# April ~9 Tht Commissiontr of Income-tax, Bombay South, Bombay v. Mtssrs. Ogalt Glass Works Ltd., Ogalt Wadi. 18.6

- **Citation:** [1955] 1 S.C.R. 185
- **Court:** Supreme Court of India
- **Decided:** 1955
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/april-9-tht-commissiontr-of-income-tax-bombay-south-bombay-v-mtssrs-ogalt-glass-371
- **Pages:** 21

## Headnote

...
,-
..
•
s~C.R.
SUPREME C0UR:'J1 REPORTS
THE COMMISSIONER OF INCOME-TAX · ·
BOMBAY SOUTH; .B.OMBA,Y .·
.
:.
ti •.
MESSRS: OGALE GLAS·s· WORKS LTD.,. '·
&,
.
•
'
•
OGALE WADL
· _, ·
[SuoHI RANJAN· DAS, N. ·H. BHAGWATI ·and ·
}AGANNADHADAS JU .
185
· Indian Income-tax Act· (XI of 1922), sectirm· 4(1)(a)-Non-resident company-Payment of sale-proceeds to the company (assessee),
by Government of India by means of cheques drawn and posted in
British India-Whether income, profits and gains received by ·~he
assessee ·in British India within the meaning of section 4(J.)(a):....:...
Indian Contract Act, 1872 (Act IX of 1872), section 50, illustration
(d)~Addressee requesting sender to send c/ieque by-post-.:.Post-office
acting as agent of addressee.
·
•'
·
·The assessee,. a limited
liability.. company, incorporated
artd
carrying on business in ·an Indian State (outside British India) was
a non-resident company for the purposes ·of the •Indian .Incomectax
Act and therefore its liability fo British Indian income-tax depended upon its receipt of income within British India. On the express
request of the
assessee· to remit the . amount· of ·the 'bills by
means of cheques in respect of. the· goods ·supplied by the -asses-see
to the Government of India the latter agreed· to make payments
by cheques which were drawn in Delhi and received by the assessee in the Indian State.
· ·
·
. Held, that according to the cour>r of business usage in• general
the parties must have intended that cheques should be sent by post
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.
Therefore on the facts of -the case, income, profits and gains in
respect of sales , made to the Government of India was .received 'in
Briti.sh India within the meaning of section 4( 1) (a) of the .Act..
•
Held, also, that as between the sender and the _addressee it is the
't-- request of the addressee that. makes the post-office the agent of the
.,
addressee and after such request the addressee cannot be· heard
to say . that the post-office was not his agent. On t.he other . hand
if there is no such request by the addressee, express or implied,
then on delivery of the letter or the cheque to the post-o'flice by
the sender, the post-office acts as the agent of the sender.
'.
.
Apart from the principle of agency, section 50, illustration ( d)
of the Indian Contract Act (IX of 1872) lays down the well-known
principle that a contractual obligation is discharged by the · perfor-
~ mance of the engagement or promise in the manner prescribed ·or
~sanctioned by the promisee.
Indian Post-Office Act 1898 (Act VI
of 1898), does not nullify illustration· (cl) to section 50 of the Inc:lian
Contract Act, or the above 'proposition of law.
'
·
1954
April ~9
Tht Commissiontr
of Income-tax,
Bombay South,
Bombay
v.
Mtssrs. Ogalt
Glass Works Ltd.,
Ogalt Wadi.
18.6
SUPREME COURT REPORTS
[1955]
Gresham Life "Assurance Society v. Bishop (L.R. (1902] A.C. 287
at p. 296). Commi;sioner of Income-tax v. Kameshwar Singh, ([1933]
1 I.1'.R. J.07), Raghunandan Prasad v.'Commiiiioner of Income-tax,.
(60 I.A. 133: [1933] 1 I.T.R. 113), Commissioner of Income-tax v.
Maheswari Saran Singh, (.[1951 J 19 l.T.R. 83), Stedman v. Gooch,
( (1793) I Esp. 5), 'Maillard v. Duke of Argyle, ((1843) 6 M. & G. 40),
Kempt v. Watt, ((1846) .15 M. & W. 672), Re. Rower and Haslam,
(L.R. (1893) 2 Q.B. 286), Palaniappa Chetty v. Arunachalam Chetty
((1911) 21 M.L.J. 432), Robinson v. Henry Reid, ((1829) 9 B. & C.
449), Anderson v. Hi/lies, ((1852) 21 L.J.C.P. (N.S.) 150), Kodarmal
v. Sagormal, ((1907) 9 Born. L.R. 903 at p. 911), Felix Hadley & Co.
v. Hadley, (L.R. (1898) 2 Ch. D. 680), Rhokana Corporation v. Inland Revenue Commissioners,. (L.R. (1938) A.C. 380 at p. 399), Commissioner
of
Excess
Profits
Tax, West Bengal v. /eewanlal Ltd.,
([ 1951]
20 I.T.R. '39 at p. 47),
Chainrup
Sampatram v. · C.1.T.,
West Bengal, ([1951] 20 l.T.R. 484 at pp. 49

## Text

_Characters 0–39,617 of 48,494. This is a partial read: ask again with offset=39617 for what follows._

...
,-
..
•
s~C.R.
SUPREME C0UR:'J1 REPORTS
THE COMMISSIONER OF INCOME-TAX · ·
BOMBAY SOUTH; .B.OMBA,Y .·
.
:.
ti •.
MESSRS: OGALE GLAS·s· WORKS LTD.,. '·
&,
.
•
'
•
OGALE WADL
· _, ·
[SuoHI RANJAN· DAS, N. ·H. BHAGWATI ·and ·
}AGANNADHADAS JU .
185
· Indian Income-tax Act· (XI of 1922), sectirm· 4(1)(a)-Non-resident company-Payment of sale-proceeds to the company (assessee),
by Government of India by means of cheques drawn and posted in
British India-Whether income, profits and gains received by ·~he
assessee ·in British India within the meaning of section 4(J.)(a):....:...
Indian Contract Act, 1872 (Act IX of 1872), section 50, illustration
(d)~Addressee requesting sender to send c/ieque by-post-.:.Post-office
acting as agent of addressee.
·
•'
·
·The assessee,. a limited
liability.. company, incorporated
artd
carrying on business in ·an Indian State (outside British India) was
a non-resident company for the purposes ·of the •Indian .Incomectax
Act and therefore its liability fo British Indian income-tax depended upon its receipt of income within British India. On the express
request of the
assessee· to remit the . amount· of ·the 'bills by
means of cheques in respect of. the· goods ·supplied by the -asses-see
to the Government of India the latter agreed· to make payments
by cheques which were drawn in Delhi and received by the assessee in the Indian State.
· ·
·
. Held, that according to the cour>r of business usage in• general
the parties must have intended that cheques should be sent by post
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.
Therefore on the facts of -the case, income, profits and gains in
respect of sales , made to the Government of India was .received 'in
Briti.sh India within the meaning of section 4( 1) (a) of the .Act..
•
Held, also, that as between the sender and the _addressee it is the
't-- request of the addressee that. makes the post-office the agent of the
.,
addressee and after such request the addressee cannot be· heard
to say . that the post-office was not his agent. On t.he other . hand
if there is no such request by the addressee, express or implied,
then on delivery of the letter or the cheque to the post-o'flice by
the sender, the post-office acts as the agent of the sender.
'.
.
Apart from the principle of agency, section 50, illustration ( d)
of the Indian Contract Act (IX of 1872) lays down the well-known
principle that a contractual obligation is discharged by the · perfor-
~ mance of the engagement or promise in the manner prescribed ·or
~sanctioned by the promisee.
Indian Post-Office Act 1898 (Act VI
of 1898), does not nullify illustration· (cl) to section 50 of the Inc:lian
Contract Act, or the above 'proposition of law.
'
·
1954
April ~9
Tht Commissiontr
of Income-tax,
Bombay South,
Bombay
v.
Mtssrs. Ogalt
Glass Works Ltd.,
Ogalt Wadi.
18.6
SUPREME COURT REPORTS
[1955]
Gresham Life "Assurance Society v. Bishop (L.R. (1902] A.C. 287
at p. 296). Commi;sioner of Income-tax v. Kameshwar Singh, ([1933]
1 I.1'.R. J.07), Raghunandan Prasad v.'Commiiiioner of Income-tax,.
(60 I.A. 133: [1933] 1 I.T.R. 113), Commissioner of Income-tax v.
Maheswari Saran Singh, (.[1951 J 19 l.T.R. 83), Stedman v. Gooch,
( (1793) I Esp. 5), 'Maillard v. Duke of Argyle, ((1843) 6 M. & G. 40),
Kempt v. Watt, ((1846) .15 M. & W. 672), Re. Rower and Haslam,
(L.R. (1893) 2 Q.B. 286), Palaniappa Chetty v. Arunachalam Chetty
((1911) 21 M.L.J. 432), Robinson v. Henry Reid, ((1829) 9 B. & C.
449), Anderson v. Hi/lies, ((1852) 21 L.J.C.P. (N.S.) 150), Kodarmal
v. Sagormal, ((1907) 9 Born. L.R. 903 at p. 911), Felix Hadley & Co.
v. Hadley, (L.R. (1898) 2 Ch. D. 680), Rhokana Corporation v. Inland Revenue Commissioners,. (L.R. (1938) A.C. 380 at p. 399), Commissioner
of
Excess
Profits
Tax, West Bengal v. /eewanlal Ltd.,
([ 1951]
20 I.T.R. '39 at p. 47),
Chainrup
Sampatram v. · C.1.T.,
West Bengal, ([1951] 20 l.T.R. 484 at pp. 493, 496),
Allahabad
Bank Ltd .. v. C.1.T., West
Bengal),
([1952]
21
l.T.R.
169),
Mohan/al Hiralal v. C.1.T., C.P. & Berar, ([19521 22 l.T.R. 448),
Hira
Mills
Ltd.,
Cawnpore v. Income-tax
Officer,
Cawnpore,
([1946] 14 I.T.R. 417), Madan/al Dharnidharka v. Commissioner of
Income-tax, Bombay. City, ((1948.1 16 l.T.R. 227
at
p.
232),
Commissioner of Income-tax, Delhi v. Punjab National Bank Ltd.
( f 1952] 21 l.T.R. 526), Norman v. Rickets. ( (1886) 3 T.L.R. 182),
Thairlwal v. The G1-eat Northern Railway Co. (L.R . .[1910] 2 K.B.
509), Badische Anilin Und Soda Fabrik v. Basie Chemical Works,
(L.R. (1898] A.C. 200), Comber v. Leyland, (L.R. (1898] A.C. 524),
Mitchell Henry v. Norwhich
Union
Life Insurance Society Ltd.
(L.R. (1918) 2 K.B. 67), Thm·appa v. Umedmalii, ((1923) 25 Born.
L.R. 604), (Ex parte Cote L.R. (1873) 9 Ch. App. 27), The Indian
Cotton Company Ltd. v. Hari Poonjoo, (I.L.R. (1937) Born. 763)
referred to.
CIVIL
APPELLATE
JuRisoicTmN : Civil Appeal No.
19 of 1953.
Appeal from the Judgment and Order dated the
17th
day of September, 1951, of the. High Court of
Judicature at Bombay
(Chagla C.J. and .Tendolkar J.)
in Income-tax Reference No. 19 of 1949.
M: C. Setalvad,
Attorney,General for India,
and ·
C. K. Daphtary,
Solicitor-General
for
India
(Poru;
A. Mehta, with them) for the appellant.
R. /. Kolah, Y. D. Pandit and Rajinder Narain
for respondents.
1954. April 19. The Judgment of the Court was
delivered by
DAs J.-This appeal arises out of proceedings for
the
assessment
to
.income-tax
of
the
respondent
...
•
•
..
•
-
' ,_
S.C.R.
SUPREME COURT REPORTS
187
Messrs. Ogale Glass Works Ltd., (hereinafter referred to
as "the assessee")
for the five -assessment years 1941-42
to 1945-46.
The assessee is a limited liability company incorporated anu carrymg on business in Aundh which in
those days was an Indian State outside British India.
It was accordingly a non-resident company for the
purposes of the Indian Income-tax Act.
The assessee manufactures lanterns and other glasswares at its works in Aundh State. In the relevant
accounting years the assessee secured some contracts
' for the supply of lanterns and other glasswares to the
Government of India. The price of the goods supplied
under .the .contracts were paid by cheques drawn on the
Reserve Bank of India, Bombay. -The cheques used to
be received by the assessee m Aundh and cashed
through its bank at Bombay as hereinafter. stated.
The assessee being a non-resident company its liability to British Indian income-tax depended upon its
receipt of income within British India. In the course
of proceedings for the assessment of the assessee to
income-tax for the five
years mentioned above, the
assessee contended that its profits on the sales accrued
and were received in the Aundh State where it received
payment by the receipt of the cheques. The Incometax
Officer and, on appeal, the Appellate Assistant
Commissioner held that the assessee received income,
profits or gams m British India inasmuch . as the
cheques were drawn on a bank m Bombay and had
been cashed m Bombay and accordingly taxed the
assessee under section 4(1) (a) of the Indian Income-tax
Act. On appeal by the assessee the Income-tax Appellate Tribunal upheld the assessment.
Being aggrieved by .the order of the Tribunal the
assessee applied for a reference of the case to the High
Court for the determination of the question of law
which arose out of the Tribunal's order and the Tribunal agreeing that a question of law did arise out of its
order referred the following question to the High Court
along with a statement of the case :
"whether on the facts of the case, income, profits
and gains in respect of sales made to the Government
13-86 S. C. Indiaf59.
' 1954
!-
The Commission.,:;:
of lneome-tax,
Bombay South,
Bombay
v.
Messrs. Ogale
Glass Works Ltd.,
Oga/e Wadi.
Das].
195+
.
T ht Coinmiisioner
o.f lncome-t~~
&nn~tfl Soulh1
v.
Messrs. Ogah
Glau Works Ltd.,
. Ogak Wadi.
Das]:
188
SUPREME COURT REPORTS
[1955}
of India was received in British India witliin the meaning 0f: section 4(1) (a) of the AJ:.t."
At the hearing of the reference by the High COurt
learned advocate for the assessee contended, inta- alia,
tl\.at the checiues were received by the assessee in full
satisfactfon of the debt due to it by the Government of
fodia and that the debt of the Government of India had
been discharged by the acceptance of the cheques by
the assessee in Aundh. The High Court felt that in
order to determine this· contention it would be necessary for the Tribunal to find certain further facts and
according! y the
Hig)l Court remanded the reference
back to the Tribunaf with a request to submit a supplementary statement of the case on the lines indicated in the order dated the 15th September, 1949. The
Tribunal submitted a supplementary statement of · the
case on the 8th June, 1951.
In the supplementary statement of the case reference
is made to clause 15 of the conditions of ·the contract
governing supplies made by the assessee to the Government of India. The system of payment under that
clause was that 90% of the price of each consignment
would be paid on proof of despatch of the stores from a
Railway Station or port in India after inspection and
the balance of 10%. would be paid on receipt of the
consignment in good
condition. That dause
also
provided:
·
''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 India1 or the Imperial
Bank of India tiansacting Government business."
. The assessee used to . submit bills in prescribed form
and ori the form used to write :
·
· .. '~Kindly iemit, the amount by a,. cheque in our
favour on any. bank.in Bombay."
·
After the submission of,.the bills .. the. assessee: used' to
receive from the Govern.ment · cheques drawn· ·on the
Bombay branch of the Reserve · Bank · of India along
with a memo stating : ·
·
'
-
..:1
S.C.R.
SUPREME COURT REPORTS .
189
"The undersigned has the honour
with cheque No.
dated'
to forward · herein payment of
the bills noted below" :-
Then followed a tabular statement setting out the
number, date and amount of the cheques. On the top
of the memo there was a direction that it-
"be immediately
returned
to the
Controller of
Supply Accounts with the acknowledgement form on
the reverse duly·· signed and stamped when necessary."
The acknowledgement form 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."
After receipt of the cheques the assessee used to
indorse it in favour of Aundh Bank Ltd., Ogale Wadi
Branch which in its
turn .used to endorse them in
favour of the Bombay Provincial Co-operative Bank
Ltd.,
Bombay.
The last
named
bank
cleared
the
cheques through the Clearing House in Bombay. The
supplementary
statement of the
case
further
records
that the A.undh Bank Ltd., used to credit the assessee's account on the very clay the cheques were received from the assessee with the amount of the cheque
less the collection charges and that the assessee used· to
credit the account of the Supply Department and make
corresponding debits to the bank's account and the
bank charges account. A case was sought to be made
by the learned advocate for
the assessee before the
Tribunal that the cheques used to be discounted by the
Aundh Bank Ltd., presumably
implying thereby
that
the assessee actually got payment in cash
in Aundh.
This casl;! was repelled by the . Tribunal which held that
the bank only allowed. the assessee to draw money on
the security of the cheques but did not . discount them.
Our attention has 'been drawn to the following passage
in paragraph 8 of ·the supplemen;ary statement . of, .the
case:
"By merely issuing . a. cheque to. the assessee .. no
payment as such was made by the Government. The
payment was only made
when the Government's
account in the books of the bank was debited."
1954
The Commisrioner
of Income-taJC,
Qombay South,
Bomb4y
v.
Messrs. Ogak
Glass Works Ltd.,
Ogale Wadi.
Das].
1954
The Commissiorut
of Income-tax,
Bombay South,
Bombay
v.
Mf:ssrs. Ogale
Glass Works Ltd.,
Ogale Wadic
Das].
190
SUPREME COURT REPORTS
[·1955]
Paragraph 9 of the supplementary statement of the
case thus summarises the Tribunal's findings :
"9. On the above facts our findings are :
(1) Under the agreement with the Government of
India . the assessee had undertaken to receive· the payment by cheque drawn on a bank in India.
(2) 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.
(3) 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.
( 4) The assessee' s bankers allowed the assessee to
draw money against the security of the cheque on the
very day the cheque was sent for collection to the bank.
(5) The assessee's
bankers realised the payment of
the cheque from the Reserve Bank of India, Bombay,
as agents of the assessee.
For rendering this service
the bank charged the usual commission charged for
collecting an outstation cheque.
(6) The sale proceeds were received in Bombay.
(7) The ,cheque was encashed on behalf of the
assessee at Bombay.
(8) The profits on the sales made to the Government of India were received by the assessee in cash in
Bombay."
· The supplementary statement of the case concludes
with the remark that both parties agreed to the correctness of the facts.
The main argument advanced before us, as before
the High Court, by the learned advocate for the assessee is that the assessee received payment for the goods
supplied by it when it received the cheques at Aundh.
In other . words the assessee accepted the cheques in full
satisfaction and in discharge of its claim against the
Government under the contracts. The conclusion pressed upon us 1s that as the cheques · were received at
Aundh the payment was received there and consequently the assessee which is a non-resident company did not
receive any income, profits ·or gains in British India
•
-
-,.
f. .,.
•
-
S.C.R.
SUPREME COURT REPORTS
191
within the meaning of section 4 (I) (a) of the Indian
Income-tax
Act
and
the
referred
question
should
be answered in the negative.
The contention put forward by the Revenue is twofold. In the first place it is urged that the question
whether the assessee accepted the cheques uncondition-
._
ally and in full satisfaction of its claims under the contracts is concluded by the Tribunal's findings of facts.
This contention is
not wholly without force. The
passage from paragraph 8 of the supplementary statement of the case and sub-paragraphs 3, 6 and 8 of
paragraph 9 do tend to suggest that in the view of the
Tribunal no payment was made by the Government by
merely
issuing
the cheques, that when the
assessee ·
_1.,
received the cheques it did not receive the sale proceeds, that it received the sale proceeds subject to the
encashment of the cheques, that the bank collected the
cheques in Bombay as the agent of the assessee and
that the sale proceeds were, therefore, received in cash
in Bombay. But in view of the language used in the
supplementary statement of the case there is
ample
scope for the view that the portions referred to above
r
do not amount to findings of fact by the Tribunal but,
on the contrary, are only inferences drawn by it from
facts found by it. Indeed the High Court was of the
opinion that the Tribunal had not in terms come to a
finding of fact that the assessee accepted the cheques
in complete discharge of its claim for the price of goods
supplied by it but on a consideration of the facts actually found by the Tribunal the High Court came to
the conclusion that the necessary inference to be drawn
< ' from those facts was that there was an arrangement
beitween the assessee and the Government from which
it could be said that the acceptance by the assessee of
the cheques from the Government resulted in an unconditional discharge
of the debt. In the .circumstances
we have to examine the facts found by the Tribunal
which have a bearing on this point.
,
The assessee contends that on the facts found by the
} -""" Tribunal it must be held that it received the cheques
in full and unconditional discharge of its claims for
the price of goods sold and delivered by it to the
1954
The Commissiorur
of Income-tax.
Bombay South,
Bombay
v.
Musrs. Ogale
Glass Works Ltd.,
Ogale Wadi .
Das] .
·1954
Thi Commissiontt
vf lncomeptax,
,Bombay South,
Bombay
v.
Messrs. ·Ogale
Glass Works Ltd.,
·Oga[e Wadi.
.Vos].
192
SUPREME:COURT. REPQRTS
} .[1955} '-fl
·Government and not conditionally subject to realisation.
1'hat a sum of money lllay be received in more ways
than one cannot be doubted. It may .be received by the
transfer .of coins or currency notes .or a negotiable
instrument which· represents and produces cash and is
treated as such by businessmen.
(.See per Lord Lindley iB Gresham Life Assurance Society v. Bishop(')).
Reference in this connection may also be made .to the
.decisions in Commissioner of Income-tax v. Kameshwar
Singh(• ),
R~ghunandan Prasad v. Commissioner of
Income-tax(' )
and Commissioner of Income-tax v .
. Maheswari Saran Singh(•). Learned Solicitor-General
does not dispute this proposition but .he .argues that, in
the absence of any agreement,
e~press or implied, to
the contrary, a payment by a negotiable instrument is
.always under,stood to be .conditional He refers us
to
Benjamin on Sale, 8th Edition, page 787, in support of
the proposition that the intention to take a bill in absolute payment for goods sold must be
clearly shown,
.and not deduced from ambiguous expressions, such as
that the bill was
taken "in payment" for the goods
Stedman v. Gooch(5), and Maillard v. Duke of Argyle(")
or "in ,discharge"
Kemp v. Watt('), or "in settlement"
.of the price Re Rower and Haslam('). In addition to ""'
the abo"<e English cases referred to in Benjamin on
,Sale the learned Solicitor"General also
relies on the
.case
of
Palaniappa Chetty v. Arunachalam
Chetty(0 )
where it was held by the Madras High Court that
the execution of a formal receipt for the amount
.covered by the bill of exchange or hundi was not
sufficient to rebut the general presumption that the
deliverey of a bill of exchange or a hundi for. a debt (.
operated only as a conditional discharge of the debt.
He insists that on the facts of this case there is nothing
from which an '1greement may be implied that the
.cheques were given ,and received unconditionally in full
discharge of the .original contractual
liability of
the
Government for the price of the goods supplied by the
(1) .L.R. [~902] A. C. 287.at p. 296;
' '(2) [1933] l LT.R. 107 .
. . r3J 60 r.A. 13~·; {1933J, r.'.J:.R .• •113.
(4) (1g51j.19 LT.R. 83.
(5) (1793) l Esp. 5.
-
•
\
~,
'
...
S.C.R.
SUPREME COURT REPORTS
l93
assessee. Sri Kolah
·on the other hand, .relied .on the
following facts
i~ answer to the contentions of the
iearned Solicitor-Gerreral :
(i) that there was an arrangement by the contract
itself, for payment by cheque (clause 15),
(ii) that ,in the bills submitted by him the assessee
expressly asked for payment by cheque,
(iii) that the Government sent cheques in payment
of the !bills,
(iv) that on receipt of the cheques the assessee
returned the acknowledgement form duly signed
and
stamped as a formal receipt,
(v) that the ;drawer of the cheques was the Government of India and the drawee was the Reserve Bank
of India for whose solvency there could be no appre-
·hensian at all in the mind of the assessee.
Sri Kolah contends that the .cumulative effect of
these facts
1s
clearly enough to establish that the
cheques were received
unconditionally as
payment.
Learned Solicitor:General points out that the assessee's
request to pay the amount of the bills by cheques
carnes the matter no further, for the undertaking to
pay by cheque was already there. The point of the
request w.as that the cheques · should ;be issued, on some
bank in Bombay. The insistence on a stamped receipt
in advance of payment was,
says the Solicitor-General,
m keeping with the usual practice of Government
departments. Therefore, we have in this ·case, according to the learned Solicitor-General, nothing more than
a term in the ·contract for payment by cheques and the
status of the drawer and drawee of the ·cheques. These
two circumstances, so submits the Solicitor-General,
are not suffic'ient to establish the fact of the acceptance
of the cheques as unconditional dischai:ge. He contends
that, in the absence of an express agreement, it is only
when the creditor elects to ·take a bill or cheque having
it in his power to obtain payment in cash, that is to
say, takes a bill or cheque by choice or preference
instead of cash that an agreement may be implied that
he took it as an unconditional and absolute payment
1954
T heCommissioatr
of lncomt•llJJC,
Bombay South,
Bomhtg
v.
Messrs. Ogale
Glass Works .Ltd.,
Ogale Wadi.
DasJ .
r954
The Commissioner
of 1ncome·tax,
Bombay South,
Bomb<fl
v.
Messrs. Ogafr
Glass Work.s Ltd.,
Ogale Wadi.
Das].
194
SUPREME COURT REPORTS
[1954]
of the.debt: Robinson v. Henry Reid( ') and Anderson
v. Hi/lies(').
Such cases must be rare, for. the creditor
IS not ordinarily likely to give up the advantage of
having a double
remedy namely one on the bill or
cheque and the other, on dishonour of the bill or
cheque, on the original ca\Jse of action. He points out
that in this case there is no finding of any special agreement in this behalf and, therefore, submits the learned
Solicitor-General, the assessee must be taken to have
received the cheques conditionally, i.e., subject to realisation. The learned Solicitor-General concludes
that,
m the circumstances, no payment was received by the
mere receipt of the cheques and that payment was
received only when the cheques were cashed in Bombay
and that such receipts m
Bombay
became
immediately assessable
to
British Indian tax
under
section 4(1)(a). The High Court repelled this line
of argument and held that the assessee received payment on the dates the cheques were delivered to it.
We find ourselves substantially in agreement with this
conclusion. It is to be remembered that there are four
modes in which a contract may be discharged, namely
(1)
by agreement, (2) by performance, (3) by being
excused by law from performing it and ( 4)
by breach.
In this case clause 15 of the contract provides how the
payment of the price is to be made. In short the contract itself,
by that clause,
prescribes the manner and
the time for performance by the Government of its
part of the contract and as the Government made the
payments in the prescribed manner, i.e., by cheques, it
fulfilled its engagement and such payment would under
section 50 of the Indian Contract Act, operate as a
discharge
of the
contract.
It should also be remembered that the assessee sent has formal stamped receipts
only after the receipt of the cheques and · not along
with the bills submitted by it. Therefore, the receipts
cannot be regarded as
having been sent in advance;
The status of the drawer and the drawee of the cheques
IS also a material consideration. Finally there
IS no
suggestion that any of the cheques was dishonoured on
presentation. We, therefore, agree with Sri Kolah that·
\r) (r829) g B.&C. +49·
(2) (1852) 21 L. J. C. P. (N.S. 15 o.
{
-
-
/' ...
l
•
y
)
S.C.R.
SUPREME COURT REPORTS
195
the several facts relied on by him and alluded to above,
taken cumulatively, must lead us to the conclusion that
the cheques were received in complete discharge of the
claim for the price of the goods.
Learned Solicitor-General, however, contends, on the
author.ity of the decision in Kodarmal v. Sagormal(1),
that the request by the creditor to send a cheque does
not imply any variation of the rule that payment by a
negotiable
instrument
1s
conditional
on
its
being
honoured on presentation within due time. Even if we
accept his contention that the
facts
referred to above
are not sufficient to raise the implication that the
cheques were accepted
as payment and even
if the
sending of the cheques in terms of clause 15 or at the
special request of the assessee did not operate as an
unconditional discharge
of the
Government's
liability
even
then the
assessee's position will be no better.
When it is said that a payment by negotiable instrument is a conditional payment what 1s meant is that
such payment is subject to a condition subsequent that
if the negotiable instrument is dishonoured on presentation the creditor may consider it as waste paper and
resort to his
original demand : Stedman v. Gooch(2).
It 1s said m Benjamin on Sale, 8th Edition, page
788 :-
"The payment takes
effect from
the delivery of
the bill, but is defeated by the happening of the condition, i.e., non-payment at maturity."
In Byles on Bills, 20th Edition, page 23, the position
is summarised pithily as follows :
"A cheque, unless dishonoured, is payment."
To the same effect are the passages to be found in
Hart on. Banking, 4th Edition, Volume I, page 342. In
Felix Hadley & C. v. Hadley( 3 ), Byrne J. expressed
the same idea in the following passage m his judgment
at page 682:
"In this case I think what took place amounted
to a conditional payment of the debt;
the condition
(1) \r9<>7) 9 Born. L.R. 903 at p. 9II.
'(2) (1793) I Esp. 5.
(3) L.R. (1891) 2 Ch. D. 680.
1954
The Commissioner
ef lncome·tax,
Bombay South,
Bombay
v.
Messrs. Ogale
Glass Works Ltd.,
Ogale Wadi.
Das].
1954
The Cornmissi011tT
of lncoTM·tax,
Bombay South,
B.omluty
v.
Messrs. Ogale
~lass W arks Ltd.,
Ogali Wadi.
Das].
196
SUPREME COURJ'. REPORTS
)1955}
, I
being that the cheque · or bill should be duly met or
honoured at the proper date. If ·that be the true view•
then I think the position is exactly as if an agreement
had been expressly made that the bill or cheque should
operate as payment unless defeated by dishonour or by
not being met ; and I think that that agreement is implied from giving and taking the cheques and bills in
question."
The following observations of Lord Maugham m.
Rhokana
Corporatirm v. Inland
Reuenue
Commissioners( 1 ) are also opposite :
"Apart from the express terms of section 33, subsection 1, a similar conclusion might be founded on the·
well known common law rules as to the effect of the
sending of a cheque in payment of a debt, and in the·
fact that
though the payment is
subject to the
condition subseqμent · that the cheque must be met·
on presentation, the date of payment, if the
cheque·
is
duly met, is the date when the cheque was
posted.'.'
In the case before us none of the cheques has been
dishonoured
on
presentation and
payment cannot,..
therefore, be said to have been defeated by the happening of the condition subsequent, namely dishonour by
non-payment and that being so there can be no ques-.
tion, therefore, that the assessee did· not receive pay-.
ment by the receipt of the cheques. The position, therefore, is that in one view of the matter there was, in the ..
circumstances of this case, an implied agreement under·
which the cheques were accepted unconditionally as·
payment and on another view, even if the cheques
were taken conditionally, the cheques not having been
dishonoured but having beea cashed, the payment
related back to the dates of the receipt 'of the cheques
and in law the dates of payments were the dates of the
delivery of the cheques,
On
the footing,
then,
that the assessee received . payment as soon as the cheques were delivered
to it the question still remains as to when and
where the assessee
recei¥ed
such
payment.
The
(1) L.R. [1938] A.C. 380 at p. 399.
. .,.
--'· J
•
-
•
•
SUPREME COURT .RE;t'.ORTS
197
answer is obvious, says the assessee, namely that it
received payment in Aundh where the cheques were
delivered to it. The ·learned Solicitor-General, how-
·ever, contests that argument. According to him the
·cheques were delivered to the assessee as soon a.s they
were posted. The rejoinder of the assessee is two-fold.
Jn the first place it is said that this
IS an entirely new
question of law which was never raised or argued before
the Tribunal and was not dealt with by it and, therefore,
·cannot be said to arise out of the Tribunal's Order and
consequently the Court .has no jurisdiction, while exercising its advisory jurisdiction under section 66 of the
Indian Income-tax Act, to permit such a new question
of law to be raised at this stage. Learned Counsel for
the assessee relies on the cases of Commissioner of Excess Profits Tax, . West Bengal v. Jeewanlal Ltd.( 1 ),
Chainrup Sampatram v. C. I. T., West Bengal( 2 ), Allahabad Bank Ltd. v. C. 1. T., West Bengal(3), Mohan/al
Hiralal v. C. I. T., C. P. & Berar(~), and Hira Mills
Ltd.,
Cawnpore v.
Income-tax
Officer,
Cawnpore("),
while the learned Solicitor-General refers us to the decisions in Madan/al Dharnidharka v. Commissioner of Income-tax, Bombay City( 8 ), and Commissioner ofi Incometax, Delhi v. Punjab National Bank Ltd.( 7 ).
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 out of" the Tribunal's order on
the interpretation of which there exists a wide divergence of judicial opinion. It should be noted that this
is not a case where .the Tribunal having refused to refer
.a question of law an applica~ion was made to the High
Court to exer.cise its jurisdiction under sub-section (2)
of section 66. 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
(1) [1951] 20 I.T.R. 39 at p. 47.
(2) [1951] 20 I.T.R. 484 at pp. 492, 496.
(3) [1952] 21 I.T.R. 169.
{4) [1952] 22 I.T.R. 448.
t.5) [1946] 14 I.T.R. 417.
(6) [1948] 16 I.T.R. 227 at p. 232 .
. fa) [1952] 21 .LT.R. 526.
1954
T ht Commi.rsioner
of Income-tax,
Bombay South,
Bomb'!'!
v.
Messrs. 0 gale
Glass Works Ltd.,
Ogale Wadi.
Das ] .
The Commissioit.er
of lncomt·tox,
Bombay South,
Bombay
.V·
Messrs. Ogall
Glass Works Ltd.,
Ogal1 Wadi.
Das].
198
SUPREME COURT REPORTS
[1955]
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
m 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
as 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 does 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 m such 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, mcome, 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 m 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
b~fore the Tribunal and on
which the Tribunal's decision was fotinded, 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 1s no warrant for such suggestion.
..i€-
i •
-
S.C.R.
SUPREME COURT REPORTS
199
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.
Sri Kolah then contends that the requisite facts, on
which this branch of the argument may be based, are
not to be found in the order of the Tribunal and the
statements of the case and,
therefore,
this
argument
should not be entertained. 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
cases here as will be presently shown. The High Court
conceded that if tl1e assessee had requested the Government to send the cheques by post then it wouH have
made the post-office its agent and in that event the
posting of the cheques by the Government at Delhi
would have been deliverey of the cheques to the assessee m Delhi. The High Court, however, held that
there was no finding by the Tribunal that it point of
fact the assessee
had ever
requested the
Government
to send the cheques by post and that that being the
position it could not be said that the cheques had been
delivered to the assessee in Delhi. In our opinion, for
reasons to be presently stated, this part of the decision
of the High Court cannot be supported on facts and
its conclusion cannot be sustained in law.
Turning to the order of the Tribunal we. find the
following passages :
"All payments for the goods supplied were made
by cheques drawn by the Government department at
Delhi on the Reserve Bank of India, Bombay Branch.
The cheques were received by the assessee Company in
its office in Aundh State."
The finding of fact recorded in the first statement of
the case also comprises the following (inter- alia) :
"These
cheques
were received
by the
assessee
Company at its office in Aundh State .by post."
1954
The Commissioner
ef Income-tax,
Bombay South,
Bombay
v.
Messrs. Ogat.
Glass Works Ltd.,
Ogale Wadi.
Das J.
1954Thf Commtssiontr
of l~orne-tax~
Bombay South,
Bombay
v.
Messrs. Ogal1
Glas,s Works Lld.,
O&all Wadi.
Das].
200
SUPREME COURT REPbRTS -
[1955].
The finding of fact m paragraph 3 of the Supplementary Statement of the case is thus recorded :
"3. The assessee
company
u"sed
to · submit · the
bills and on the form of the bill it used to write "Kindly
remit the amount by a cheque in our favour on any
bank in Bombay".
The question for our consideration is as to what, on
the legal principles laid down in judicial · decisions; these
findings of fact amount to."
In Norman v. Rickets(' ), the creditor
carrying on
business as milliner in Bond Street wrote to one of the
customers who resided in Suffolk saying "the favour
of a cheque within a week will oblige".
The customer
upon such request sent a cheque for the amount by
post. The cheque was, stolen in the transit and was
paid by the Bank to the theif. It will be noted that
there was no express request to send the cheque by
the post, but nevertheless it was held that the sending·
of .the cheque by post was payment. On appeal the
Court of Appeal upheld the trial Court and observed :
"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 the 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 reasonably 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 Madame Phillipe · might have intended ,.was
that she was to send the . cheque by post. She, therefore, reasonably believed that she was invited to send
her cheque 'by post, and she did what she Was , asked
to· ifo;
Consequently what she did amounted to payment."
t
• ,. ft..
' .
'
' ...
•'
-
.
+
;-
In Th{lidwalv. The Great Northern R,ailway Co.,(•)
the directors' by their report · recommended (a) . the
declaration of dividend at certain rates, and (b) the --J
(1) (1886) 3 T.L.R. t8il.
' co) LR: (tg10). K..B. 509:" '
'
'
•
-
•
-
S.C.R.
SUPREME ·couRT REPORTS
201
despatch of dividend warrants by post. At the half
yearly general meeting the shareholders passed a resolution that dividends be declared at certain altered
rates but said nothing about sending the same by post.
Dividend warrants were sent to a stock-holder by post
but it was lost in the post. Bray J., held that in the
circumstances there was a request by the stock-holder
to the company to pay the amount due to him by
means of a warrant sent by post. The case of Badische
Anilin Und Soda Fabrik v. Basie Chemical Works( 1 ),
was concerned with a Swiss seller who was asked to
send the goods by post to England which he did. The
goods were manufactured according to an invention
protected by an English Patent. The question was as
to who brought the goods to England so as to be liable
to an action for infringement. It was held that the
post-office was the agent of the English buyer . and,
therefore, the Swiss seller could not be sued. After
stating that the seller had sent the goods in pursuance
of the order from the buyer to a particular named
·carrier namely the post-office which is after all only a
carrier of parcels like any other carrier Lord Halsbury
at p. 204 said :
"It is not necessary that the carrier should have
been named. If, according to the ordinary course of
delivery, the carrier would be the person who would
receive it, that would be just as good, for the purpose
of the argument , as if the carrier had been actually
named ; but we have not to consider that question
here, because the carrier is named. Then, for what
reason am I to depart from the well-known and recognised principle of law that, under these circumstances,
when goods are delivered by the order of the buyer to
a named carrier, from that moment the goods vest in
the buyer?"
.P
The decision in Comber v. Leylqnd( 2), is very important for our purpose in that it explains the meaning and
implication of the word "remit" which is the word
used by the assessee when it requested the Government
f ~ Department to "remit" the amount by cheque.
There
(1) L.R. (1898] A.C. 200.
(2) L.R. f1898] A.C. 5li4.
1954
The Commissiont
of lncornz..tax,
Bombay South,
Bombay
v.
Messrs. 0 gale
Glass Works Ltd.,
Ogale Wadi.
DasJ.
1954
The Commissiontr
of Income-tax,
Bombay South,
Bombay
v.
Messrs. Ogal1
Glass Works Ltd.,
Ogalt Wadi.
Das J.
202
SUPREME COURT REPORTS
[1955]
was in that case no · express reference to the post-office
at all. Said Lord Herschell, at p.