Appeal No 326 of 1957
Appeal by special leave from the judgment and order dated February 16 1955 of the Orissa High Court in N J C No 117 of 1951
C K Daphtary Solicitor General of India K N Rajagopal Sastri R H Dhebar and D Gupta for the appellants
Rameshwar Nath section N Andley and J B Dadachanji for the respondent
May 5
The Judgment of the Court was delivered by KAPUR J
This appeal pursuant to special leave is brought by the Commissioner of lncome tax against the judgment of the High Court of Orissa holding that the amounts received by the assessees respondents were not received in what was British India and 870 therefore not liable to income tax
The respondents at all material times were non residents carrying on business at Secunderabad which was then in the territories of the Nizam of Hyderabad
They acted as agents for the supply of gas plants manufactured by Messrs T V section Iyengar  Sons Madura to the Nizam s Government and also as agents of the Lucas Indian Services Bombay branch for the supply of certain goods to that Government
The year of assessment is 1945 46
There does not appear to have been any written agreement between the two manufacturers and the respondents but the goods were to be supplied on a commission basis
In pursuance of this agreement the respondents received from Ms TVS lyengar  Sons Madura cheques drawn on the Imperial Bank of India Madras amounting to Rs 35202 in respect of all goods supplied from Madura and also from Lucas Indian Services Bombay by cheques drawn on Imperial Bank of India Bombay branch amounting to Rs 5302 in respect of goods supplied by them thus making a total of Rs 40504
These cheques were sent by post and when received by the respondents at Secunderabad were credited in the account books of the respondents and sent to their banker G Raghunathmal for collecting and crediting to the account of the respondents
As against these sums so deposited the respondents at once drew cheques and thus operated on these amounts deposited
In regard to the commission received from the Bombay firm it was paid into the account on December 22 1944 but was given credit for only on January 2 1945
The Income tax Officer assessed these sums as taxable income holding that the entire amount of Rs 40504 was received in British India and not at Secunderabad
An appeal was taken by the respondents to the Appellate Assistant Commissioner who upheld the order holding that income must be held to have accrued arisen or received in British India
Against this order the respondents took an appeal to the Income tax Appellate Tribunal and it was held that the amounts were received by the respondents from Madura and Bombay firms as commission but 871 they were received at Secunderabad
The appeal was therefore allowed
The finding Of the Appellate Tribunal in their own words was  The contention of the Appellants is that the cheques being negotiable instruments and the creditor having accepted them and passed through their books II the receipt must be taken to be receipts in Hyderabad
We agree with the view submitted by the appellants
In Bhashyam s Negotiable Instruments Act 8th Edition Revised page 556 it is stated that it will be open to a creditor to accept a cheque in absolute payment of money due to him in which case it will be equivalent to cash payment
That being the position it cannot be said that the income was received in British India 
At the instance of the Commissioner a reference under section 661 of the Act was made to the High Court of Orissa for their opinion on the following question   Whether in the circumstances of the case the sums of Rs 35202 and Rs 5302 received as commission from T V section lyengar  Sons Ltd and Lucas Indian Services Ltd respectively were income that accrued arose or were received in British India 
The High Court found that the statement of case was imperfect and that the real question was different
It said   The real question in all such cases is not merely whether the cheques were drawn on a bank in British India and sent for collection to that bank
The question is whether when the cheques were received by the assessee having his place of business outside British India those cheques were in fact received as absolute and final payments by way of unconditional discharge or whether they were received as mere conditional payments on realisation
The fact that cheques were drawn on a bank in British India or that they were sent for collection through a Secunderabad banker of the assessee though relevant are not conclusive 
It therefore remitted the case to the Appellate Tribunal for submission of supplementary statement of case
It appears that at that stage the controversy was 872 confined to the question whether the cheques having been sent to Secunderabad and having been realised in British India would amount to a final discharge or an unconditional one
The Tribunal in its supplementary statement found that the course of conduct followed by the parties showed that the cheques were received from the Bombay and Madura firms in full satisfaction of the commission ascertained from time to time and due on such date
It said  The facts that such entries were made in the assessee s books that the cheques were put into the bank immediately that the bank at once gave credit to the assessee for these sums after charging discount thereon and immediately allowed the assessee to operate on those sums are significant 
Therefore the finding of fact by the Tribunal although not specific was that the receipt of the cheque by the respondents operated as full discharge of the debt due on account of commission from these two firms
The matter was decided by the High Court against the appellant and in the meanwhile this Court had given a judgment in Commissioner of Income tax vs Ogale Glass Works Ltd 1
Even after considering the decision of that case the High Court was of the opinion that the income of the respondents was not received in British India and answered the question against the Revenue
The High Court refused to give leave to appeal to this Court and it was this Court which gave special leave to appeal
The question is whether the amounts of commission paid by cheques drawn respectively on banks at Madras and Bombay and respectively posted from Madura and Bombay can in the circumstances of this case be held to have been received in what was British India or at Secunderabad  The Appellate Tribunal found that all the cheques whether from Madura or from Bombay were sent by the two respective firms from Madura or Bombay and were received by the respondents at Secunderabad and were treated as payment
The question still remains as to the effect of the sending of the cheques from Madura or Bombay by post
If there is an express request by the 1 873 creditor that the amount be paid by cheques to be sent by post and they are so sent there is no doubt that the payment will be taken to be at the place where the cheque or cheques are posted
The respondents argued that there was an agreement between the Madura and Bombay firms and the respondents that the money would be paid whether in cash or by cheque at Secunderabad  and therefore when the cheques were sent by post the post office was the agent of the debtor and not of the respondents
There is in support of the respondents an affidavit which was filed in the assessment proceedings and which was relied upon in the High Court
According to this affidavit it was verbally agreed that the commission would be paid at Secunderabad in cash or by cheque as the case may be the language used in the affidavit was  The above commission was verbally decided to be paid to Messrs Patney  Co Ltd Secunderabad the Agent Company in Hyderabad State at Secunderabad in cash or by cheque as the case might be 
In the case of payment by cheques 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
Therefore the post office is an agent of the person to whom the cheque is posted if there be an express or implied authority to send it by post Commissioner of Income tax vs Ogale Glass Works Ltd 1
In that case there was an express request of the assessee to remit the amount of the bills outstanding against the debtor that is Government of India by means of cheques
But it was observed by this Court that according to the course of business usage in general which has to be considered as a part of the surrounding circumstances the parties must have intended that the cheques should be sent by post which is the usual and normal mode of transmission and therefore the posting of cheques in Delhi amounted to payment in 1 110 874 Delhi to the post office which was constituted the agent of the assessee
But it was argued for the respondents that in the absence of such a request the post office could not be constituted as the agent of the creditor and relied on a passage in Ogale s case 1 at p 204 where it was observed  Of course if there be no such request express or implied then the delivery of the letter or the cheque to the post office is delivery to the agent of the sender himself 
It was further contended that in this case there was an express agreement that the payment was to be made at Secunderabad and therefore the matter does not fall within the rule in Ogale Glass Works case 1 and the following principle laid down in judgment by Das J as he then was is inapplicable   Applying the above principles to the facts found by the Tribunal the position appears to be this
The engagement of the Government was to make payment by cheques
The cheques were drawn in Delhi and received by the assessee in Aundh by post
According to the course of business usage to which as part of the surrounding circumstances attention has to be paid under the authorities cited above the parties must have intended that the cheques should be sent by post which is the usual and normal agency for transmission of such articles and according to the Tribunal s finding they were in fact received by the assessee by post In our opinion this contention is well founded
Whatever may be the position when there is an express or implied request for the cheque for the amount being sent by post or when it can be inferred from the course of conduct of the parties the appellant in this case expressly required the amount of the commission to be paid at Secunderabad and the rule of Ogale Work s case 1 would be inapplicable
The High Court judgment in our view was correct and we would therefore dismiss this appeal with costs
Appeal dismissed


Summary:
On March 23 1948 while certain disputes were under adjudication the workmen pressed the same demands upon the company for immediate solution without awaiting the award of the tribunal
The company refused to meet the demands and thereupon the workmen went on an illegal sit down strike
The company closed the works indefinitely and notified that all those workmen who had resorted to the illegal strike were discharged from that date
On July 5 the company notified that the works would open on July 6 and all old employees could apply for reengagement upto July 21
A majority of them applied for being retaken and all those who applied upto July 21 were taken but those who applied after that date were refused
On November 18 1953 the Government made a reference in respect of the reinstatement Of 250 old workmen who had not been retaken
No list of the 250 workmen was sent to the tribunal nor was such a list filed even during the adjudication proceedings but after the arguments on behalf of the company were over a carelessly prepared list Of 220 persons was filed before the tribunal by the workmen on December 14 1953
The Tribunal ordered reinstatement without specifying who were to be reinstated
It directed the company to give a general notice notifying the strikers to come and join their duties on a fixed date and to reinstate those who applied within the time allowed
On appeal the Labour Appellate Tribunal upheld the order of reinstatement in respect Of 15 workmen only
Held that there was no reason for ordering reinstatement of any of the workmen on such a vague reference made after such an unreasonable delay
It was reasonable that disputes should be referred as soon as possible after they had arisen and after conciliation proceedings had failed particularly in cases of wholesale discharge of workmen followed by fresh recruitment of labour
Though the workmen were discharged during the pendency of a dispute in violation of section 33 of the  the remedy of the workmen was to apply under section 33 A of the Act but that was not done
This defect in the discharge of the workmen could be ignored in the circumstances of this case on account of the illegal strike the failure to 151 avail of the remedy under section 33 A and the delay and vagueness of the reference which all show that the workmen were not interested in reinstatement