COMMISSIONER OF INCOME TAX BIHAR AND ORISSA Vs. PATNEY AND CO

JUDGEMENT

(1.) This appeal pursuant to special leave is brought by the Commissioner of Income-tax against the judgment of the High Court of Orissa holding that the amounts received by the assessees-respondents were not received in what was British India and therefore not liable to income-tax. The respondents at all material times were non-residents carrying on business at Secunderabad which was then in the territories of the Nizam of Hyderabad. They acted as agents for the supply of gas plants manufactured by M/s. T. V. S. Iyengar and Sons, Madura to the Nizam's Government, and also as agents of the Lucas Indian Services, Bombay branch, for the supply of certain goods to that Government. The year of assessment is 1945-46. There does not appear to have been any written agreement between the two manufacturers and the respondents but the goods were to be supplied on a commission basis. In pursuance of this agreement the respondents received from M/s. T. V. S. Iyengar and Sons, Madura, cheques drawn on the Imperial Bank of India, Madras, amounting to Rs. 35,202 in respect of all goods supplied from Madura. and also from Lucas Indian Services Bombay by cheques drawn on Imperial Bank of India, Bombay branch, amounting to Rs. 5,302 in respect of goods supplied by them, thus making a total of Rs. 40, 504. These cheques were sent by post and when received by the respondents at Secunderabad were credited in the account books of the respondents and sent to their banker G. Raghunathmal for collecting and crediting to the account of the respondents. As against these sums so deposited the respondents at once drew cheques and thus operated on these amounts deposited. In regard to the commission receive from the Bombay firm it was paid into the account on 22-12-1944, but was given credit for only on 2-1-1945. The Income-tax Officer assessed these sums as taxable income holding that the entire amount of Rs. 40,504 was received in British India and not at Secunderabad:An appeal was taken by the respondents to the Appellate Assistant Commissioner who upheld the order holding that income must be held to have accrued, arisen or received in British India. Against this order the respondents took, an appeal to the Income-tax Appellate Tribunal and it was held that the amounts were received by the respondents from Madura and Bombay firms as commission but they were received at Secunderabad. The appeal was therefore allowed. The finding of the Appellate Tribunal in their own words was:

(2.) It appears that at that stage the controversy was confined to the question whether the cheques having been sent to Secunderabad and having been realised in British India would amount in a final discharge or an unconditional one. The Tribunal in its supplementary statement found that the course of conduct followed by the parties showed that the cheques were received from the Bombay and Madura firms in full satisfaction of the commission ascertained from time to time and due on such date. It said:

(3.) The matter was decided by the High Court against the appellant and in the meanwhile this Court had given a judgment in Commissioner of Income-tax vs. Ogale Glass Works Ltd., (1955) 1 SCR 185. Even after considering the decision of that case the High Court was of the opinion that the income of the respondents was not received in British India had answered the question against the Revenue. The High Court refused to giver leave appeal to this Court and it was this Court which gave special leave to appeal.