Case: Shri Jagdish Mills Ltd Vs. The Commissioner Of Income-Tax, Bombay North, Kutch A

1. These two appeals with special leave under Art. 136 of the Constitution are directed against the order of the Income-tax Appellate Tribunal of India, Bombay Bench "A" (hereinafter referred to as "the Tribunal") dated August 3, 1954, in Income-tax Appeals Nos. 3756 of 1948-49 and 2161 of 1950-51 whereby the Tribunal held that the amounts of cheques of Rs. 1,98,643 and Rs. 4,96,365 for the assessment years 1943-44 and 1944-45 were received by the appellant from the Government in the taxable territories and were as such liable to tax under S. 4(1)(a) of the Indian Income Tax Act (XI of 1922) (hereinafter referred to as "the Act")2. At all material times the appellant was a public joint stock company incorporated under the then Baroda State Companies Act and having its registered office at Baroda. The appellant was the owner of a textile mill and carried on business in manufacturing and selling textiles at Baroda3. In the accounting years 1942 and 1943 tenders were invited by the Government of India for some of the articles manufactured by the appellant and the appellant submitted its tenders to the Government of India which accepted the tenders and placed orders for supply of goods manufactured by the appellant. These orders were accepted by the appellant at Baroda and the deliveries of the goods manufactured by the appellant and sold by it to the Government of India were pursuant to the said orders to be and were in fact effected F. O. B. Baroda. In fact so far as the manufacture and sale of the goods supplied to the Government of India were concerned, as also the deliveries thereof, everything took place at Baroda, outside the then British India4. According to the conditions of the contracts governing the supplies made by the appellant to the Government, the system of payment was, that unless otherwise agreed upon between the parties, payment for delivery of the goods would be made on submission of the bills in the prescribed form in accordance with the instructions given in the acceptance of the tender by a cheque on a Government Treasury or a Branch of the Reserve Bank of India or the Imperial Bank of India transacting Government business. The appellant after effecting deliveries of the goods, submitted bills in the prescribed printed form which contained the sentence that "Government should pay the amount due to the appellant by cheque" but the appellant did not request or write to the Government, in what way the payment by cheque was to be made by Government to the appellant. After submission of the bills the appellant received at Baroda, in payment of its bills cheques through post from the Government drawn on a Government Treasury or on a branch of the Reserve Bank of India or the Imperial Bank of India transacting Government business. The said cheques were received at Baroda by the appellant from the Government, along with a memo stating:"The undersigned has the honour to forward herewith cheque No. dated in payment of the bills noted below."then followed a tabular statement setting out the number amount and date of the bills. On the top of the memo there was a direction that "it be immediately returned to the Controller of Supplies Accounts, with the acknowledgment form on the reverse duly signed and stamped." The acknowledgment form was expressed as follows:"The undersigned has the honour to acknowledge cheque No. dated for Rs. in payment of the bills noted in the first column on the reverse."The payments made by cheques were accepted by the appellant unconditionally and in full satisfaction of its claim for goods supplied to the Government. On receipt of such cheques, the appellant endorsed the same and sent them either to Bombay or Ahmedabad in the Banking account of the appellant at such places5. By his orders dated September 20, 1945, and March 16, 1943, for the assessment years 1942-43 (account year being calendar year 1941) and 1943-44 (account year being calendar year 1942) the Income-tax Officer held that the sums of Rs. 1,98,643 and Rs. 4,96,365 being the amounts of the cheques received by the appellant for the goods supplied to the Government of India amounted to receipt of income, profits and gains in British India during the said accounting years inasmuch as the said cheques were drawn on banks in British India and were liable to tax6. On appeal to the Appellate Assistant Commissioner from the said orders of the Income-tax Officer, the Appellate Assistant Commissioner confirmed the orders of the Income-tax Officer and dismissed the appeals8. On December 20, 1954, the appellant applied for special leave to appeal against the said order of the Tribunal under Art. 136 of the Constitution which leave was granted by this Court by its order dated April 15, 1955. By a further order dated September 19, 1955, both the appeals were consolidated for the purposes of printing of the record and for filing of the petitions of appeal and the statements of case therein. These appeals have now come up for hearing and final disposal before us.

Reasoning:
13. If there was nothing more, the position in law is that the Post Office would not become the agent of the addressee and the mere posting of the cheque would not operate as delivery of the cheque to the addressee so as to pass the title in the cheque to the addressee14. Where, however, on the facts and circumstances of the case an implied request by the creditor to send the cheque by post can be spelt out, the Post Office would be constituted the agent of the addressee for the purposes of receiving such paymentThe only reasonable and proper way of dealing with the situation was that the payment would be made by cheques which the Government would send to the appellant at Baroda by post. According to the course of business usage in general which appears to have been followed in this case, the parties must have intended that the cheques should be sent by post which is the usual and normal agency for transmission of such particles. If that were so, there was imported by necessary implication an implied request by the appellant to send the cheques by post from Delhi thus constituting the Post Office its agent for the purposes of receiving those payments20. In our opinion the principle which has been enunciated by us in1 SCR 185  : (AIR 1954 SC 429  ) (supra), is applicable to the facts of the present case, even though the words "to remit the amount by cheque" have not been specifically used herein.r of those words does not make any difference to the position and it is not possible to distinguish the present case from that case merely on this ground.