COMMISSIONER OF INCOME-TAX (CENTRAL), NEW DELHI vs. M/S. S. ZORASTER & COMPANY

CIVIL APPEAL No. 2012/1968Supreme Court[1972] 1 S.C.R. 91624 September 1971Bench: 2 JudgesAuthor: C.A. VAIDYIALINGAM, P. JAGANMOHAN REDDY COMMISSIONER OF INCOME11 pages
AI SummaryDismissed

What were the facts?

The assessee, M/s. S. Zoraster & Company, located in Jaipur (outside taxable territories), supplied goods to the Government of India. Payment was made by cheques drawn on the Reserve Bank of India, Bombay, and received by the assessee at Jaipur. The Revenue contended that the amounts represented by these cheques, cashed in Bombay (a taxable territory), were taxable. The High Court, on reference, held that the cheques were received outside taxable territories and the amounts were thus received there. The Revenue's contention that cheques were posted at Delhi and thus payment was made there was rejected by the High Court, which accepted the Tribunal's finding that the Revenue failed to prove posting at Delhi. The Revenue applied for certificates to appeal to the Supreme Court, which were granted by the High Court on the ground that a question of law regarding presumption under Section 114 of the Evidence Act arose.

What did the Supreme Court hold?

The Supreme Court held that the jurisdiction of the court at the stage of granting a certificate for appeal is limited to considering whether a substantial question of law arises, having due regard to the material on record and the High Court's judgment. The Court found that the High Court erred in granting certificates on the ground of a presumption under Section 114 of the Evidence Act, as the Appellate Tribunal and the High Court had already recorded findings that the Revenue failed to prove the posting of cheques at Delhi. Therefore, no question of applying any presumption arose. The learned judges dealing with the certificate applications had no jurisdiction to go behind the findings of fact recorded in the original judgment. The Court also noted that questions of law should not be decided in the abstract but must arise from the material on record. Consequently, the certificates granted by the High Court were cancelled, and the appeals were held to be not maintainable.

What were the issues?

1. Whether the High Court, while dealing with an application for a certificate to appeal to the Supreme Court, has the jurisdiction to go behind the findings of fact recorded by the Appellate Tribunal and accepted by the High Court in its judgment disposing of the reference, particularly concerning the posting of cheques at Delhi. Assessee's Arguments: - The certificates granted by the High Court are not proper because the High Court erred in ignoring the specific findings of the Tribunal and the referring judges that the Revenue placed no evidence to show cheques were posted at Delhi, thus negating any presumption under Section 114 of the Evidence Act. Revenue's Arguments: - The payments by cheques were made at Bombay where they were cashed, not at Jaipur where received. - The cheques were posted at Delhi, and the post office acted as the assessee's agent, making payment at Delhi. - A substantial question of law arose regarding whether a presumption under Section 114, illustration (f) of the Evidence Act could be drawn regarding the posting of cheques, which is of general importance.

Which sections of the Income-tax Act were involved?

Section 66,Section 114

AI-generated summary — verify with the full judgment below

916 COMMISSIONER OF INCOME-TAX (CENTRAL), NEW DELID V. M/S. S. ZORASTER & COMPANY September 24, 1971 [C. A. VAIDIAL!NGAM AND P. JAGANMOHAN REDDY, JJ.J lncome-tax--Certificate to appeal to Suoren1e Court-Dutv of Hi.eh Court in grantinR certificate-No juri iction to go behind the finding recorded in original judgnlent1 disposing of the Reference. A B In re•pect of the goods supplied by the a"e"ee the Government of India paid the price by cheques.

The cheques drawn on the &eserve C Bank of India, at Bombay, were received by the aSiCisee at Jaipur. out- side the taxab!i:~ territories.

On the question whethet the amounts repre- sented by the cheques, cashed at Bombay, were taxable in the hands of the asse.,ee under the Income-tax Act, 1922. t~o High Court, on refer- ence, held that the mere fact that the cheques were realised at Bon1bay was of no consquence and that in the particular circumstances of Ihe case since the cheques were 'received by the asse~ce outside the taxable terri- tory the amounts covelred by the cheques were received by the assessce at D that place. Jn dealing with the contention of the revenue that the asse~sec must be considered to have rece

The order continues below.

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