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Commissioner of Income-tax, Central, Bombay Vs. Indore Malwa United Mills Ltd. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtMumbai High Court
Decided On
Case NumberIncome-tax Reference No. 36 of 1955
Judge
Reported in[1960]39ITR438(Bom)
ActsIncome Tax Act, 1922 - Sections 4(1)
AppellantCommissioner of Income-tax, Central, Bombay
Respondentindore Malwa United Mills Ltd.
Appellant AdvocateG.N. Joshi, Adv.
Respondent AdvocateR.J. Joshi, Adv.
Excerpt:
direct taxation - taxable territories - section 4 (1) of income tax act, 1922 - assessee supplied goods from territory of former state of indore - bills were prepared and sent to purchaser - direction for payment of bill read as 'please pay by cheque to self on bank of indore' - department taxed profits made by assessee as non-resident on sale of goods - whether assessee was liable to pay tax in taxable territories on ground that sale proceeds which included profits elements therein was received in taxable territories - words used by assessee imports request to send payment by cheque through post - post office acts as agent of assessee making request for purpose of receiving cheques posted by other party - cheques deemed to be received by assessee making request at place where cheques.....shah, j. 1. the dispute in this reference relates to assessment years 1943-44, 1944-45, 1945-46, 1946-47, 1947-48, and 1948-49. the assessee is a limited company having offices at bombay and indore, and has a factory for manufacturing cotton textiles at indore within the territory of the former state of indore. during the relevant accounting years, on orders placed by the stores department, government of india, the assessee supplied textile goods for war purposes. the purchase order were placed by the stores department with assessee at indore, and the delivery was to be f.o.r. indore. the orders were received by the assessee at indore and the same were returned to the government of india, supply department, duly signed by the general manager of the assessee at indore. there were, it.....
Judgment:

Shah, J.

1. The dispute in this reference relates to assessment years 1943-44, 1944-45, 1945-46, 1946-47, 1947-48, and 1948-49. The assessee is a limited company having offices at Bombay and Indore, and has a factory for manufacturing cotton textiles at Indore within the territory of the former State of Indore. During the relevant accounting years, on orders placed by the Stores Department, Government of India, the assessee supplied textile goods for war purposes. The purchase order were placed by the Stores Department with assessee at Indore, and the delivery was to be f.o.r. Indore. The orders were received by the assessee at Indore and the same were returned to the Government of India, Supply Department, duly signed by the general manager of the assessee at Indore. There were, it appears, orders of two types - (i) the purchase war order, and (ii) bulk purchase order. On the reverse of the form of the purchase war order certain conditions were printed. It was recited therein that the price to be paid for the quantity specified in the order shall be that agreed upon between the Government and the standing Sub-Committee of the Cotton Textile Panel; and the first W.S. B. 116 in duplicate, using the prescribed forms. On the bulk purchase order forms also certain conditions and important instruction were printed and condition No. 9 which related to payment, provided :

'Unless otherwise agreed between the parties, payment for the delivery of stores will be made on submission of bills in the prescribed form in accordance with the instruction given in 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.'

In the prescribed bill form there was a column for the contractor's signature for receipt of payment with the following printed statement : 'please pay by cheque to.........on Bank/Treasury at.........'

2. Arrangement were made by the Government of India for inspection of the goods at the premises of the factory, and a special Officer was posted at Indore for inspecting the goods supplied. When the inspecting officer was informed by the assessee that the goods were ready for delivery he attended the factory premises of the assessee, inspected the goods and issued an inspection certificate. The goods were then sent the railway receipts were made out in name of the representative of the government to whom the goods were directed to be despatched. After the goods were inspected and approved by the inspector, bills were prepared in the form prescribed by government and sent to the controller of supplies, New Delhi. In forwarding the bills, the assessee entered the words 'self' and 'Indore' respectively in the two blanks. The direction for payment of the bill, therefore, read as : 'Please pay by cheque to self on bank of Indore.' After the bills were made out, entries were posted in the cited note entry book with particulars as on date, the name of account, invoice number, the names of the parties to whom goods were supplied, and the ledger folio of the account in which the bills were debited, and from the credit notes entry book entries for goods supplies were posted in the ledger to the account of the controller of Supplies, New Delhi. For the amount of the bills the Government of India drew cheques in the favour of the assessee on the Reserve Bank of India and these cheques were sent by post to the assessee at Indore, and were deposited in the account of the assessee with the Imperial Bank of India, Indore branch, and on clearance of the cheques the amounts was credited to the account of the assessee.

3. The Income-tax officer at Bombay sought to bring to tax the profits made by the assessee as a non-resident on the sale of goods supplied pursuant to the purchase war orders and the bulks purchase orders. The order passed by the Income-tax Officer was confirmed in appeal to the Appellate Assistant Commissioner. The Income-tax Appellate Tribunal by its order, dated March 13, 1953, held, following the judgment of this court in Kirloskar Bros. Ltd. v. Commissioner of Income-tax, that the profits earned by the assessee who was a non-resident not being received in the taxable territory were not liable to tax under the Indian Income-tax Act. By order, date March 4, 1955, the Tribunal at the instance of the Commissioner of Income-tax referred the following question to the court under section 66(I) of the India Income-tax Act :

'Whether the assessee-company is liable to pay tax in the taxable territories on the ground that the sale proceeds, which included the profits elements therein, were received in the taxable territories ?'

4. It may be observed that since the date of the order passed by the Income-tax Appellate Tribunal negativing the claim of the Revenue, their Lordships of Supreme Court, by their judgment in Commissioner of Income-tax v. Ogale Glass Works Ltd., reversed the judgment of this court in Kirlosker's case, holding that when cheques were sent to a non-resident assessee to a place outside British India, in pursuance of instructions from the assessee to remit the amount of bills submitted, the income, profit or gain must be deemed to have been received at the place where the cheques were put in transmission by post.

5. In this reference, Mr. G. N. Joshi for the Revenue contends this case is covered by the principal of the judgment of their Lord-ships of the supreme court in the case of Ogale Glass Works Ltd. It is necessary to set out in detail the course of the proceedings which ultimately resulted in the order made by the Supreme Court in the case of Ogale Glass Works Ltd. The assessee (Ogale Glass Works Ltd.) was a non-resident company carrying on business of manufacturing certain articles in the State of Aundh (an Indian State) and it secured contracts for the supply of curtain articles to the government of India. The contracts provided that '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 instruction 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.' The assessee dispatched the railway receipts with the bills in the prescribed form and wrote at the foot of the bills, 'Kindly remit the amount by a cheque in our favour on any bank in Bombay.' The cheques were accordingly drawn by the Government of India on the Bombay branch of the Reserve Bank of India and the same were sent to the assessee by post. The assessee endorsed the cheques in favour of the Aundh Bank, Ogalewadi branch, which in its turn endorsed the cheques in favour of a Bombay bank. The cheques were cleared through the clearing house in Bombay, and the assessee after being intimated about the clearance sent formal receipts to the Government of India. In proceedings for assessment of income-tax the taxing authorities and the Tribunal held that the assessee had received in British India income, profits or gains within the meaning of section 4(I)(a) of the Indian Income-tax Act because encashment of the cheques in Bombay amounted to receipt of income in British India. On a reference on the question whether the income, profits or gains were received by the assessee in British India within the meaning of section 4(I)(a) of the Income-tax Act, this court was of the view that the statement of the case submitted by the Tribunal was insufficient to enable the court to answer the question, and accordingly a supplementary statement of the case was called for. The Tribunal in the supplementary statement set out the system of payment which was adopted under the contract, and also referred to the modus of submission of bills on the forms prescribed. This court was of the view that the cheques transmitted by the Government of India were unconditionally accepted by the assessee at Aundh and accordingly the income was received outside the taxable territories, and in the circumstances it was unnecessary to consider the question whether the assessee's bankers acted as agents of the assessee and cleared the proceeds of the cheques. Counsel for the Revenue then attempted to raise a contention which had not been raised before the taxing authorities or before the Income-tax Appellate Tribunal that the delivery of the cheques to the post office at Delhi at the request of the assessee amounted to payment of the amount to the assessee at Delhi, and accordingly the income was received by the assessee in British India and not in Aundh. That contention was rejected and the question submitted to this court was answered in the negative. In appeal against that decision, it was held by the Supreme Court that on the facts taken cumulatively the cheques were received in complete discharge of the claim and the assessee received payment on the dates on which the cheques were delivered; that the request by the assessee to remit the amount due amounted to a request to remit the amount by post; that by posting the cheques at the request of the assessee the Government of India performed its obligation in the manner sanctioned by the assessee, and that posting of cheques in Delhi amounted in law to payment in that town. Their Lordships observed that the argument of the Revenue that the posting of the cheques in Delhi operated as payment at the place of posting did not raise any new question of law not covered by the question referred, and that apart from the implication of an agreement arising from business usage the assessee having expressly requested the Government to 'remit' the amounts of the bills by cheques, there was an express request by the assessee to send the cheques by post, and posting of the cheques pursuant to the request amounted to payment in Delhi, and the income, profits or gains in respect of the sales made to the Government of India were therefore received by the assessee in British India. It was observed in that case that there was a wide divergence of judicial opinion on the scope, meaning and import of the words 'any question of law arising out of the Tribunal's order' within the meaning of section 66 of the Indian Income-tax Act but it was unnecessary in the circumstances of the case to deal with the precise scope of that expression. The case was not one where an application was made to the High Court to exercise its jurisdiction under sub-section (2) of section 66, the Tribunal having refused to refer a question of law : it was a case in which the Tribunal in exercise of its powers under sub-section (I) of section 66 did refer a question of law to the High Court, and at that time nobody contended that the question of laws referred to the High Court did not arise out of the Tribunal's order or had not been properly referred to the High Court. Therefore, in the view of their Lordships of the Supreme Court, a 'question of law arising out of' the Tribunal's order having been properly referred by the Tribunal under sub-section (I), the High Court had to deal with the question in exercise of its jurisdiction under sub-section (5). Their Lordships then observed :

'Here no new question of law is sought to be raised. The question of law still is, whether on the facts of this case, income, profits and gains in respect of sales made to the Government of India was received in British India within the meaning of section 4(I)(a) of the Act. The argument is that as the cheques were posted at Delhi at the request of the assessee payment was received by it in British India. It is said that although the language in which the question has been framed is wide enough to include this branch of the argument, 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 argument actually advanced before the Tribunal and on which the Tribunal's decision was founded, leaving out all other facts appearing on the record and even referred to in the Tribunal's order and the statements of the case. There is no warrant for such suggestion. The language of the question clearly indicates that the question of law has to be determined 'on the facts of this case'. To accede to the contention of the assessee, will involve the undue cutting down of the scope of the question by altering its language. Seeing that the High Court permitted this argument to be advanced before them we are not prepared to shut it out.'

6. Their Lordships then negatived the contention of counsel for the assessee that the requisite facts were not to be found in the order of the Tribunal and the statement of the case and that ground the plea sought to be raised by counsel for the Revenue that the assessee had received payment when the cheques were delivered to the post office should not be entertained. After a detailed consideration of the authorities cited at the Bar, their Lordships observed :

'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 in general 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 findings they were in fact received by the assessee by post. Apart from the implication of an agreement arising from such business usage the assessee expressly requested the Government to 'remit' the amounts of the bills by cheques......The Government did act according to such request and posted the cheques in Delhi. It can scarcely be suggested with any semblance of reasonable plausibility that cheques drawn in Delhi and actually received by post in Aundh would in normal course of business be posted in some place outside British India. This posting in Delhi, in law, amounted to payment in Delhi.'

7. Between the facts of the case of Ogale Glass Works Ltd., and the facts of the present case, there is a striking similarity. The cheques were sent by post in Ogale Glass Works case in pursuance of a request by the assessee to remit the amount by cheques, and the cheques were sent by post in pursuance of the request and were collected through the bankers of the assessee with the taxable territories. The contention that the request to remit the amount by cheques in favour of the ASSESSEE constituted the post office, which would normally be the agency for transmission of such articles, as agent for the assessee was not raised before the taxing authorities or the Income-tax Appellate Tribunal; and for the first time that contention was raised by counsel for the Revenue at the hearing of the reference in the High Court. Their Lordships, on the materials in the statement of the case, held, especially having regard to the amplitude of the question submitted, that the post office was constituted by the request made by the assessee its agent for receiving the cheques, and therefore, income, profits or gains were received at the place where the cheques were posted.

8. Mr. Kolah for the assessee in this case has strenuously contended that there is no evidence on the record to show that the cheques were in fact sent by post. But the contention is, in our judgment, wholly without force having regard to the admitted statement of the case submitted by the Tribunal. In the second paragraph of the statement of the case the Tribunal has observed that on receipt of the bill the Government drew cheques in favour of the assessee on the Reserve Bank of India, Bombay, and these cheques were sent by post to the assessee at Indore, and in the last paragraph it is recited that the parties had agreed that all the facts were correctly stated. It is evident, that before the Tribunal it was conceded that the cheques were drawn by the Government of India in favour of the assessee on the Reserve Bank of India, Bombay, were , pursuant to the request contained in the bills, sent to the assessee by post.

9. In a very recent case. Shri Jagdish Mills Ltd. v. Commissioner of Income-tax, decided on May 12, 1959, their Lordships of the Supreme court were faced with a problem similar to the one arising in this case. In that case, a company having its registered office at Baroda, a former Indian state, was the assessee. The Government of India placed orders for the supply of certain articles manufactured by the assessee, and those orders were accepted by the assessee at Baroda and the goods were supplied pursuant to those orders f.o.r. Baroda, and accordingly the manufacture, sale and delivery of goods took place at Baroda. After effecting delivery of the goods, the assessee submitted bills in the prescribed printed forms which contained a clause that the Government will pay the amount due to the assessee by cheque. There was nothing written either in the bills or in any other intimation expressly requesting the Government of India to send the cheques by post. After the bills were submitted the received at Baroda payment of bills by cheques drawn on the Government Treasury or on a branch of the Reserve Bank of India and dispatched by post from Delhi. The Cheques were received at Baroda and were cleared in due course. In that case also, their Lordships of the Supreme Court held that the assessee had accepted the cheques unconditionally and in full satisfaction of its claims for the goods supplied to the Government, and by virtue of the fact that the cheques were ultimately collected in the taxable territories no liability to pay tax arose. Their Lordships then proceeded to consider the argument for the revenue that because the cheques were posted by the Government in Delhi at the implied request of the assessee payment must be deemed to have been received at Delhi, the post office being constituted the agent of the assessee for receiving the same. Counsel for the assessee contended that the payment for the goods supplied was at request of the assessee made by cheques but there was no request either express or implied from the assessee to dispatch the cheques by post; and even if the Government of India chose to send cheques by post from Delhi it was not in pursuance of any request express or implied and, therefore, the post office was not the agent of the assessee but was the agent of the Government. After referring to the cases cited at the Bar, their Lordships observed that where an implied request by the creditor to send the cheque by post can be spelt out from the facts and circumstances of the case the post office will be constituted the agent of the addressee for receiving such payment. Their Lordships, therefore, held that the principle of the case of Ogale Glass Works Ltd., was applicable to the facts of the case before them even though the words 'to remit the amount by cheque' were not specifically used in the bills.

10. The principle of these two cases is, in my judgment, decisive of the present case. In the case before us, there was a request expressly made by the assessee to the Government of India to pay the amount of the bills by cheques to self on bank at Indore. That pursuant to this request the cheques drawn by the Government of India were received by the assessee is not, in the circumstances of the case, denied. There was a request expressly made by the assessee to send the amount due to it by cheque; and as the normal agency for transmission of cheques is the post office, the cheques would be regarded as duly handed over at Delhi - the headquarters of the Government of India - and the post office at Delhi became the agent of the assessee to receive the cheques.

11. But Mr. Kolah for the assessee has strongly relied upon another recent judgment of their Lordships of the Supreme Court in Civil Appeal No. 50 of 1957, decided on May 12, 1959, New Jehangir Vakil Mills Ltd. v. Commissioner of Income-tax. In that case, a company manufacturing textile goods at Bhavnagar - a town in the former Indian State of Bhavnagar - was the assessee. In the assessment years 1944-45 the assessee was sought to be taxed for income, profits and gains earned in British India in respect of sale of goods delivered to the Supply Department, Government of India, in pursuance of certain orders placed with the assessee. In that case, the amounts due to the assessee were received at Bhavnagar by cheques drawn on banks in British India. The Income-tax Appellate Tribunal in that case, following the judgment of this court in Kirloskar's case, held that the receipt of the cheques in Bhavnagar constituted the first receipt and, therefore, the amounts so received were not liable to tax under section 4(I)(a) of the Income-tax Act. The Income-tax Appellate Tribunal, at the instance of the Commissioner of Income-tax, referred to the High Court the following question :

'Whether the receipt of the cheques in Bhavnagar amounted to receipt of sale proceeds in Bhavnagar ?'

12. This court in hearing the reference observed that the mere receipt of the cheques by post in Bhavnagar was not conclusive of the question whether the sale proceeds were received in that town, and expressed the view that it could not shut out the necessary inquiry, which, even from the point of view of the High Court, was necessary to be made in order that the court should satisfactorily answer the question raised in the reference, and the court had under section 66(4) of the Income-tax Act a right independently of the conduct of the parties to direct the Tribunal to state further facts so that the court can properly exercise its advisory jurisdiction. This court then called for a supplementary statement of the case on the question whether any of the cheques were received by post and whether there was a request made by the assessee, express or implied, that the amounts, which were the subject-matter of the cheques, should be remitted to Bhavnagar by post.

13. Against this order calling for a supplementary statement of the case, an appeal was preferred to the Supreme Court, and the primary question which the Supreme Court was called upon to decide was whether the procedure followed by the High Court was correct. Their Lordships set out the facts in detail and examined the scheme of section 66 of the Income-tax Act and observed :

'Section 66(4) does not enable the High Court to raise a new question of law which does not arise out of the Tribunal's order and direct the Tribunal to investigate new or further facts necessary to determine this new question which had not been referred to it under section 66(I) or section 66(2) and direct the Tribunal to submit a supplementary statement of the case. This power and jurisdiction which is vested in the High Court is to be exercised within the four corners of section 66... The jurisdiction of the High Court under section 66 is a consultative or advisory jurisdiction. In order to satisfactorily discharge that advisory jurisdiction the High Court must have before it all the facts which are admitted and/or found by the Tribunal properly set out in the statements in the case. It is only in those cases where the statement of case referred to the High Court under section 66(I) and section 66(2) are not sufficient to enable the High Court to determine the question raised thereby that the High Court is empowered to refer the case back to the Tribunal within the four corners of section 66(I) and section 66(2) may make such additions to those statements or alterations therein as may be directed by the court... Such additions thereto or alterations therein as the court may direct in that behalf are additions of facts to the statement of case or alterations therein which though they were part of the record before the Income-tax authorities or the Tribunal were not incorporated in the statement of case drawn up by the Tribunal either because such facts or statements though contained in the record were not found by the Tribunal or were omitted to be incorporated in the statement of case drawn up by it.'

14. Their Lordships then observed that where there are no materials and evidence at all in existence the High Court cannot in exercise of its jurisdiction under section 66(4) refer the case back and ask the Tribunal to make such additions thereto or alterations therein so as to enable the Tribunal to buttress up its order or to fortify it by requisitioning to its aid materials and evidence which were not before it but which it discovers by investigation after the order was passed. 'Adopting such a procedure' their Lordships observed, 'would involve, in effect, raising fresh issues and taking fresh evidence in order that fresh facts may be found which facts certainly were not there at the time when the matter was heard before the Income-tax authorities or before the Tribunal in the first instance.' They observed that there was no power in the High Court to remand the case to the Tribunal for fresh findings of facts on further inquiry or to require the Tribunal to embark upon a fresh line of enquiry which had never been canvassed at any time before the Income-tax authorities or the Tribunal in the first instance and to record fresh finding on evidence adduced by the parties in that behalf.

15. They observed that at no time was the question about the posting of the cheques in British India at the request, either express or implied, of the assessee and the consequent receipt of the sale proceeds in British India ever mooted before the Income-tax authorities or the Tribunal before the Tribunal made its order on July 17, 1952, or even in the reference applications field on September 15, 1952, nor was that question ever mooted before the Tribunal when it heard the reference and drew up the statement of the case on November 8, 1954. They then observed that if the argument whether the post office was constituted the agent of the assessee for the purpose of receiving the payment was allowed to be entertained, the question would have to be wholly recast and it 'would be quite distinct and separate from the question of law actually referred by the Tribunal to the High Court in the statement of the case originally drawn up.'

16. Evidently their Lordships were dealing in that case with the question whether the High Court has jurisdiction under section 66(4) to direct an enquiry on question of fact which did not arise out of the order of the Tribunal and which necessitated ascertainment of fresh facts which were never canvassed at any time before the Income-tax authorities or the Tribunal. There is, however, nothing in the judgment which, in my opinion, seeks to throw any doubt upon the correctness of the view taken in the judgment in Ogale Glass Works' case.

17. Mr. Kolah, however, placed very strong reliance upon the observation made by their Lordships in the course of the judgment that the Revenue had not urged before the Tribunal that the question whether the cheques which were posted were posted by the Government of India at Delhi were posted in pursuance of the request, either express or implied, by the assessee should be referred to the High Court for its decision, and the reference application were heard only on the materials which were on record before the Tribunal, that the question whether there was any request made by the assessee, express or implied, that the amount of the cheques should be remitted to Bhavnagar by post had not been canvassed before the Income-tax authorities or before the Tribunal and did not find place in the order of the Tribunal, and that, therefore, any question of law appertaining thereto could not be said to arise out of the said order of the Tribunal. Mr. Kolah also relied upon the observations that the facts admitted and/or found by the Tribunal would be the foundation or the basis on which such questions of law could be raised and neither party would be entitled to require the Tribunal to refer to the High Court any question of law which did not thus arise out of the order of the Tribunal, that section 66(2) which gives the power to the High Court to require the Tribunal to state the case and refer the question of law to it also proceeds on the same basis and that even where the High Court exercises the power under section 66(2) it can only require the Tribunal to state the case on any question of law arising out of such order. Mr. Kolah also referred to the case of Commissioner of Income-tax v. State Bank of India, and the remarks (at page 551) of Chakravartti, C.J., which were apparently quoted with approval by their Lordships of the Supreme Court in New Jehangir Vakil Mills' case.

18. These observations, in my judgment, do not militate against the view which I have expressed earlier. If the Revenue with a view to support its claim to tax the income of the assessee were asking this court to call for a supplementary statement of the case to open up a fresh line of inquiry and that fresh line of inquiry necessitated findings of facts on points which had never been canvassed before the Income-tax authorities or before the Tribunal, such a request could not in view of the judgment in New Jehangir Vakil Mills' case be entertained. But the Revenue asks us, on the facts found in the four corners of the reference. To decide whether the post office was constituted an agent of the assessee in that the assessee had requested the Government of India to send the amount due to it by cheques and pursuant to the request the cheques were sent. It may be pertinent to note that in all the three cases decided by their Lordships of the Supreme Court, which we have referred to, viz., the case of Ogale Glass Works Ltd., Shri Jagdish Mills Ltd., and New Jehangir Vakil Mills Ltd., two of the learned judges who constituted the Bench were the same, and the judgments in the cases of Shri Jagdish Mills Ltd., and New Jehangir Vakil Mills Ltd., were delivered on the same day. It is in the circumstances difficult to uphold the argument of Mr. Kolah that by making the observations relied upon from the judgment in the New Jehangir Vakil Mills' case it was intended to modify-without expressly so stating-the view expressed in the other two cases. Assuming that, divorced from the context in which the passages on which Mr. Kolah has relied occur, they are capable of a wider import, they must, in my judgment, be read in the context in which they occur. Their Lordships of the Supreme Court In the case of the New Jehangir Vakil Mills were dealing with a case in which the primary question was as to the competence of the High Court to remand a case to the Tribunal in exercise of its powers under section 66(4) and to call for a finding on a question, which had never been agitated before the Income-tax authorities or even before the Tribunal and to support which there was no evidence on the record. The jurisdiction of the High Court under section 66 of the Income-tax Act is advisory and it has normally to answer the question submitted to it for decision. The High Court, it is true, is not bound to answer the question in the form in which it is submitted; it may reframe the question if the parties, so that the real matter in dispute before the Tribunal may be decided. The High Court is also invested with jurisdiction to refer the case back and to ask the Tribunal to make such alterations therein or additions thereto as to enable the court to determine the question submitted. If, however, a question of law which is sufficiently wide to cover an argument, which on the facts set out in the order of the Tribunal can be entertained and answered, is referred to the High Court, there is, in my view, nothing in the judgment of their Lordships of the Supreme Court in the New Jehangir Vakil Mills case which supports the submission that such an argument cannot be entertained, and the arguments advanced before the High Court must be strictly limited to those contentions only which were raised before the Tribunal. In my view, if the right of the Revenue to tax an assessee on the question posed before the High Court is sought to be supported on the evidence on record but on grounds other than those which were pressed before the taxing authorities or the Tribunal, it cannot be rejected on the plea that the ground was not set up before the Tribunal. The observations made by their Lordships of the Supreme Court in the case of the Ogale Glass Works Ltd., to which I have already referred, clearly support the view that the High Court may, at the hearing of a reference, permit a new ground to be set up in support of the case of a party on the facts before it though that ground was not presented before the Tribunal. The test, in my judgment, is whether the new ground set up before the High Court can be adjudicated upon without opening up a fresh line of enquiry upon fresh facts which are not on the record. In the present case, the question as to the liability of the assessee to pay tax arises on the facts which were before the Tribunal. It is true that the Tribunal was not asked to decide the question of liability of the assessee on the ground which is now submitted before us; but the mere circumstance that the ground which on the facts could have been set up was not set up will not prevent the Revenue from relying upon that ground before this court.

19. On that view of the case, I am of the view that the assessee was liable to pay tax in the taxable territories on the ground that the sale proceeds, which included that profit element therein, were received in the taxable territories. I would accordingly answer the question referred in the affirmative.

S.T. Desai, J.

20. I has the advantage of reading the judgment just delivered by my learned brother and have given it careful consideration. I feel loath to disagree with the view expressed by him, but I have been unable to persuade myself to adopt the same. Mr. G. N. Joshi, learned counsel for the Revenue, has pressed for our acceptance a new contention and it is indisputable and not disputed that the contention is being raised for the first time at the stage of the hearing of this reference. It was not mooted before the Income-tax authorities for the Tribunal nor indicated in the application for reference under section 66(1) and it is for the first time that it is sought to be raised before us as a mixed question of fact and law on the ground that the question as framed by the Tribunal and referred to us is in sufficiently wide terms to include the point relating to payment by cheque at the request express or implied made by the assessee and that the relevant facts are on record. This has raised, therefore, the crucial question as to the scope and submit of the authority of this court to entertain on a reference made under section 66(1) any such new contention raising a mixed question of fact and law.

21. The rather vexed question of what in case of payment by cheques amounts to receipt by a non-resident of sale proceeds of goods in the taxable territories has been considered by the Supreme Court in some very recent decisions. In none of these cases the specific question-the larger question-as to the scope, meaning and import of the words in section 66(1), 'any question of law arising out of such order', that is the order of the Tribunal under section 33(4), was decided by their Lordships. In Commissioner of Income-tax v. Ogale Glass Works Ltd., to which decision I shall have to refer a little later, it was observed by Das J. (now my Lord the Chief Justice of India) :

'In the view we have taken it is not necessary for us, on this occasion, to express any opinion on the larger question as to the scope, meaning and import of the words any question of law arising our of' the Tribunal's order on the interpretation of which there exists a wide divergence of judicial opinion.'

22. In the latest case on the subject, New Jehangir Vakil Mills Co. Ltd. v. Commissioner of Income-tax (2) delivered on May 12, 1959, their Lordships of the Supreme Court have pronounced upon this matter and it seems to me that it would not accord with that pronouncement to permit the Revenue to agitated and for us to entertain the new contention which is now for the first time sought to be raised by Mr. Joshi. As I read that decision it leads directly to the solution of this crucial question strenuously debated before us. But before I turn to it I shall succinctly state the facts which are relevant for the purpose of this reference.

23. The six relevant assessment years are 1943-44 to 1948-49. The assessee is a limited liability company to which I shall refer as the 'company'. The company was 'non-resident' and carried on the business of manufacturing textiles at Indore (then in an Indian State). It supplied goods to the Stores Department of the Government of India. The Department placed orders for purchase of goods with the company at Indore. All the purchase orders were received and accepted by the company at Indore. The delivery was to be f.o.r. Indore and the freight from the railway station at Indore was borne by the Department. On receipt of information that the goods were ready the inspection officers of the Department were to inspect the goods at the mills at Indore. When this was done inspection certificates were issued under their signature at Indore and the goods were dispatched by rail from Indore. Thereafter bills were made in the form prescribed by the Government and sent to the Controller of Supplies, New Delhi. On the making out of such bills, entries were passed on the; books of the company for the value of the goods supplied and the; amount of the bills were debited to the account of the Controller of Supplies. Clause 9 of the bulk purchase order states as follows :

'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 in the Acceptance of Tender by cheques 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 Governmental business.'

24. The bills submitted by the assessee contained the following :

-------------------------------------------------------------------BankReceived Please play by cheque to self on ------ at IndorePayment TreasuryContractor's For the Indore For the IndoreSignature Malwa United Mills Contractor's Malwa UnitedLtd. Signature. Mills Ltd.Sd. S. N. Agarwal Sd. S. N. AgarwalManager, ManagerCloth sales Dept. Cloth Sales Dept.-------------------------------------------------------------------

25. It is to be noted that the assessee in terms stated that the payment should be made 'by cheque to self on Bank/Treasury at Indore'. On receipt of the bills, the Government drew cheques in favour of the assessee, on the Reserve Bank of India, Bombay, and these cheques were sent by post to the; assessee at Indore. On receipt of the cheques, an office voucher was prepared in duplicate, one being sent to the cashier with instructions to credit the amount of the cheque to the account of the Controller of Supplies, New Delhi. Cheques received from the Government were deposited in the account of the; assessee company at the Imperial Bank of India, Indore, and the bank on receipt of the cheques credited the account of the company in their books Indore. I have taken these facts from the statement of the case. The parties were agreed before the Tribunal when the order of reference was made that all the facts in the statement of the case were correctly stated and that there was no omission of any material fact. It was urged before us by Mr. Kolah, learned counsel for the assessee, that there was in fact nothing on the record of the case or in the order of the Tribunal to show that the cheques were sent by post to the assessee at Indore and we should, therefore, ignore that fact. It is true that there is nothing said in the order of the Tribunal about the posting of the cheques but I do not think we can accede to this submission. I have already included this fact in the synopsis above.

26. On these facts the Tribunal set aside the order passed by the Income-tax authorities and allowed the assessee's appeal and the Commissioner of Income-tax has come to this court on this reference. It is clear from the order of the Tribunal and the statement of the case that it was at no stage the contention of the Revenue that there was any request express or implied by the assessee to send the cheque by post so as to constitute the post office the agent of the assessee. It is also clear from that order and the statement of the case that one feature of the matter to which the Tribunal has expressly drawn attention was the fact that the assessee in the present case had expressly requested the Supply Department of the Government of India to 'pay by cheque to self on Bank/Treasury at Indore'. Of this more hereafter.

27. It has been argued before us by learned counsel for the Revenue that there are facts on the record of this case on which it must be held that the income, profits and gains in respect of the sales made to the Government of India were received by the assessee in British India within the meaning of section 4(I)(a). It is said that the effect of clause 9 relating to payment, which I have set out above and the request to pay by cheque contained in the bills in the words 'Please pay l; by cheque to self on Bank/Treasury at Indore' coupled with the fact that cheques were sent by post to the assessee at Indore are sufficient to amount to an express request and in any case by necessary implication to amount to and establish an implied request by the assessee to send the cheques by post from Delhi thus constituting the post office the agent of the assessee for the purpose of receiving those payments. It was said that the facts of this case are substantially similar to those in the case of Commissioner of Income-tax v. Ogale Glass Works Ltd., decided by the Supreme Court and reliance has been placed on the view there expressed by the Lordships. The greatest reliance is, however, placed on behalf of the Revenue on another decision of the Supreme Court Shri Jagdish Mills Ltd. v. Commissioner of Income-tax (2) which was delivered on May 12, 1959. It is necessary, therefore, to refer at the outset to the facts and the decision in the case of Ogale Glass Works Ltd., in some detail. In that case, the assessee, a non-resident company carrying on business of manufacturing certain articles in the State of Aundh secured some contracts for the supply of the; articles to l; the Government of India. The contract provided that '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 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'. The assessee submitted the bill in the prescribed form and wrote on it as follows : 'Kindly remit the amount by a cheque in our favour on any bank in Bombay'. The assessee received cheques drawn on the Bombay branch of the Reserve Bank of India along with a memo containing an acknowledgment form which was thus expressed : 'The undersigned has the honour to acknowledge cheque No.... dated..... for Rs.... in payment of the bills noted in the first column in the reverse'. The assessee endorsed the cheques in favour of the Aundh Bank, Ogalewadi branch, which in its endorsed them in favour of a Bombay bank. The Bombay bank cleared the cheques through the clearing house in Bombay. The Aundh bank credited the assessee's account on the very day the cheques were received from the assessee with the amount of the cheques less the collection charges, and the assessee credited the account of the Supply Department and made corresponding debits to the bank's account and bank charges account. The assessee, it may be observed, sent its formal stamped receipts to the Government of India only after the receipt of the cheques and not along with the bills submitted by it. The Department contended that the assessee received income, profits or gains in British India within the meaning of section 4(1)(a) of the Indian Income-tax Act, 1922, on the ground that the encashment of the cheques in Bombay amounted to receipt of income in British India. An alternative contention was also raised before the High Court and the Supreme Court that the posting of the cheques at Delhi operated as a payment in British India. The primary contention of the Revenue both before the High Court and the Supreme Court was that no payment could be said to have been received by the assessee by the mere receipt of the cheques at Aundh and that payment was received only when the cheques were cashed in Bombay British Indian income-tax under section 4(1)(a). That line of argument was repelled by the High Court and their Lordships of the Supreme Court found themselves substantially in agreement with the High Court.

28. The alternative contention of the Revenue in that case was that in any event it should have been held by the High Court that in the facts and circumstances of the case the assessee had constituted the post office its agent to receive payment by cheque at New Delhi. It was urged in support of that contention that in the circumstances of the case the mere posting of the cheques at New Delhi at the request of the assessee led to the conclusion that payment was made in New Delhi. The argument it clearly appears was principlally founded on the facts : (1) that the assessee had while submitting the bills in the prescribed form stated to 'Kindly remit the amount by a cheque in our favour on any bank in Bombay'; (2) the assessee had sent it formal stamped receipts to the Government of India only after the receipt of the cheques and not along with the bills submitted by it; (3) the cheques were received by the assessee at its office in Aundh State by post. The rejoinder of the assessee to this alternative contention was two-fold. In the first it was said that it was entirely a new question of law which was never raised or argued before the Tribunal and not dealt with by it and, therefore, could not be said to arise out of the Tribunal's order and consequently the court had no jurisdiction, while exercising its advisory jurisdiction under section 66, to permit such a new question being raised at the hearing of the appeal by the Supreme Court and a number of decisions were cited in support of that argument. It was noticed by their Lordships that there was a wide diversity of judicial opinion on the subject and they expressly refrained from deciding the larger question so raised by learned counsel for the assessee. But that question has very recently been decided by the Supreme Court in the; case of New Jehangir Vakil Mills Co. Ltd. v. Commissioner of Income-tax. The greatest reliance has been placed by Mr. Kolah, learned counsel for the assessee, on the law on the subject as now laid down by their Lordships on that case. It will be necessary for me to refer to that decision in the context of the point relating to the scope, meaning and import of the words 'any question of law arising our of' the Tribunal's order, which are to be found in section 66(1) of the Act. It will also be necessary for me to refer to certain observations of their Lordships in the case of Ogale Glass Works Ltd., made in the course of examination of the first submission on behalf of the assessee to which I have already made some reference. It will be convenient, however, to deal with this wider aspect of the matter after referring to the decision of the Supreme Court in Commissioner of Income-tax v. Ogale Glass Works Ltd., on the merits of that case. I have already given a synopsis of that case and also stated the facts on which the alternative contention of the Revenue was primarily founded and need not rehearse the same. After the discussion of the principle applicable to the question of remittance of a cheque by post at the request of a party their Lordships observed :

'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 in general to which, as party 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 findings they were in fact received by the assessee by post. Apart from the implication of an agreement 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 above, clearly amounted in effect to an express request by the assessee to send the cheques by post. The Government did act according to such request and posted the cheques in Delhi. It can scarcely be suggested with any semblance of reasonable by post in Aundh would in the normal course of business be posted in some place outside British India. This posting in Delhi, in law, amounted to payment in Delhi.'

29. To turn to the argument of learned counsel on behalf of the Revenue when it was urged that the facts of the case before us were substantially similar to those in the above mentioned case. It was said that the only point of difference was that instead of the words 'Kindly remit the amount by a cheque in our favour on any bank in Bombay' we have here the words 'Please pay by cheque to self on Bank/Treasury at Indore'. It seems unnecessary to linger longer on the facts of the two cases and it will suffice to note that a brief comparison of the facts clearly brings out certain salient points of difference. In the first place there is in the case before us no request to 'remit' the cheque to the assessee. Then the assessee had not sent its formal stamped receipts to the Government of India after the receipt of the cheques but already acknowledged receipts along with the bills submitted by it. And the crucial point of difference, be it noted, is that there was here an express request 'to pay by cheque to self on Bank/Treasury at Indore'. In view of all these it is extremely difficult for me to see how it can be said that in the case before us there was an express request by the assessee constituting the post office the agent of the assessee for the purpose of receiving payments. I must, therefore, hold that on merits, the present case is not ruled by that authority. It has been my endeavour to point out that it is clearly distinguishable on facts.

30. But it was urged on behalf of the Revenue that in any case the words of request 'Please pay by cheque to self on Bank/Treasury at Indore' were sufficient to amount by necessary implication to and establish an implied request by the assessee to send the cheque by post from New Delhi, thus constituting the post office the agent of the assessee for the purpose of receiving payments. Mr G. N. Joshi sought to rely in the main on this aspect of the; matter and leaned heavily in support of the same on the decision of the Supreme Court in Shri Jagdish Mills Ltd. v. Commissioner of Income-tax, delivered on May 12, 1959. In that case, the assessee, a textile mills company, carried on business and had its registered office at Baroda, outside the taxable territories. The assessee submitted tenders for the supply of textiles which were accepted by the Government of India and orders for the goods were thereafter placed with the assessee company. Those orders were accepted at Baroda and deliveries of the goods were effected f.o.r. Baroda. One of the conditions of the contracts was that unless otherwise agreed upon by the parties payment for delivery of the goods would be made on the 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 assessee, after effecting delivery of the goods submitted bills in the prescribed form, which contained the sentence that 'Government should pay; the amount due to the assessee by cheque'. this was the request relating to payment by cheque. But apart from this the assessee did not request or write to the Government in what way the payment by cheque was to be made by the Government to the assessee. After submission of the bills, the assessee 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 payments made by cheques were accepted by the assessee unconditionally and in full satisfaction of its claim for goods delivered to the Government. The contention of the Revenue was that payment was drawn on banks in British India. The matter was carried to the Tribunal and the Tribunal finally held by its order dated August 3, 1954, that even though the assessee did not write to the Government saying that cheques be sent by post, there was an implied request to the Government to send the cheques by post observing that when a person in Baroda writes to another in New Delhi to send the money due to him by cheques, there is an implied request to send the cheque by post. The Tribunal reached the conclusion that the amounts of the cheques were received by the assessee in the taxable territories and the assessee was liable to tax under section 4(1)(a) of the Act. The matter was carried directly to the Supreme Court on special leave to appeal against the order of the Tribunal being granted by that court. It is clear from the judgment of their Lordships of; the Supreme Court that the conclusion reached was that the cheques were posted by the Government of India at New Delhi at the implied request of the appellant and it was held that the cheques must be held to have been received by the appellant in New Delhi, the post office thus constituted the agent of the assessee for the purpose of receiving the same. It is also clear from that judgment that their Lordships reached that conclusion about implied request on the facts and circumstances of that case.

31. The contention of the Revenue has rested principally on this decision. It has been argued that there are on the record of the case before us sufficient facts from which must arise the necessary inference that the assessee constituted the post office its agent for the purpose of receiving payments and the cheques having been posted at New Delhi taxable territories. The argument ran that on a comparison of the facts of the case before us with the facts of the case of Shri Jagdish Mills Ltd., there should be all the greater reason for holding that there was an implied request of the nature urged on behalf of the Revenue. It has been argued on the other hand, by learned counsel for the assessee, that on facts the case before us should be distinguished from the case of Shri Jagdish Mills Ltd., and that no such implied request can be spelt out. The principle argument of Mr. Kolah was that this contention about an implied request to send the cheques by post so as to constitute the post office the agent of the assessee was entirely new and was now for the first time sought to be raised before us. It was said that the contention was not even mooted before the Tribunal and it was, therefore, not open to the Revenue to raise any such new contention at this stage of the hearing of the reference. I shall turn to examine that argument pressed before us on behalf of the assessee after I have dealt with the present contention of learned counsel for the Revenue founded on an implied request.

32. I find considerable difficulty in accepting this contention on behalf of the Revenue that in the circumstances of the case before us the words 'Please pay by cheque on Bank/Treasury at Indore' are comprehensive enough and sufficient to amount to an implied request by the assessee that the cheque be sent by post so as to constitute the post office the agent of the assessee for the purpose of receiving payment, there is here an express request to make the payment by a cheque on a bank or the treasury at Indore. It may be observed that the question here is not as to on what bank or treasury the cheque was in fact made out but the sole context is of what the request was and whether it was sufficient to amount to a request by implication to send the cheque by post from New Delhi, so as to constitute the post office the agent of the assessee for the purpose of receiving payment. It may also be observed that in the case of Ogale Glass Works Ltd., there was the express request to remit the amount by a cheque on any bank in Bombay, that is there was the clear expression that the assessee wanted a cheque drawn on a banker in the taxable territories. In the case of Jagdish Mills Ltd., there were no words whatever of request land their Lordships of the Supreme Court took care to point out that the assessee 'did not request or write to the Government, in what way the payment by cheque was to be made by the Government'. Now, there are in the case before us these express words requesting payment to be made by cheque on a bank or at the treasury at Indore. It seems to me humbly that they cannot be overlooked. Nor can their significance and importance be minimised in the present context of implications which may reasonably be fastened on that request. In my judgment it would require a good deal of wresting with these express words of request, showing that it was the unmistakable intention of the assessee to receive the payments by cheques at Indore, that is outside the taxable territories, to read in them by implication the further request to send the cheques by post so as to constitute the post office an agent of the assessee for the purpose of receiving payment. Expressum facit tacitum cessare. Where parties have entered into express stipulations or made express requests it is manifestly not desirable to extend them by implications. For all these reasons, it is not possible for me to accede to the contention of the Revenue that there was in this case an implied request of the nature so strongly pressed for our acceptance.

33. I now come to the crucial question whether it is open to the Revenue on this reference to raise this new contention about the post office being constituted the agent of the assessee, which contention it is indisputable was not raised nor mooted before the Income-tax authorities or the Tribunal. Nor was it even indicated in the application for reference under section 66(1) made by the Revenue. It has been urged, however, by Mr. G. N. Joshi that the facts on which he relies in support of this new contention. As I have already indicated, learned counsel for the assesses translate challenged this position taken up by the Revenue. The pivot of his argument was that it is not permissible to the Revenue to raise this new contention and not open to us to entertain the same and in support of this argument he relied strongly on the recent pronouncement of their Lordships of the Supreme Court on the subject in the case of New Jehangir Vakil Mills Co. Ltd. v. Commissioner of Income-tax, where inter alia the wider and vexed question relating to the scope and ambit of the authority of this court to entertain, on a reference made under section 66(1), any such new contention came up for consideration. The facts and history of that case may be briefly stated. The assessee, a company manufacturing textile goods at Bhavnagar outside the taxable territories and which was held to be a non-resident, sold textiles to the Supply Department of the Government of India. It was held by the Income-tax Officer that sale proceeds amounting to a very large sum were received by the assessee by cheques from the Supply Department of the Government of India on British Indian banks and were therefore taxable under section 4(1)(a) of the Act. The assessee had contented that the amounts had been received by it at Bhavnagar by cheques drawn on banks in British India. The Revenue did not dispute the fact that the cheques had been actually received at Bhavnagar but contended that payments by cheques, though such cheques were received at Bhavnagar, were received in British India at the time and the place where the cheques were ultimately cashed and honoured by the banks on which the cheques were drawn and that until such encashment of the cheques, the moneys could not be said to have been received by the assessee. The appellate Assistant Commissioner confirmed that order. There was an appeal to the Tribunal started in its order as follows :

'There is no evidence that the cheques from Government were received in Bhavnagar. It is not the Department's case that the assessee company has a registered office elsewhere. The presumption is that the letters containing the cheques were addressed to the assessee company at Bhavnagar. We therefore hold taut the cheques were received from Government at Bhavnagar and that the money was also received in Bhavnagar.'

34. I may observe that neither before the Income-tax authorities nor before the Tribunal was it contended by the Revenue that there was any request express or implied by the assessee in the matter of the cheques as would constitute the post office the agent of the assessee for the purpose receiving the payments. The only ground urged by the Revenue at all material stages was that because the amounts were received by cheques drawn on banks in British India and were ultimately encashed in British India, the moneys could not be said to have been received in Bhavnagar, though the cheques were in facts received at Bhavnagar. At the instance of the Commissioner of Income-tax, a reference was made by the Tribunal to the High Court. On of the two questions referred to the High Court and which was in wide terms was this :

'Whether in the circumstances of this case, the income, profits and gains in respect of the sales amounting to Rs. 15,67,967 made to the Government of India and other customers were received in British India within the meaning of section 4(1)(a) of the Indian Income-tax Act ?'

35. The two decisions of the Supreme Court in Commissioner of Income-tax v. Kirloskar Brothers and Commissioner of income-tax v. Ogale Glass Works Ltd., were given by the time the reference application was heard by the Tribunal and the Tribunal referred the matter to the High Court. In spite of these decisions, the Revenue did not even at the stage of the reference application urge before the Tribunal that aspect of the matter relating to the post office being constituted agent of the assessee to receive payment by cheques to be sent by post. This aspect of the matter has been stressed by Bhagwati, J., who delivered the judgment of the Supreme Court in the case of New Jehangir Vakil Mills Co. Ltd., under consideration. The reerence was heard by this High Court and in his judgment the learned Chief Justice (Chagla, C.J.) observed :

'The question that has been submitted to us by the Tribunal is whether the receipt of the cheque in Bhavnagar amounted to receipt of sale proceeds in Bhavnagar. This question overlooks the important aspect which was dealt with both by us in Kirloskar's case and also by the Supreme Court. Assuming the cheques were received in Bhavnagar, the question still remains as to whether if the cheques were received by post the post office was constituted the agent of the assessee or not. The mere receipt of cheques by post in Bhavnagar is not conclusive of the question raised by the Tribunal. Unless we are in a position to say that the cheques were sent to Bhavnagar by post without there being a request, express or implied, by the assessee the mere receipt of cheques in Bhavnagar would not constitute the receipt of sale proceeds in Bhavnagar. When we look at the statement of the case there is no reference at all to this aspect of the case.'

37. In the result, this High Court directed that a supplementary statement of the case should be submitted by the Tribunal on the following points :

'On the finding of the Tribunal that all the cheques were received in Bhavnagar, the Tribunal to find what portion of these cheques were received by post,... whether there was any request by the assessee, express of implied, that the amounts which are the subject matter of these cheques should be remitted to Bhavnagar by post. Mr. Joshi concedes that to the cheques were not received by post but by hand, the receipt will be for the purposes of tax at Bhavnagar.'

38. The matter was carried by the assessee mills company to the Supreme Court. After setting out the provisions of sub-section (1), (2) and (4) of section 66, Bhagwati, J., observed :

'It is clear on a plain reading of the terms of section 66(1) that the only question of law which the assessee or the Commissioner can require the Tribunal to refer to the High Court is 'any question of law arising out of the order of the Tribunal' so that if the question of law which the assessee or the Commissioner requires the Tribunal to so refer to the High Court does not arise out of its order the Tribunal is not bound to refer the same. What has, therefore, to be looked at in the first instance is whether the question of law thus required to be referred arises out of the order of the Tribunal. The Tribunal no doubt has got before it the facts which are admitted and/or found by the Tribunal and which are necessary for drawing up a statement of the case and it is the facts admitted and/or found by it that would form the basis on which the statement of case would be drawn and references of the question of law made by the Tribunal to the High Court. If such facts were not there whether in the order of the Tribunal or in the record before it there would certainly not be any foundation for the raising of any question of law either in the abstract or otherwise and it is only a question of law which would arise out of such facts which are admitted and/or found by the Tribunal that would be the substratum of the reference to the High Court. The facts admitted and/or found by the Tribunal would really be the foundation or the basis on which such questions of law could be raised and neither party would be entitled to require the Tribunal to refer to the High Court any question of law which could not thus arise out of the order of the Tribunal.'

39. Referring to section 66(4), his Lordship observed :

'Even though the terms of section 66(4) are wide enough to comprise 'such additions thereto or alterations therein as the court may direct in that behalf' the scope of such directions has got to be read in the context of and in conjunction with the provisions of section 66(1) and section 66(2) and under the guise of that direction the High Court cannot refer the case back to the Tribunal to find new facts or embark upon a new line of enquiry which would enable either the assessee or the Commissioner to make out a case which had never been made during the course of the proceedings before the Income-tax authorities or the Tribunal so far.'

40. Referring to the decisions of the Supreme Court in Commissioner of Income-tax v. Kirloskar Brothers and Commissioner of Income-tax v. Ogale Glass Works Ltd., his Lordship observed :

'It is worthy of note that the decision of this court in the said two cases proceeded on the basis that on the particular facts of those appeals the post office had acted as the agent of the assessee and that though the cheques were in fact received by post by the assessee outside British India, nevertheless, by reason of the fact that the assessee in the said two appeals had expressly requested the Government to remit the amounts by cheques, the assessee had constituted the post office their agent to received, on their respective behalves, the said cheques which were posted by the Government at Delhi having addressed them to the assessee outside British India.

41. In spite of the said decisions, the Revenue did not urge before the Tribunal that the said aspect of the matter should in the present case also be referred to the High Court for its decision and the reference applications were heard on the materials which were on record before the Tribunal when it made its orders dated July 17, 1952. The said order of the Tribunal was based on the facts admitted and/or found by the Tribunal as stated in the reference applications made by the Revenue as aforesaid and this aspect of the case, viz., whether any portion of these cheques were receive by; post and if so whether there was any request by the appellant express or implied that the amounts of those cheques should be remitted to Bhavnagar by post, had certainly not been canvassed before any of the Income-tax authorities or before the Tribunal... and any question of law appertaining thereto could not be said to arise out of the said order of the Tribunal.'

42. The pivotal argument of learned counsel for the assessee before us, as I have already mentioned, has been that it is not permissible to the Revenue to raise what is indisputable a new contention and not open to us to entertain the same. In support of that argument, he has relied on observations of their Lordships some of which I have set out above. Learned counsel also argued that the question sought to be raised is a mixed question of fact and law and at no time either before the Tribunal or the Income-tax authorities he had any opportunity of bringing on record other facts that might have been relevant on this question of implied request and urged that we should at lease ask for a supplemental statement. There is in my opinion considerable force in this contention. But it is clear from the above judgment of the supreme Court that it is not competent to this court to raise any question and ask for facts about the posting of cheques in British India at the request express or implied of the appellant as was done by this court in that very case and which, it was held by the Supreme Court, this court had no jurisdiction to do. Therefore, there is no scope here of raising any such question or directing the Tribunal to submit a supplementary statement of case with regard to such question. Referring to the question of posting of the cheques in British India at the request express or implied of the assessee, the Supreme Court in that decision expressly observed that if it were allowed to be entertained, it would have to be recast under :

'Whether the posting of the cheques in British India at the request, express or implied, of the appellant, amounted to receipt of sale proceeds in British India ?'

43. and added that if that were done it would be a question quite distinct and separate from the question of law which was actually referred by the Tribunal to the High Court in the statement of case drawn on November 5, 1955.

44. I have already pointed out that one of the two questions referred to the High Court in that case was in very wide terms. There is, in my judgment, considerable force in the argument of learned counsel for the assessee that if we were to entertain the contention about the posting of the cheques in British India at the implied request of the assessee amounting to receipt of sale proceeds in the taxable territories, we would have to recast the question in the form indicated by their Lordships of the Supreme Court as quoted by me above. And if we were to do so, we would, indubitably, be permitting a new contention and a new mixed question of fact and law being raised on this reference. The mere fact that in the statement of the case it is mentioned that cheques were posted at New Delhi cannot alter the position since at no stage was the attention of the assessee drawn to this new contention of the Revenue and which was not even mooted before the Income-tax authorities or the Tribunal.

45. Now, let me see what the Revenue has to say on this crucial question and this decision of the Supreme Court. Little could be said by learned counsel for the Revenue about the legal position as to the scope and ambit of the authority of this court to entertain any new contention raising a mixed question of fact and law as emerges from this latest pronouncement of the Supreme Court. All that was said in the course of the arguments at the Bar was that a similar new contention was allowed to be raised by the High Court for the first time at the hearing of the reference in the case of Ogale Glass Works Ltd., and the Supreme Court also entertained that new contention and did not shut it out on the ground that it was mooted for the first time at the late stage of the hearing of the reference by the High Court. Reliance was placed on the following observations of Das, J. (now my Lord the Chief Justice of India) :

'Here no new question of law is sought to be raised. The question of law still is, whether on the facts of this case, income, profits and gains in respect of sales made to the Government of India was received in British India within the meaning of section 4(1)(a) of the Act. The argument is that as the cheques were posted at Delhi at the request of the assessee payment was received by it in British India. It is said that although the language in which the question has been framed is wide enough to include this branch of the argument, 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 argument actually advanced before the Tribunal and on which the Tribunal's decision was founded, leaving out all other facts appearing on the record and even referred to in the Tribunal's order and the statements of the case. There is no warrant for such suggestion. The language of the question clearly indicates that the question of law has to be determined 'on the facts of this case'. To accede to the contention of the assessee will involve the undue cutting down of the scope of the question by altering its language.'

46. Some support can be derived from the above observations for the proposition that having regard to the facts and circumstances of a case it may be possible to entertain such a contention of the nature of an express request at the stage of the hearing of the reference although it was not raised before the Income-tax authorities or the Tribunal since it would only require construction by the court of an express request and there would be no question of any implied request being spelt out. Therefore, there are, in my judgment, cogent reasons why the Revenue cannot succeed by simply resting its case on these observations. Before making those observations their Lordships had taken care to say in terms that in that case they were not expressing any opinion on the larger question which they have now considered in the case' of New Jehangir Vakil Mills Co. Ltd. Then again at the end of those observations they added the significant remark, 'Seeing that the High Court permitted this argument to be advanced before them we are not prepared to shut it out.' But it was said that there is nothing in the recent judgment of the supreme Court which would show that the view expressed in the case of Ogale Glass Works Ltd., and quoted above was modified or altered. The answer to this seems humbly to me, firstly, that the case of Ogale Glass Works Ltd., was decided by the Supreme Court on its particular facts, one of them being that there was, on construction of the word 'remit', held to be an express request : secondly, that the High Court had permitted the contention to be raised and their Lordships did not deem it necessary to shut it out; and lastly that their Lordships expressly refrained from giving any opinion on the larger question which they ultimately decided in the case of New Jehangir Vakil Mills Co. Ltd. The decision in the case of Ogale Glass Works Co. Ltd., is, in my opinion, therefore, clearly distinguishable both on merits, as I have already; pointed out in the earlier part of my judgment, and also on this wider question which embraces the connotation of the words 'question of law arising out of such order' in section 66(1). Reverting to the case of New Jehangir Vakil Mills Co. Ltd., it seems to me of greater cogency to note that the question of 'implied request' considered in it by the Supreme Court in the context of the scope; and ambit of section 66(1) and of the meaning and import of the words 'question of law arising out of such order' in that sub-section is the identical question with which we are concerned on this reference. It is also of some cogency to note that in the case of Shri Jagdish Mills Ltd., decided by the Supreme Court in which the question of what may amount to 'implied request' was examined and to which I have already made reference and on which learned counsel for the Revenue very strongly relied, the new contention was not being raised for the first time at the stage of the hearing of the reference but had already been specifically raised before the Tribunal and decided by it against the assessee who thereafter carried the matter to the Supreme Court. That judgment, I may incidentally add, was delivered on the May 12, 1959, that is on the same day on which the judgment in the case of New Jehangir Vakil Mills Co. Ltd., was delivered.

47. The controversy before us does not turn to the construction to be put on the expression 'remit' which in the context of a cheque was held by the Supreme Court to mean an express request to send the cheque by post. There can be no question of investigation into any fact or any grievance on that score when the primary question is one of construing any such word of request. Such was the position in the case of Ogale Glass Works Ltd. But the plea of an implied request to send the cheque by post from New Delhi so as to constitute the post office an agent of the assessee for the purpose of receiving payment in the taxable territories would indubitably raise a mixed question of law and fact which must involve investigation into various facts and circumstances. It is not possible to anticipate what those facts and circumstances would be in a particular case. They are bound to vary from the nature of each case and the course of dealing and conduct of the parties. It cannot be said in any such case that the plea does not depend for its validity upon facts and circumstances. If these are not investigated because the plea was not raised at any stage not even before the Tribunal - it is not competent to this court to treat the plea as implicit in or covered by the question simply because the question is couched in words of amplitude. The new plea in any such case would raise a new contention; involving a new question of law which can only properly be brought out by reforming the question referred to the High Court. It would not be a matter of merely advancing a new argument on a question of law arising out of the order of the Tribunal.

48. For all these reasons, I have reached the conclusion that it is not open to the Revenue to raise before us or for us to entertain this new contention about an implied request of the assessee whereby the post office was constituted an agent of the assessee to receive from the Government of India payments by cheques in the taxable territory. The point, in my judgment, is covered by the decision of the Supreme Court in the case of New Jehangir Vakil Mills Co. Ltd. I may in passing observe that while examining the scope and ambit of section 66(4) their Lordships in that case referred to a number of decisions one of which was a reference decided by the High Court of Calcutta in Commissioner of Income-tax v. State Bank of India. It was observed by their Lordships of the Supreme Court that the view taken by them about the scope, nature and extent of the jurisdiction of the High Court under section 66(4) which was not larger than that under section 66(1)-was amply borne out by authorities and their Lordships inter alia quoted the following observations from the judgment of the learned Chief Justice of the Calcutta High Court :

'We intimated to Mr. Meyer as soon as he formulated his points that he could not be allowed to take the first of them, since it did not appear to have been taken on behalf of the Department at any stage of the proceedings and certainly not before the Tribunal. It could not, therefore, be said to arise out of the Tribunal's order. The practice followed in this court in references under section 66(1) of the Act has always been to limit the party, at whose instance a reference has been made, to the points raised and canvassed before the Tribunal. Questions are often framed in a general form, such as whether the assessment for a particular year made in a certain manner was valid in view of the provisions of a certain section of the Act. A question framed in that form might be said to comprise all possible contentions to which the terms of the relevant section might give rise, but this court has always refused to treat matters arising out of questions so framed as entirely at large. It has adopted and acted on that view for the reason that this court is only an advisory body and the advice which it can be properly asked to give is only advice on matters which had been in contention before the Tribunal and which had been decided in one way or another, such advice being sought in order that the parties interested might know whether the decision on those contentions had been in accordance with law. In hearing a reference under section 66(1), this court does not sit in appeal from the assessment and it is not called upon to give its advice on matters which the Tribunal was not asked to decide and which the Tribunal neither decided, nor included in the statement of case for the opinion of this court.' I have already stated the conclusion reached by me and have only referred in passing to these observations made in the context of section 66(1) which according to their Lordships of the Supreme Court amply bear out the view taken by them in the case of New Jehangir Vakil Mills Co. Ltd. This was while examining the scope and ambit of sub-sections (4), (1) and (2) of section 66. It is obvious that these observations in the decision of the Calcutta High Court lend great support to the main contention of the assessee. But I rest my judgment on this aspect of the case, as indeed I am bound to do, on the view expressed by the Supreme Court in the case of New Jehangir Vakil Mills Co. Ltd.

49. I would answer the question in the negative.

50. In view of the differences of opinion. The papers will be submitted to the learned Chief Justice for orders under section 66A of the Income-tax Act read with section 98 of the Civil Procedure Code.

K.T. Desai, J.

51. A difference of opinion having arisen between Mr. Justice J. C. Shah and Mr. Justice S. T. Desai as regards the answer to the question raised in this reference, the matter has now come before me under the provisions contained in the proviso to section 66A(1) of the Indian Income-tax Act, 1922.

52. The reference has been made under section 66(1) of the Indian Income-tax Act, 1922, at the instance of the Commissioner of Income-tax (Central), Bombay. The assessee is the Indore Malwa United Mills Ltd., Bombay. The assessment years under consideration are 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, the company has its offices at Bombay and Indore. The company has been assessed as a person not resident in the taxable territories. The company carried on the business of manufacturing textile goods at Indore, then an Indian Native State. During the relevant accounting years, the company supplied goods to the Indian Stores Department, Government of India. The purchase orders were placed by the Department with the company at Indore. All the purchase orders were accepted at Indore being signed by the general manager of the company at Indore and thereafter sent to the Supply Department in British India. The delivery of the goods was to be f.o.r. Indore. Information was to be given to the inspecting officer of the Government as and when the goods were ready for inspection. On receipt of such information the inspecting officer was to inspect the goods at the mills at Indore, for that purpose a special inspecting officer issued inspection certificates under his signature at Indore. The goods were then sent by railway from Indore station, the railway receipts being made out in the name of the representative of the Government to whom the goods were directed to be dispatched. Thereafter bills were made out in the form prescribed by the Government and sent to the Controller of Supplies, New Delhi. The bills contained a receipt for payment made out in advance duly signed on behalf of the assessee. On receipt of the bills, the Government drew cheques in favour of the assessee on the Reserve Bank of India, Bombay, and these cheques were sent by post to the assessee at Indore. On receipt of the cheques, an office voucher was prepared in duplicate, one being sent to the cashier with instructions to credit the amount of the cheque to the account of the Controller of Supplies. New Delhi. Cheques received from the Government were deposited in the account of the assessee company at the Imperial Bank of India, Indore, and the bank on receipt of the cheques credited the account of the company in their books at Indore.

53. It is admitted by counsel for the applicant as well as counsel for the respondent that one of the terms on which all the goods were supplied was term No. 9, which ran as follows :

'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 in 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.'

54. There was no other agreement arrived at between the parties as regards payment. The prescribed form in which the bills were agreed to be submitted by the assessee contained inter alia the following clause :

-------------------------------------------------------------------Received payment One Anna Please pay by chequeBFCB Receipt self Bankstamp on to--------on ---------original Bank TreasuryContractor's copy at...........signature. only.Contractor's signature.'-------------------------------------------------------------------

55. Amongst the instructions given in the acceptance of tender were instructions Nos. 13 and 14, in regard to payment which ran as follows :

'13. If payment is desired to be made to the contractor's bankers or other parties, 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 contractor by the accounts officer named in the Acceptance of Tender by means of crossed cheques only, unless a specific request is made to the contrary for the issue of an open cheque on the bill.'

56. Under the terms of the agreement arrived at between the parties the assessee was under an obligation to submit bills containing a request by the assessee to the Government to pay moneys by cheque. It was a further term of this agreement that the cheques were to be drawn 'on a Government Treasury in British India or on a branch in British Indian of the Reserve Bank of India or the Imperial Bank of India transacting Governmental business. 'Under instruction No. 13 an option was given to the assessee to require payment to be made to the assessee's bankers or other parties on compliance with the provisions therein contained. Under instruction No. 14 an option was given to the assessee to require payment to be made by open cheques instead of crossed cheques by making a specific request for that purpose on the bill. In the absence of such request payment was to be made by means of crossed cheques only. There being no other agreement arrived at between the parties, the plaintiff was not entitled to demand payment by cheque drawn otherwise than '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 Governmental business'. In each of the bills submitted by the assessee the assessee has retained the words appearing therein in print, viz., 'please pay by cheque to self on...' The assessee has struck out the word 'bank' appearing thereafter and has added after the word 'bank' the words 'at Indore.' In the result, the assessee has made a request in terms following :

'Please pay by cheque to self on Bank at Indore.'

57. It has been urged on behalf of the Revenue that the request made by the assessee in the bill about the cheque being drawn on a bank at Indore is contrary to the express terms of the agreement arrived at between the parties. Mr. Kolah, the learned counsel for the respondent, urged that the request which the assessee had made was one which he was entitled to make under clause 9 of the agreement between the parties. According to him, under clause 9 of the Government was under an obligation to pay by cheque drawn (i) on a Government Treasury in British India or (ii) on a branch in British India of the Reserve bank of India or (iii) on the Imperial Bank of India transacting Governmental business. He urges that as the assessee had requested payment to be made by cheque on a bank at Indore and as there was a branch of the Imperial Bank of India at Indore, his instruction fell within the ambit of clause 9. In my view, Mr. Kolah's argument is not borne out by the language used in clause 9 of the agreement between the parties. The words therein used, on a true construction, mean that the Government was under an obligation to give cheques (i) on a Government Treasury in British India or (ii) on a branch in British India of the Reserve Bank of India or (iii) on a branch in British India of the Imperial Bank of India transacting Governmental business. If it was intended that the Government was under an obligation, if required, to issue cheques on the Imperial Bank of India transacting Governmental business, the word 'on' would also have been inserted after the word 'or' and before the words 'the Imperial Bank of India transacting Governmental business'. If Mr. Kolah's contention was accepted, it would lead to this invidious result that so far as the Reserve Bank of India was concerned, the cheques would be required to be drawn only on any of its branches in British India whilst so far as the Imperial Bank was concerned, there was no such limitation and that the cheques could be required to be drawn on the Imperial Bank of India transacting Governmental business irrespective of its location. In my view, the words 'on a branch in British India of' are applicable both to the Reserve Bank of India and the Imperial Bank of India. In my view, the request that was made by the assessee for the cheque being drawn on a bank at Indore, which was outside British India, was a request which was not made in due compliance with the terms of the agreement between the parties.

58. In view of what is stated above, it is not necessary to consider the further question whether at the relevant time the Imperial Bank of India had a branch at Indore transacting Governmental business.

59. When the matter came up before the Tribunal, the Bombay High Court had given its decision in the case of Kirloskar Brothers Ltd. v. Commissioner of Income-tax. In that case the assessee was a non-resident company carrying on business of manufacturing machinery in the State of Aundh. The assessee had entered into a contract with the Government of India for the supply of some articles manufactured by it. Under the contract, payment for the delivery of articles was to 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 Governmental business. 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'. When the cheque drawn on a bank in Bombay 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.'

60. The question was whether the income was received by the assessee in British India where the cheque was cashed or in the State of Aundh where the cheque was received. It was held by the Bombay High Court that as the assessee accepted the cheque itself as an unconditional discharge of the Government's liability, the income was received by the assessee in the State of Aundh and not in British India. It was further held that even assuming that the cheque was posted in Delhi, the posting of the cheque in Delhi did not constitute the receipt by the assessee of the cheque in Delhi inasmuch as the assessee had not requested the Government to send the cheque by post. Following that decision, the Income-tax Tribunal in the present case held that the receipt of the cheques by the assessee at Indore was not subject to any condition and that the amounts of the cheques, being the sale proceeds of the goods, were received at Indore and were not assessable to tax. The Commissioner of Income-tax applied to the Tribunal to make a reference to the High Court of the question of law which arose out of the order of the Tribunal under section 66(1) of the Income-tax Act. As an appeal had been filed before the Supreme Court from the decision of the Bombay High Court in the case of Kirloskar Brothers Ltd., the application for reference was stayed pending the decision of the Supreme Court in that case. Thereafter the decision of the Bombay High Court in the case of Kirloskar Brothers Ltd., was reversed on appeal by the Supreme Court. The Supreme Court in that case on appeal held that on the facts and circumstances of that case as the cheques were posted at Delhi, on a request being made by the assessee in that case to remit the amount to the assessee by cheque, the payment was received by the assessee at Delhi in British India, the post officer being constituted the agent of the assessee and the assessee was liable to pay tax thereon. After the decision of the Supreme Court was given, the matter came up before the Tribunal for the purpose of making a reference in the present case. In the course of the statement of the case submitted by the Tribunal, the Tribunal in terms state as follows :

'The decision in Kirloskar Bros. has been reversed, on appeal, by their Lordships of the Supreme Court and it has been held that the delivery of the cheques amounts to payment of the sale price whether the cheques were received unconditionally or were subject to a condition subsequent. Their Lordships of the Supreme Court, however, held that section 4(1)(a) applied inasmuch as the assessee in that case requested the Government to 'remit the amount by a cheque in our favour on any bank in Bombay'. In the present case, in the prescribed form the words used are : 'Please pay by cheque to...........on Bank/Treasury at........' While forwarding the bills to the Government, the assessee has filled in the words 'self' and 'Indore' in the blank spaces. The question is as to whether these words amount to a request to send the sale proceeds by means of a cheque by post and the post office is the agent of the assessee. It is pointed out by the assessee that the request in the present case is to pay the amounts of the bill by cheque drawn on a bank at Indore and, therefore, the question of paying the amount in British India does not at all arise. The question is as to the construction and as to the meaning that has to be given to this expression.'

61. The Tribunal thereafter proceeds to state that the point with regard to the post office being the agent of the sender or the receiver was not argued by either side. On these facts and circumstances of the case, the Tribunal has referred to the High Court for its decision the question of law following :

'Whether the assessee company is liable to pay tax in the taxable territories on the ground that the sale proceeds which included the profit element therein were received in the taxable territories ?'

62. It is stated in the statement of the case that the parties agreed that all facts had been correctly stated and that there was no omission of any material fact.

63. When this reference came up for hearing on February 24, 1956, the same was adjourned sine die on the application of counsel for the respondent, on the ground that there was an appeal pending before the Supreme Court in the case of Shri Jagdish Mills Ltd., involving a point similar to the point raised in the present reference.

64. For the purpose of answering the question that has been raised in this reference, the point to be determined is whether the moneys which had been sent by post by means of cheques could be said to be received by the assessee at New Delhi in British India where the cheques were posted or whether they should be considered to have been received at Indore, outside the taxable territories, where the cheques ultimately came to the hands of the assessee. For this purpose, it is necessary to determine whether the post office was constituted the agent of the assessee for the purpose of receiving the cheques. If the post office was the agent of the assessee for the purpose of receiving the cheques, the assessee would be deemed to have received the cheques in New Delhi, i.e., British India, where the cheques were posted. If the post officer was not the agent of the assessee for the purpose of receiving the cheques, but was the agent of the sender, viz., the Government, then payment would be deemed to be made at the place where the cheques were received by the assessee, viz., Indore, which at all material times was outside the taxable territories.

65. The law on the subject a to when the post office is constituted the agent of the party to whom the cheque is posted has been laid down in England as far back as the year 1886. The Court of Appeal consisting of Lord Esher, Master of the Rolls, and Lindley and Lopes, L.JJ., in the case of Norman v. Ricketts, has very succinctly dealt with the law on the subject. In that case Madam Philippe, one of the plaintiffs, carried on business as a milliner in Bond Street. One of her customers was the defendant Mrs. Ricketts. Between March, 1884, and March, 1885, goods were supplied by Madam Philippe to Mrs. Ricketts to the amount of pounds 142. Mrs. Ricketts lived in Suffolk. At the end of March, 1885, Madam Philippe wrote to her in Suffolk saying, 'the favour of a cheque within a week will oblige'. Mrs. Ricketts accordingly, on April 6, sent Madam Philippe a cheque for the amount by post. The cheque was an open cheque payable to then order of Madam Philippe. The cheque was stolen in transit, and Madam Philippe never received it, but it was paid by Mrs. Ricketts' bankers to the thief. Madam Philippe then commenced action to recover the amount. The court of first instance held that the sending of the cheque was payment and gave judgment for the defendant. The plaintiffs appealed therefrom. The appeal court dismissed the appeal. Lord Esher, the Master of the Rolls, in the course of his judgment observes as under :

'... if a debtor has to pay his creditor money, as a general rule the debtor must come and pay his creditor. But if the creditor asked him to pay in a particular way, the debtor might do so. If asked to pay through the post, the putting of the letter in the post with the money was sufficient. The only question here was whether the plaintiffs asked the defendant in effect to send the money through the post. An express request to send through the post was not necessary. If what the plaintiffs said amounted to a request to send the cheque by post, then there was payment. To answer that question the existing circumstances must be looked at. A milliner in London wrote to a lady in Suffolk asking for a cheque. Did that letter reasonable lead the lady to suppose, and did she suppose that she; might send the cheque by post She could not suppose that she was to send a messenger with it or come up to London herself. The only reasonable and proper meaning to be attached to it, whatever Madam Philippe might have intended, was that she was to send the cheque by post. She, therefore, reasonable believed that she was asked to do. Consequently what she did amounted to payment.'

66. The observations of the Master of the Rolls have been quoted with approval by the Supreme Court in the case of Commissioner of Income-tax v. Ogale Glass Works Ltd., and in the case of Shri Jagdish Mills Ltd. v. Commissioner of Income-tax decided on May 12, 1959, in Civil Appeals Nos. 681 and 682 of 1957. In the case before me, the assessee was under an obligation to submit bills containing a request for payment by cheque and containing stamped recites duly signed by the assessee in advance for payment that was to be made. In fact, bills containing such request and containing such stamped receipts duly signed on behalf of the assessee were sent to the Controller of Supplies, New Delhi. The amount of the bills was sent by means of cheques which were posted at New Delhi. The question is whether having regard to the terms of the agreement entered into between the parties and/or the; request made by the assessee as set out in the bills submitted by the assessee, it could be said that the post office was constituted the agent of the assessee for the purpose of receiving the cheques. In dealing with this matter, I may aptly use the words which were use by the Supreme Court in the case of Shri Jagdish Mills Ltd. :

'The stipulation in the contract between the appellant (the assessee) and the Government was that the payment would be made by cheques. The Government of India was located in Delhi and the cheques would be necessarily drawn by it from Delhi. Could it be imagined that in the normal course of affairs the cheques thus drawn in Delhi would be sent by a messenger to Baroda (in this case, to Indore) so that they may be delivered to the appellant in Baroda (in this case, to the assessee at Indore) Or that the officer concerned would come to Baroda (in this case, to Indore) himself and hand the same over to the appellant in Baroda (in this case, to the assessee at Indore). The only reasonable and proper way of dealing with the situation was that the payment would be made by cheques which the Government would send 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 articles. If that were so, there was imported by necessary impication 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 payments.'

67. The words 'please pay be cheque to self' used by the assessee in the circumstances of the present case import a request to send payment by cheque and where the request is made by on party at Indore and is communicated to the other party at New Delhi, it would amount to a request to the other party to send the moneys by cheque through the post and would constitute the post office the agent of the party making the request for the purpose of receiving the cheques posted by the other party, and the cheques would be deemed to the received by the party making the request at the place where the cheques were posted, in the present case British India. This conclusion is further supported by the fact that along with such request even a duly signed receipt is forwarded in advance to the party which has to make the payment. Even if the contention of Mr. Kolah was right that the request which the assessee had in fact made to 'pay by cheque to self on Bank at Indore' was a request which fell within the ambit of clause 9, the position would not be different. It would merely alter the place of encashment of the cheques and would not alter the place of the receipt of the cheque which is the material on the facts of the present case. Where payment, as in the present case, is agreed to be made by cheque or where a request, as on the present case, is made for payment by cheque, the material place is the place of the receipt of the cheque for the purpose of section 4(1)(a) of the Indian Income-tax Act, 1922, and not the place of encashment of the cheque.

68. There are two decisions of the Supreme Court which have been strongly relied upon by the learned counsel for the applicant, one, the decision in Commissioner of Income-tax v. Ogale Glass Works Ltd., which I shall hereafter refer to as 'Ogale's case' and the other, the decision given on May 12, 1959, in Civil Appeals Nos. 681 and 682 of 1957 in the case of Shri Jagdish Mills Ltd. v. Commissioner of Income-tax, which I shall hereafter refer to as ''Shri Jagdish Mills' case' These two cases were cases which had arisen under somewhat similar circumstances. It is strongly urged by Mr. Joshi, the learned counsel for the applicant, that these two cases do not leave the matter, which is before me, at large and are conclusive in connection with the question that is now before me. Mr. Kolah, on the other hand, has sought to distinguish these two cases and has urged that these two cases were cases decided on their special facts and are not applicable to the facts and circumstances of the present case. The facts in Ogale's case were similar to the facts in the case of Kirloskar Brothers Ltd. v. Commissioner of Income-tax, which I have referred to earlier. The question that was referred to in Ogale's case was as under :

'Whether on the facts of the case, income, profits and gains in respect of sales made to the Government of India was received in British India within the meaning of section 4(1)(a) of the Act.'

69. The assessee had submitted the bill in the prescribed form and had written on the bill the words following :

'Kindly remit the amount by a cheque in our favour on any bank in Bombay.'

70. At page 545 of that report, Mr. Justice S. R. Das, as he then was, who delivered the judgment of the Supreme Court, observes as follows :

'There can be no doubt that as between the sender and the addressee it is the request of the addressee that the cheque be sent by post that makes the post office the agent of the addressee... 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. Apart from this principle of agency there is another principle which makes the delivery of the cheque to the post office at the request of the addressee a delivery to him and that is that by positing the cheque in pursuance of the request of the creditor the debtor performs his obligation in the manner prescribed and sanctioned by the creditor and thereby discharges the contract by such performance (see sanction 50 of the Indian Contract Act and illustration (d) - thereto).'

71. Towards the end of the judgment the learned judge observes as follows :

'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 in general 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 findings they were in fact received by the assessee by post.'

72. These observations equally applied to the facts of the case before me. The learned judge thereafter refers to another line of reasoning and observes as follows :

'Apart from the implication of an agreement 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 above, clearly amounted in effect to an express request by the assessee to send the cheques by post. The Government did act according to such request and posted the cheques in Delhi. It can scarcely be suggested with any semblance of reasonable plausibility that cheques drawn in Delhi and actually received by post in Aundh would in the normal course of business be posted in some place outside British India. This posting in Delhi, in law, amounted to payment in Delhi.'

73. This decision has been sought to be distinguished by Mr. Kolah, the learned counsel for the assessee, on three different grounds. It issued that in the first place there is, in the case before me, no request by the assessee to 'remit the amount by a cheque' in favour of the assessee. It is secondly urged that in Ogale's case (1) the assessee had not sent his formal stamped receipts to the Government of India in advance as in the present case, but had sent the same after the receipt of the cheques. It is lastly urged that in the case before me there is an express request to 'pay by cheque to self on blank at Indore'. In the case before me the words 'Kindly remit the amount by a cheque in our favour on any bank in Bombay' do not occur. The words which occur are 'please pay by cheque to self on bank at Indore'. The words 'on bank at Indore' and the words 'on any bank in Bombay' cannot make any material difference. It is not the location of the bank on which the cheque is drawn, which is determinative of the question whether the post office in a particular case is constituted the agent of the sender or the receiver for the purpose of receiving the cheque. It is no doubt true that in Ogale's case the word 'remit' appears and that word has been interpreted to imply a request to send the cheque by post. The question that will have to be considered will be whether the words 'please pay by cheque' which occur in the present case are equally capable of being constructed to imply a request to send the cheque by post. To that extent there is a difference between the two cases. The judgment in Ogale's case has been based on two distinct grounds (i) the implication of an agreement arising from business usage and (ii) the express request to be inferred from the use of the word 'remit'. The first ground given in that judgment applies to the facts of the present case.

74. As regards the distinction sought to be drawn by reason of the fact that the receipts on the present case were sent duly signed in advance, the view which I take is, that the; matter before me stands on a much stronger footing than in Ogale's case where receipts were subsequently sent. Under the terms of the contracts between the parties in the case before me it is stipulated that receipts had to be sent in advance duly signed to the party paying, that these receipts had to be accompanied by a request to pay by cheque and that the payment was to be made on submission of the bills to the Government at New Delhi containing such request and containing such signed receipts. On a true construction of the terms of the agreement, it is clear that the parties have departed from the normal rule that the debtor had to come and pay the creditor. In the present case, under the terms of the agreement it is the creditor who has to seek the debtor to obtain payment. It is the creditor who has to submit to the debtor the bills containing the request and the signed receipt at the place where the debtor is, viz., New Delhi. On the terms of this agreement, it is not possible to say that it was the obligation of the Government in this case to seek the assessee and pay him at the place where the assessee and pay him at the place where the assessee was.

75. As regards the distinction sought to be made by reason of the use of the words 'on bank at Indore', in my view, these words do not make any material difference.

76. The distinction sought to be drawn l; by reason of the absence of the word 'remit' is; met by the decision given by the Supreme Court in the case of Shri Jagdish Mills. The facts in that case, briefly stated, were as follows : The Jagdish Mills Ltd., was a company incorporated under the then Baroda State Companies Act and had its registered office at Baroda. The company was the owner of a textile mill and carried on business of manufacturing land selling textiles at Baroda. In the accounting years 1942 and 1943 tenders were invited by the Government of India for some of the articles manufactured by the company. The company submitted its tenders to the Government of India which accepted the tenders and placed orders for supply of goods manufactured by the company. These orders were accepted by the company at Baroda. The delivery of the goods in pursuance of the said orders was made f.o.b. Baroda. The manufacture and the sale of the goods and the delivery thereof took place at Baroda. According to the conditions of the contracts, payment for the delivery of the goods was to be made on the 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 company after effecting deliveries of the goods, submitted bills in the prescribed printed form which contained a request that the Government should pay; the amount due to the company by cheque. After submission of the bills the company received at Baroda in payment of its bills cheques through post from the Government. In the course of the judgment, which was delivered by Mr. Justice Bhagwati, it has been observed as follows :

'On the facts narrated above it is clear that the mode of payment agreed upon between the appellant and the Government of India, as specified in clause 21 in the printed form of tender, was that the payments for the delivery of the goods were to be by cheques drawn on a Government Treasury or on a branch of the Reserve Bank of India or Imperial Bank of India transacting Government business. The mentioned that the Government should pay the amounts due to the appellant by cheque. In payment of these bills the appellant used to receive at Baroda, cheques drawn by the Government as aforesaid...'

77. After referring to the various authorities, the learned judge thereafter made the observations which I have referred to in the earlier part of my judgment, holding that there was imported by necessary implication an implied request by the assessee to send the cheques by post from Delhi thus constituting the post office its agent for the purpose of receiving those payments. At the end of his judgment, the learned judge observes as follows :

'In our opinion the principle which has been enunciated by us in Commissioner of Income-tax v. Ogale Glass Works Ltd., 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. Non-user of those words does make any difference to the position and it is not possible to distinguish the present case from that case merely on this ground.'

78. It is not possible for me to draw any distinction between the words used by the assessee in Shri Jagdish Mills' case that Government should pay the amount due to the assessee by cheque and the words used by the assessee in the present case, viz., 'Please pay by cheque to self'. In my view, it is not possible to distinguish the case of Shri Jagdish Mills Ltd., and say that it is not applicable to the facts of the present case. In my view, the words used in the present case contain by necessary implication an implied request by the assessee to send the cheques by post from New Delhi, thus constituting the post office its agent for the purpose for receiving those payments.

79. There is one more judgment given by the Supreme Court to which my attention was drawn by both counsel for the applicant and the respondent. It is the case reported in Commissioner of Income-tax v. Patney and Co. In that case, the assessee company, which was assessed as a person non-resident in the taxable territories, carried on business at Secunderabad in the territories of the Nizam of Hyderabad outside British India. The assessee company acted as agents for two other companies resident in British India for the supply of certain goods to the Nizam's Government. The assessee company received cheques drawn on banks in British India towards commission from the resident companies. The cheques were sent by post from places in British India and were received by the assessee company at Secunderabad. The same were credited in the assessee company's account books and were sent to its bankers for collecting and crediting the same to the account of the assessee company. The question was whether the amounts of commission received by the assessee company but cheques were received in British India. The assessee company filed an affidavit stating that it was verbally agreed that the commission would be paid at Secunderabad in cash or by cheque, as the case may be. The judgment of the Supreme Court in that case was delivered by Mr. Justice Kapur. In dealing with Ogale's case, the learned judge observes last page 491 as follows :

'In that case there was an express request of the assessee to remit the amount of the bills outstanding against the debtor, that is, the 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 Delhi to the; post office which was constituted the agent of the assessee.'

80. The learned judge thereafter proceeds to observe as follows :

'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 the creditor authorised the debtor either expressly or impliedly to send a cheque by post that 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.'

81. On the facts of that particular case the learned judge stated that in that case there was an express agreement that the payment was to be made at Secunderabad and that by reason of that agreement the case did not fall within the rule in Ogale Glass Works' case. The learned judge in the course of his judgment observes at page 492 as follows

'Whatever may be the position when there is an express or imposed 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 that amount of the commission to be paid at Secunderabad and the rule in Ogale Glass Works' case would be inapplicable.'

82. This decision reaffirms the principle laid down in Ogale Glass Works' case.

83. In the case before me, the agreement between the parties shows that it was contemplated that payment was to be made at the place where the paying party, viz., the Government, was and not at the place where the receiving party, viz., the assessee, was. Mr. Kolah, however, has relied on this case and has contended that in the present case the assessee had demanded payment by cheque to self on a bank at Indore and that that request really amounted to a request for payment at Indore. This argument is fallacious. The request is to make the payment by cheque. The cheque is desired to be drawn on a bank at Indore. The place of payment in such a case is not the place where the bank on which it is drawn encashes the cheque, but the place where the cheque is received. In my view, on the facts of this case it is not possible to say that there was any agreement to pay moneys at Indore or that any request was made to pay the moneys at Indore. The decision in Patney & Co.'s case is not applicable to the facts of the present case in the way in which Mr. Kolah seeks to apply it.

84. The next argument which has been urged before me by Mr. Kolah is based on the provisions contained in section 66(1) of the Indian Income-tax Act, 1922. That section provides as follows :

'Within sixty days of the date upon which he is served with notice of an order under sub-section (4) of section 33 the assessee or the Commissioner may, by application in the prescribed form, accompanied where application is made by the assessee by a fee of one hundred rupees, require the Appellate Tribunal to refer to the High Court any question of law arising out of such order, and the Appellate Tribunal shall within ninety days of the receipt of such application draw up a statement of the case and refer it to the High Court.'

85. It is rightly urged that under the provisions contained in section 66(1) the Commissioner can only require the Appellate Tribunal to refer to the High Court any question of law arising our of the order of the Tribunal and no other. It is, however, urged that in the present case, the points of law urged before me by the Revenue are not points of law which arise out of the order of the Tribunal. It is submitted that the Revenue is only entitled to urge before; me those arguments which it urged before the Tribunal and that it is not entitled to urge any points which were not canvassed before the Tribunal and which do not find a place in the judgment of the Tribunal. When the matter was canvassed before the Tribunal, the decision of the Bombay High Court in the case of Kirloskar Brothers Ltd., was in force. The Tribunal in the course of its decision observed that the facts in the case before it were similar to those in Kirloskar Brothers Ltd.'s case and that the case before it was covered by the decision in Kirloskar Brothers Ltd. That decision having been set aside by the Supreme Court in appeal, the Revenue seeks to rely upon different arguments in support of its case. The question that has been referred to this court is 'whether the assessee company is liable to pay tax in the taxable territories on the ground that the sale proceeds, which included that profit element therein, were received in the taxable territories'. It is not disputed that this is a question of law which arises our of the order of the Tribunal. If a question of law arises our of the order of the Tribunal, it would not be permissible to the court to shut out various arguments that may be advanced in support of the case of the rival parties merely because the same were not urged before the Tribunal. Fresh arguments may be advanced for the first time before the High Court and even before the Supreme Court provided the facts on which those arguments are based are admitted and/or found by the Tribunal and appear in the statement of the case.

86. The Supreme Court had to consider a similar argument in Ogale's case. At page 540 of the report of that case, the Supreme Court in the course of its judgment observes as follows :

'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 and even now it is not suggested before us that the question of law referred to the High Court did not arise out of the Tribunal's order or had not been properly referred 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 its jurisdiction under sub-section (5). In support of its contention that the question should be answered in the affirmative the Revenue advanced the argument, based on certain facts, that the cheques had been accepted only conditionally and, therefore, there was no payment until the cheques had been cashed and the cheques having been cashed in Bombay the payment must be regarded is having been received in Bombay. That argument did not find favour with the High Court and that being the position the Revenue sought to raise before the High Court, as it dies before us, an alternative argument, also based on facts, that the cheques having, at the request of the assessee, been posted at Delhi, the mere posting of the cheques in circumstances operated as payment in Delhi. Here no new question of law is sought to be raised. The question of law still is, whether on the facts of this case, income, profits and gains of sales made to the Government of India was received in British India within the meaning of section 4(1)(a) of the Act. The argument is that as the cheques were posted at Delhi at the request of the assessee payment was received by it in British India. It is said that although the language in which the question has been framed is wide enough to include this branch of the argument, 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 argument actually advanced before the Tribunal and on which the Tribunal's decision was founded, leaving out all other facts appearing on the record and even referred to in the Tribunal's order and the statements of the case. There is no warrant for such suggestion. The language of the question clearly indicates that the question of law has to be determined 'on the facts of this case'. To accede to the contention of the assessee, will involve the undue cutting down of the scope of the question by altering its language.'

87. These words equally apply to the facts of the present case.

88. There is another judgment of the Supreme Court to which my attention was drawn in this connection. It is the case of United Commercial Bank Ltd. v. Commissioner of Income-tax. Mr. Justice Kapur, who delivered the judgment of the Supreme Court in the case, observed at page 703 as follows :

'It does not appear from the judgment of the High Court that the question was argued in the manner it has been debated in this court. The appellant seems to have rested his case on the applicability of section 10 to the profits under the head 'interest on securities' because of the securities being trading assets, but this contention was repelled and the same question has been raised before us but the assessee now supports his case on an alternative argument that even if the securities fall under section 8 still the profits from that source are from an item of the assessee's business and, therefore, the loss of the previous year from banking business of the assessee can be set off against the profits of the assessment year whatever be the source of that profit. The case is similar to the one in Commissioner of Income-tax v.Ogale Glass Work Ltd. The question framed by the Tribunal is a general one and what is to be determined is whether the loss of the previous year can be set off against the income of the assessment year within the provisions of section 24(2) of the Act. The question is wide enough to cover the point raised before us. In the circumstances of this case the third point, raised by counsel for the assessee, is open to be canvasses before us.'

89. In view of these judgments of the Supreme Court, it is not necessary for me to refer to or deal with the observations of the Bombay High Court in the case of Scindia Steam Navigation Co. Ltd. v. Commissioner of Income-tax, and the remarks to a somewhat different effect of the Calcutta High Court in the case of Commissioner of Income-tax v. State Bank of India.

90. Mr. Kolah, however, has relied upon the decision of the Supreme Court in the case of New Jehangir Vakil Mills Ltd. v. Commissioner of Income-tax. The judgment in that case has been delivered by Mr. Justice Bhagwati the same day on which he delivered the judgment in Shri Jagdish Mills' case. As strong reliance has been placed upon this case, it is necessary for me to set out briefly the facts of that case. The assessee company, the appelIant in that case, was a limited liability company which was manufacturing textile goods at Bhavnagar, which was an Indian native State, during the relevant assessment years. The company was assessed as a person non-resident in the taxable territories. During the assessment years the company had received the sale proceeds of its good inter alia by means of cheques on the Imperial Bank issued by the Supply Department of the Government of India and other cheques received at Bhavnagar but drawn on banks in British India. The company had contended that the aforesaid amounts had been received at Bhavnagar by cheques drawn on banks in British India. The Revenue had not disputed the fact that the cheques had been actually received at Bhavnagar but had contended that payments by cheques were received in British India at the time and the payments by cheques were ultimately cashed and honoured by the banks on which the cheques were drawn and that until such encashment of the cheques, the moneys could not be said to have been received by the assessee. The Tribunal, following the judgment of the Bombay High Court in the case of Kirloskar Brothers Ltd. v. Commissioner of Income-tax, held that the cheques were received at Bhavnagar and that the money was also received at Bhavnagar. In the course of his judgment, Mr. Justice Bhagwati observes as follows :

'It may be pointed our that neither did the Income-tax Officer, when the proceedings were before him, or when the proceedings were before the Appellate Assistant Commissioner, nor did the Revenue, when the proceedings were before the Tribunal, at any stage contend that the Cheques aggregating to the said amounts in the said two years were not received at Bhavnagar because of the alleged posting of the cheques in British India and/or by reason of the allegation that the cheques were sent by post and/or that the post office was the agent of the appellant and that too, in spite of the decision in the case of Kirloskar Bros. Ltd., which decisional had already been pronounced by then and where the said question had been debated and argued by the Revenue. The only ground urged by the Revenue at all material stages was that because the amounts which were received, from the merchants or the Government, were received by cheques drawn on banks in British India which were ultimately encashed in British India, the moneys could not be said to that been received in Bhavnagar though the cheques were in fact received at Bhavnagar.'

91. The Commissioner of Income-tax, Bombay North, Kutch and Saurashtra, applied for a reference under the provisions contained in section 66(1) of the Income-tax Act. In the course of the application, the Commissioner suggested the raising of the following two questions of law :

'(1) Was there any eivdence on the record to justify the Tribuunal 's finding that the mere receipt by the assessee of cheques of Rs. 2,58,987 and Rs. 13,08,980 in Bhavnagar amonuted to receipt of above amounts in Bhavnagar even though the said cheques had actually been cashed in British India and the proceeds thereof were credited to the assessee's accounts with certain banks in British India

(2) Whether in the circumstances of this case, the income, profits and gains in respect of the sales amounting to Rs. 15,67,967 made to the Government of India and other customers were received in British India within the meaning of section 4(1)(a) of the Indian Income-tax Act ?'

92. The Tribunal did not raise any of the questions suggested by the Commissioner. The only question raised by the Tribunal and submitted to the High Court for its decision was :

'Whether the receipt of the cheques in Bhavnagar amounted to receipt of sale proceeds in Bhavnagar ?'

93. The said reference was heard by the High Court. The High Court held that it was not possible to answer the question in the absence of materials as to whether the cheques which were received in Bhavnagar were posted by the Government at the request of the appellant and observed as follows :

'The question that has been submitted to us by the Tribunal is whether the receipt of the cheque in Bhavnagar amounted to receipt of sale proceeds in Bhavnagar. This question overlooks the important aspect which was dealt with both by us in Kirloskar's case and also by the Supreme Court. Assuming that the cheques were received in Bhavnagar, the question still remains as to whether if the cheques were received by post, the post office was constituted the agent of the assessee nor not. The mere receipt of cheques by post in Bhavnagar is not conclusive of the question raised by the Tribunal. Unless we are in a position to say that the cheques were sent to Bhavnagar by post without there being a request, express or imposed, by the assessee, the mere receipt of the cheques in Bhavnagar would not constitute receipt of sale proceeds in Bhavnagar.'

94. The High Court directed that a supplementary statement of the case should be submitted by the Tribunal lender the provisions contained in section 66(4) of the Income-tax Act on the points following :

'On the finding of the Tribunal that all the cheques were received in Bhavnagar, the Tribunal to find what portion of these cheques were received by post,.... whether there was any request by the assessee, express or implied, that the amounts which are the subject matter of these cheques should be remitted to Bhavnagar by post. Mr. Joshi concedes that to the extent that the cheques were not received by post but by hand, the receipt will be for the purposes of tax in Bhavnagar.'

95. It is clear from the order of the High Court that what the High Court required was a finding by the Tribunal on the question (1) as to which of the aforesaid cheques were received by post and (2) whether there was any request by the assessee, express or implied, that the amounts, which were the subject matter of the cheques, should be remitted to Bhavnagar by post. The matter came up before the Supreme Court on special leave granted. In dealing with the matter, Mr. Justice Bhagwati observes as follows :

'The appeal raises an important question as to the nature, scope and extent of the jurisdiction vested in the High Court under section 66(4) of the Act....'

96. The learned judge thereafter refers to the provisions contained in sections 66(1), 66(2) and 66(4) of the Indian Income-tax Act and then proceeds to observe as follows :

'But section 66(4) does not enable the High Court to raise a new question of law which does not arise out of the Tribunal's order and direct the Tribunal to investigate new or further facts necessary to determine this new question which had not been referred to it under section 66(1) or section 66(2) and direct the Tribunal to submit a supplementary statement of case.'

97. He further observes :

'Even though the terms of section 66(4) are wide enough to comprise 'such additions thereto or alterations therein as the court may direct in that behalf' the scope of such directions has got to be read in the context of and in conjunction with the provisions of section 66(1) and section 66(2) and under the guise of that direction the High Court cannot refer the case back to the Tribunal to find new facts or embark upon a new line of inquiry which would enable either the assessee or the Commissioner to make out a case which had never been made during the course of the proceedings before the Income-tax authorities or the Tribunal so far. Such additions thereto or alterations therein as the court may direct in that behalf are additions of facts to the statement of case or alterations therein which though they were part of the record before the Income-tax authorities or the Tribunal were not incorporated in the statement of case drawn up by the Tribunal either because such facts or statements though contained in the record were not found by the Tribunal or were omitted to be incorporated in the statement of case drawn up by it...'

98. After citing several cases the learned judge observes as follows :

'If there is no power in the High Court to remand the case to the Tribunal for fresh findings of facts on further enquiry in the manner stated above, much less would the High Court have the power while exercising its jurisdiction under section 66(4) of the Act to refer the case back to the Tribunal to make such additions thereto the alterations therein as the court may direct as would require the Tribunal to embark upon a fresh line of enquiry which had never been canvassed at any time before the Income-tax authorities or the Tribunal in the first instance and record fresh findings on evidence adduced by the parties in that behalf.'

99. After discussing the law on the subject, the learned judge at page 24 observes as under :

'On the facts of the present case before us it is abundantly clear that the only question which was canvassed before the Income-tax authorities and the Tribunal before it made its order dated July 17, 1952, was whether the cheques which were received at Bhavnagar having been cashed in British India, the money in respect of the same should be said to have been received in British India and the Tribunal had held following the case of Kirloskar Brothers that the cheques were received from the Government at Bhavnagar and the receipt of money in respect of cheques from banks in British India related back to the receipt of the cheques at Bhavnagar and therefore was also received in Bhavnagar... The question of law which was referred by the Tribunal to the High Court for its decision was 'Whether the receipt of the cheques at Bhavnagar amounted to receipts of sale proceeds in Bhavnagar' and it was only based on the facts admitted and/or found by the Tribunal which had relevance only to that question and not to the question which was sought to be mooted by the High Court in its judgment under appeal. If the latter question was allowed to be entertained the question would have to be recast as under 'Whether the posting of the cheques in British India at the request, express or implied, of the appellant, amounted to receipt of sale proceeds in British India ?''

100. The court set aside the order of the High Court and remanded the matter to the High Court to arrive at its decision on the question of law referred to it in the statement of the case already submitted to it by the Tribunal.

101. This decision is clearly a decision on the provisions contained in section 66(4) of the Indian Income-tax Act and the only point laid down by this judgment is that the High Court cannot, in the exercise of its jurisdiction under section 66(4), raise a new question of law which did not arise out of the order of the Tribunal and require the Tribunal to embark upon a fresh line of enquiry, hear the parties in regard to the same and record fresh findings of fact which would enable either the assessee or the Commissioner to advance a case which had never been made out before the Income-tax authorities or the Tribunal. The question referred to the High Court in that case was merely 'whether the receipts of the cheques at Bhavnagar amounted to receipts of sale proceeds in Bhavnagar' and it could not be said to include the question 'whether the posting of the cheques in British India at the request, express or implied, of the appellant, amounted to receipt of sale proceeds in British India', and the Supreme Court considered that it was not proper to allow such a question to be raised and canvassed after fresh evidence being taken by the Tribunal and that the provisions of section 66(4) did not enable the court to do so.

102. The question referred in the present case, viz., 'whether the assessee company is liable to pay tax in the taxable territories on the ground that the sale proceeds, which included the profits element therein, were received in the taxable territories', is wide enough to cover the argument based on the posting of the cheques in British India at the request, express or implied, of the assessee. The facts necessary for the purpose of basing that argument are found in the statement of the case and there is no reason why that argument should not be entertained. The decision of the Supreme Court in the case of New Jehangir Vakil Mills Ltd., in no way militates against the other decisions of the Supreme Court referred to by me earlier. It is not the question which is new; it is only the argument that is sought to be advanced that is new. In my view, the authority of the earlier judgments of the Supreme Court is not in any way shaken by the judgment of the Supreme Court in the case of New Jehangir Vakil Mills Ltd.

103. A contrary view had been taken by Mr. Justice S. T. Desai when he heard the present reference. In the course of his judgment the learned judge observes as follows :

'One of the two questions referred to the High Court (in the case of) the New Jehangir Vakil Mills Ltd.), and which was in very wide terms was this : 'Whether in the circumstances of this case, the income, profits and gains in respect of the sales amounting to Rs. 15,67,967 made to the Government of India and other customers were received in British India within the meaning of section 4(1)(a) of the Indian Income-tax Act ?''

104. With respect to the learned judge, I may point out that the question referred by the Tribunal to the High Court in the New Jehangir Vakil Mills Ltd.'s case was not the wider question referred to by the learned judge, but the limited question 'whether receipts of the cheques at Bhavnagar amounted to receipts of sale proceeds in Bhavnagar' which could not cover the question 'whether the posting of the cheques in British India at the request, express or implied, of the appellant amounted to receipt of sale proceeds in British India'. Mr. Kolah frankly stated that this is an obvious inaccuracy which has crept in, in the judgment of the learned judge.

105. In my view, the question of law that has been raised by the Tribunal in the present case is sufficiently wide to cover the aspect of the case sought to be raised by the learned counsel for the Revenue. He seeks to confine himself to the facts as set out in the statement of the case and I do not see any reason why that argument cannot be entertained and given effect to.

106. In the result, my answer to the question is in the affirmative.

107. Question answered in the affirmative.


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