P.V.B. Rao, J.
1. This is a reference made by the Income-tax Appellate Tribunal to the High Court under Section 66(1), Income-tax Act, on an application by the Commissioner.
2. The point that has been raised on this reference is whether on the facts and in the circumstances of the case as stated in the reference at page 3 of the printed paper-book, certain amounts received during the accounting year by the assesses as commission, from some of the parties for whom it was doing business, was income that accrued, arose or was received in British India.
The assessment relates to the year 1945-48 before the State of Hyderabad was integrated with India and the assessee is a company doing commission business at Secunderabad. The facts on which the question arises are stated in para 4 of the statement of the case printed at page 2 of the paper book.
3. This matter came up for hearing before a Bench consisting of the then Chief Justice (B. Jagannadhadas J., now a Judge of the Supreme Court) and S.P. Mohapatra J. and by their judgment dated 25-7-1952, they directed the Tribunal to submit to this Court a supplementary statement showing whether the cheques which were received by the assessee from the two customers towards commission were received in full satisfaction of the commission due to them as and, when they were received in Secunderabad and whether the course of the dealings between the parties showed that the debt by way of commission was intended to be discharged by the mere receipt and acceptance at Secunderabad of the cheques by the assessee; or whether when the assessee entrusted these cheques to their bankers for collection, they did so merely treating these cheques as provisional and conditional payment and not as absolute discharge, as the real question is whether when the cheques were received by the assessee having his place of business outside British India those cheques were in fact received as absolute and final payments by way of unconditional discharge or whether they were received as only conditional payments on realisation and that the fact that the cheques were drawn on a Bank in British India or that they were sent for collection through a Secunderabad banker of the assessee though relevant are not conclusive, and observed that the Tribunal will make such further enquiry as it considers necessary for elucidating all the relevant facts and to help a conclusion on the above matter after giving fresh opportunity to the parties concerned.
4. In the above-said judgment, they also held that the Income-tax Commissioner is not entitled to ask the Court for any answer to the reference on the footing of income having accrued or arisen within British India; that the reference must therefore, be confined in its further stages only to the question of assessability of the income on the basis of the place of the receipt of the same; that the question of the place of the receipt of the income for income-tax purposes is not the mere receipt of income into his hands by the assessee but Is a legal concept depending on all the relevant facts, and that it is not purely a question of fact.
5. In accordance with the said direction of this Court, the Income-tax Tribunal submitted a supplementary statement of the Case which was agreed to by both the parties.
6. The facts as stated in the original statement of the case by the Tribunal are as follows: Messrs Patny & Co. the assessee in this case acted as agents of Gas Plants manufactured by Messrs T. V. S. Iyengar of Madura for the purpose of supplying them to the Nizam's Government. They also acted as agents of the Lucas Indian Service, Bombay Branch, for the supply of their goods similarly in the Nizam's Dominions.
The orders for Gas Plants were placed bythe Nizam's State Railway to Messrs T. V. S.Iyengar of Madras through the assessee Company.The cheques for commission in respect of supplies made by Messrs T. V. S. Iyengar and SonsLtd. were paid to the assessee Company bycheques drawn on the Imperial Bank of India,Ltd. Madras, which were sent by the assessee toG. Raghunath Mall, Bankers for collecting theamount and crediting the same to the assessee'saccounts in their books.
In respect of these cheques entries were made in the assessee Company's General Ledger crediting the commission amount. The charges incurred for encashing the cheques were debited to the Bank charges of this Company. Similar procedure was also followed in respect of the Lucas Service Ltd. with the slight difference that the prices of goods were paid to Lucas Indian ' Service Ltd., sometimes by the assessee-Company after deducting the commission payable on orders placed through the Company through Raghunath Mall, banker.
6a. In the supplementary statement of the case it Is stated that with respect to the transactions with T. V. S. Iyengar and Sons Ltd., half- yearly statements were sent, one ending with 30-12-1944, that these showed the commission due to the assessee and a cheque for the amount or for a slightly higher amount was sent; that the cheques were made payable on the Imperial Bank of India, Madras; and that similarly the commission due on the transactions with the Lucas Indian Service Ltd. was received by a cheque and the cheque was Payable on the Imperial Bank of India at Bombay.
It was also stated that the assessee received these cheques at Hyderabad and immediately on receipt put them into Raghunath Mall Bank, its bankers: that in all the cases, receipts for the amount received were passed on by the assessee on the same day and these receipts mentioned the number of the cheque and the amount also: that entries were also made in the bank account in the assessee Company's general ledger crediting the commission amount and the charges incurred for encashing the cheque were debited to the bank charges account of the assessee-Company; that the bank on receipt of the cheques; immediately credited the assessee's accounts with the proceeds of the cheque and that- the pass books also show that immediately thereafter the assessee operated on those accounts and has drawn' sums from the sums of money so credited.
It was also stated in the supplementary statement of the case that the course of conduct followed by' the parties would seem to show that the cheques were received by the assessee from Lucas Indian Service Ltd., Bombay and from T. V. S. Iyengar and Sons Ltd., Madura towards commission in full satisfaction of the commission ascertained from time to time and due on such date.
7. The learned standing counsel for the opposite party files copies of certain documents which are on the record and which are made available to us, after giving notice to the learned counsel for the assessee. These documents are an affidavit filed on behalf of the assessee-Company dated 19-2-49, a letter dated 19-12-44, from T. V. S. Iyengar & Sons Ltd. to the assessee-Company, a letter dated 23-12-44 from the assessee to T. V. S. Iyengar & Sons Ltd., a letter dated 2-10-44, from T. V. S. Iyengar & Sons Ltd. to the assessee Company, and a petition dated 17-1-46 filed by the assessee-Company before the Income-tax Officer Berhampur. In reply the assessee files a true copy of letter No. 105 DDM/46 of 23-1-1946 from the assessee to the Income-tax Officer, Berhampur.
8. Mr. M. S. Mohanty the learned counsel for the assessee contends, that these documents cannot be looked into at this stage as they are not referred to in the statement of the case and that they do not form part of the annexures to the statement of the case. These documents were filed during the proceedings before the Income-tax authorities.
The learned counsel for the petitioner relies upon a decision in the case of -- 'Hassan Kassam E v. Commr. of Income-tax, B & O' AIR 1949 Pat 178 (A). In this case it was held that it was not open to the learned standing counsel to raise a new question of fact at that stage. This case does not apply to the facts of the present case. He also relies upon the case of -- 'In the matter of Binraj Hukumchand' : AIR1931Cal683 (B), which; is a decision of a Special Bench. In this case it was held.
'It is not open to any assessee to ask the Court upon such a reference to examine his books of account and come to findings of fact contrary to those arrived at by the Commissioner In the case stated; and that it is intended still less that this Court should be a last resort for the production of books which were not produced before any one of the three Income-tax authorities which had to deal with the case.'
This case does not also apply in the present instance as the documents produced by the standing counsel are copies of documents already on record and referred to in the orders of the In come-tax Officers. In the case of -- 'Messrs G. I. M. Gregory & Co., In re' : 5ITR12(Cal) ; (C), it was held by the Calcutta High Court that in a reference under Section 66 (2), the High Court is entitled to look at documents and, proceedings annexed to the statement of the case even though there is no specific reference to them in the body of the statement of the case.
In the case of -- 'Commissioner of Income-tax v. Ogale Glass Works Ltd.' : 25ITR259(SC) (D), to an objection raised by the counsel for the assessee that the requisite facts on which a branch of the argument may be based are not to be found in the order of the Tribunal and the statement of the case and therefore that argument should not be entertained, the Supreme Court observed:
'There would have been considerable force in this contention if the facts necessary to support the new argument advanced by the Revenue were not on the record. But such is not the case here as will be presently shown'.
This observation of the Supreme Court lends support to the view that if the documents are on the record, they can be looked into. As the documents in question are documents which are already on record, the contention of Mr. Mohanty that they cannot be looked into cannot be accepted.
9. The first document filed now by the Income-tax Department is an affidavit on behalf of the assessee dated 18-2-49. In para. 2 of the said affidavit it is stated
'The above said commission was verbally decided to be paid to Messrs. Patny & Co. Ltd., Secunderabad, the Agent Company in Hyderabad State at Secunderabad in cash or by cheque as the case might be'.
In para. 5 it is stated that
'Cheques for commission earned in Secunderabad were sent by post by Messrs. T. V. S. Iyengar & Sons' Ltd., Madras, direct to the Agent Company and amount realised by crediting the cheques to the Company's account in the local Bank'.
Relying on these statements of the affidavit, the learned standing counsel contends that as the commission was paid by cheques drawn on the Imperial Banks of Madras and Bombay and the categorical statement made in para 5 above that the cheques were sent by post by Messrs. T. V. S. Iyengar & Sons Ltd., the commission, was received at Madras and Bombay respectively where the cheques were post ed and consequently the income must be held to have been received in British India.
This contention is advanced on the strength of the recent decision of the Supreme Court referred to above in the case of : 25ITR259(SC) (D), 'in which it was held:
'Delivery of the cheque to the post office atthe request of the addressee is a delivery to himas by posting the cheque in pursuance of the' request of the creditor the debtor performs, hisobligation in the manner prescribed and sanctioned by the creditor and thereby discharges the contract by such performance. The posting of the cheques in Delhi in the instant case in law amounted to payment in Delhi to the assessee and accordingly the income was received in British India within the meaning of Section 4(1) (a), Income-tax Act'.
10. The important facts of that case as found in the statement of the case quoted in the Judgment are: under an agreement with the Government of India the assessee undertook to receive payment by cheque drawn on a Bank in India. The assessee company made a specific request to the Government to make payment of the sale proceeds by cheque drawn on a Bank in Bombay.
When the assessee received the cheque, It did not receive the sale proceeds; it received the sale proceeds subject to the encashment of the cheque. The sale proceeds were received in Bombay and the cheque was, encashed on behalf of the assessee at Bombay.
11. It was contended by the assessee in that case that the assessee received payment for the goods supplied by it when it received the cheques at Aundh. The main contention advanced by the Revenue before the Supreme Court was that the cheques having, at the request of the assessee, been posted at Delhi, the mere posting of the cheques in such circumstances operated as payment in Delhi.
Relying on the principles laid down in the cases of -- 'Norman v. Ricketts' (1886) 3 TLR 182 (E); 'Tairlwall v. G. N. Rly. Co. 1910 2 KB 509 (P); 'Badische Anilin Und Soda Fabrik v. Basle Chemical Works (1898) AC 200 (G); 'Comber v. Leyland' (1898) AC 524 (H); and 'Mitchel Henry v. Norwich Union Life Insurance Society Ltd.' (1918) 2 KB 67 (I) their Lordships of the Supreme Court observed:
'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'.
12. In discussing this question their Lordships also held:
'On the other hand if there be no express or implied request by the creditor to send the amount by post the mere posting of a hundi duly endorsed in favour of the addressee does not operate as delivery of the hundi to the addressee so as to pass the title in the hundi to the addressee for the post office in such circumstances, does not become the agent of the addressee'
and cited with the approval the case of -- 'Thorappa v. Umedmalji AIR 1924 Bom 205 (J), and the case of -- 'Ex parte Cote (1873) 9 Ch. A. 27(K).
13. On the authority of the decision of the Supreme Court it follows that if the Revenue can show that the cheques were sent to assessee by post on his specific request or that the cheques were sent to him on being asked to remit the money which amounts to an implied request to send by post the income would be received in British India, the cheques haying been posted at Bombay and Madras respectively.
The learned counsel relies on the statement in para. 5 of the affidavit that the cheques for commission earned in Secunderabad were sent by post by Messrs. T. V. S. Iyengar and Sons Ltd. This statement in the affidavit, in my opinion, does not amount to a request by the assessee to sent the cheques by post. It is simply a statement of the fact that the cheques were sent by Messrs. T. V. S. Iyengar and Sons Ltd. by post.
He also relies upon the statement in para 7 of the affidavit that commission on all railway supplies and overriding commission on annual sale were settled annually and payment made by cheques the amount of which were realised through local Banks.
This statement also in my opinion does not amount to a specific request made by the assessee to send the money by cheque. On the other hand the statement of the assessee in the affidavit in para 2 to the effect that
'the commission was verbally decided to be paid to Messrs. Patny & Co. Ltd., Secunderabad the agent Company in Hyderabad State at Secunderabad in cash or by cheque as the case might be'
clearly indicates that the payment according to the verbal agreement was to be made at Secunderabad. The words 'in cash or by cheque as the case might be' cannot imply a request to send the cheques by post or remit the money by post, 'Commission is to be paid at Secunderabad in cash or by cheque' -- these words are also consistent with the insistence that whether the money is to be paid by cash or cheque, it is to be paid by the assessee at Secunderabad.
There can be a case where even if the money is agreed to be paid by cheque the cheque was to be delivered at Secunderabad. These words accordingly may go to show, on the other hand, that the assessee had no intention or did not agree to accept the money by cheques by post.
14. The learned standing counsel then relies upon the observation made by the Supreme Court in the last paragraph of the Judgment to the effect,
'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'.
and contends that under the circumstances of the present case the Court should draw an inference that the parties must have Intended that the cheques should be sent by post and that consequently the income is deemed to be received at Bombay or Madras. In this case there is no finding of the Tribunal that the cheques were in fact received by the assessee' by post. As already stated above, the decision of the Supreme Court is mainly based upon the finding that there was a specific request by the assessee to send the cheques by post. Under the circumstances, the contention of the learned standing counsel cannot be accepted.
15. Further it has been held by the Supreme Court in the above case in repelling the first contention of the learned Solicitor General for the Revenue that the facts in that case taken cumulatively led to the conclusion that the cheques were received in complete discharge of the claim for the price of the goods. In the supplementary statement of the case it is expressly mentioned by the Tribunal that the course of conduct followed by the parties would seem to show that the cheques were received by the assessee from Lucas Indian Service Ltd., at Bombay and from T. V. S. Iyengar and Sons Ltd. at Madras towards commission in full satisfaction of the commission ascertained from time to time and due on such date.
Document No. 3 put In by the learned standing counsel for the Income-tax department is acopy of letter dated 23-12-1944 from the assessee to Messrs T. V. S. Iyengar and Sons Ltd. This, shows that immediately after the receipt of the cheques for Rs. 14,174/- they sent an official stamped receipt acknowledging payment of the commission. Under Section 49 Contract Act
'When a promise is to be performed without application by the promisee and no place is fixed for the performance of it, it is the duty of the promisor to apply to the promisee to appoint a reasonable place for the performance of the promise and to perform it at such place'
and under Section 50,
'the performance of any promise may be made in any manner or at any time which the promisee prescribes or sanctions'.
In this case there is nothing to show that the promisor applied to the promisee to appoint a reasonable place for the performance of the promise and according to the case of -- 'Motilal v.Surajmal', 30 Bom 167 (L),
'Where no specific contract exists as to the place where the payment of the debt is to be made it is clear that it is the duty of the debtor to make the payment where the creditor is'
and in this case the cheques were received at Secunderabad. The receipts acknowledging discharge of the debt were sent by the assessee from Secunderabad immediately on receipt of the cheque and the amount of the cheque was drawn from the banker at Secunderabad, and as there is no specific or implied request by the assessee to send the cheques by post the decision in the case of : 25ITR259(SC) (D)', does not apply to the facts of this case. I am therefore, of opinion that the income of the assessee was not received in British India and the question referred by the Tribunal is accordingly answered in the negative. The assessee is entitled to his costs. Hearing fee Rs. 200/-.
16. I agree.