Case Note & Summary
The assessee, a non-resident textile manufacturer with offices at Indore and Bombay, supplied goods to the Indian Stores Department, Government of India, during account years 1942 to 1947. Purchase orders were placed at Indore, then in an Indian State. The Government drew cheques on the Reserve Bank of India, Bombay, in favour of the assessee and posted them to Indore. The assessee deposited the cheques with the Imperial Bank of India, Indore, for realisation from the Reserve Bank. For assessment years 1943-44 to 1948-49, the Income-tax authorities held that the profits were received in British India and taxable under section 4(1)(a) of the Indian Income-tax Act, 1922. The Appellate Tribunal took the view that payment was received at Indore, outside British India. In reference, the High Court applied Commissioner of Income-tax v. Kirloskar Bros. Ltd. (1954) 25 I.T.R. 547, holding that the cheques were received by the assessee through its agent, the post office, in British India. The High Court further held that the Revenue was entitled to raise this contention for the first time before it. The assessee appealed to the Supreme Court on certificate. The judgment of the Supreme Court is not fully extracted; the available headnote indicates that the High Court's decision was under challenge. The core legal issue was whether the income was received in British India, making it taxable in the hands of a non-resident. The resolution of that issue depended on whether the post office was acting as the agent of the assessee or the Government of India in transmitting the cheques. The final outcome of the appeal is not stated in the provided text.
Headnote
A) Income Tax - Taxability of Non-Resident - Section 4(1)(a) Indian Income-tax Act, 1922 - Assessee, a non-resident manufacturer in Indore, supplied goods to Indian Stores Department; payment by cheques drawn on Reserve Bank, Bombay, sent by post to Indore - Tribunal held payment received at Indore; High Court applied Kirloskar Bros. and held post office was assessee’s agent in British India, so income received there and taxable - Held that Revenue could raise contention for the first time in High Court, and post office was agent of assessee, making income taxable in British India. B) Income Tax - Receipt of Income - Post Office as Agent - Indian Income-tax Act, 1922, Section 4(1) - Cheques sent by post from British India to non-resident assessee in Indore State - High Court held that by posting cheques, Government of India delivered them to assessee through its agent, the post office, in British India, hence receipt occurred in taxable territory.
Issue of Consideration
Whether the profits of a non-resident assessee in respect of supplies to the Government of India were received in British India through the post office acting as the assessee's agent, and therefore taxable under section 4(1)(a) of the Indian Income-tax Act, 1922.
Law Points
- Income received by non-resident
- receipt of cheques through post office
- post office as agent of assessee or government
- taxable in British India
- section 4(1)(a) of Indian Income-tax Act
- 1922
