle the of agency the request delivery of the cheque to the post-office at of the addressee a delivery to him and that is that by the the cheque in pursuance of the request of posting the in creditor the debtor performs his obligation manner prescribed and sanctioned by the creditor and thereby discharges such performance the contract by (see section 50 of the Indian Contract Act and illustra tion ( d) thereto).

there is another principle which makes

then the delivery of

is delivery

through

Sri Kolah points out that when the Indian Contract Act, 1872, was passed, the Indian Post-Office Act, 1866, was in force. He has the relevant taken us provisions of that old Act and he points out that those provisions were quite different from those of the present Act. According to him illustration ( d) to section 50 of the passing of the the Indian Contract Act must, after Act of 1898, be taken to have become inappropriate, think that there is obsolete and incorrect. We do not the two Acts in respect of any basic difference between the matter under discussion. It does not appear to us that the Act of 1898 enlarges the sender to reclaim the postal article to the well nullify that a contractual obligation known general principle is discharged by the performance of . the engagement or promise in the manner prescribed or sanctioned by the-'- ) promisee.

illustration ( d) or otherwise to affect

to such an extent as

the right of

--1 1

f

-

195~

The Ccmmi.rsiontr of Iiw.me-tax, Bombay South, Bombay v. Messrs. 0 gau Glass W arks Ltd., Ogal1 Wadi.

Das].

S.C.R.

SUPREME COURT REPORTS

205

•

+

)

for

the

Applying . the above principles

to the facts found by to be this. The the Tribunal the position appears engagement of the Government was to make payment in Delhi and by cheques. The cheques were drawn in Aundh by post. According received by the assessee to the course of business usage in general to which, as part of the surrounding cir,cumstances, attention has to be paid under the authorities cited above, the parties the cheques should be sent by must have intended that post which is the usual and normal agency trans mission of such articles and according to the Tribunal's findings they were in fact received by the assessee by implication of an agreement post. Apart from arising from such business usage the assessee expressly requested the Government to "remit" the· amounts of the bills by cheques. This, on the authorities cited request above, clearly amounted in effect to an express to send the cheques by post. The · by· the assessee to such request and Government did act according It can scarcely be sug- posted reasonable plausibility . gested with any that cheques drawn in Delhi and actually received by in Aundh would in the normal course of business post _,, · be posted m some place outside British India. This posting in Delhi, to payment in Delhi. In this view of the matter the referred question should, with respect, have been answered by the High Court in the the affirmative. We, appeal and answer the question accordingly. In view the main. the appellant has failed in of the fact argument but has succeeded on a new one we think no that eai::h order should be made as l- · \ party should bear and pay his or its own costs before

the cheques in Delhi.

in law, amounted

therefore, allow

to costs except

semblance of

that

us as well as before the High Court.

Appeals allowed .

.1. -'·