SHRI JAGDISH MILLS LTD. vs. THE COMMISSIONEB OF INCOME-TAX, BOMBAY NORTH, KUTCH AND SAURASHTRA, AHMEDABAD

CIVIL APPEAL No. 681/1957Supreme Court[1960] 1 S.C.R. 23612 May 1959Bench: 3 JudgesAuthor: SUDHI RANJAN DAS, NATWARLAL HARILAL BHAGWATI, M. HIDAYATULLAH JAGDISH MILLS LTD.13 pages
AI SummaryDismissed

What were the facts?

The appellant company, Jagdish Mills Ltd., manufactured and sold textiles in Baroda. For assessment years 1942-43 and 1943-44, it supplied goods to the Government of India. Payments were to be made by cheque as per the contract. The appellant submitted bills stating "Government should pay the amount due to the appellant by cheque," but did not specify how the payment should be made. The Government, located in Delhi, sent cheques by post to the appellant in Baroda. The appellant received and accepted these cheques in Baroda, which were then cashed through its bank accounts in Bombay and Ahmedabad. The Income-tax Officer and Appellate Assistant Commissioner held that these amounts were received in the taxable territories. The Income-tax Appellate Tribunal, following a previous Supreme Court decision, also held that the amounts were received in taxable territories and were thus liable to tax under Section 4(1)(a) of the Indian Income-tax Act, 1922.

What did the Supreme Court hold?

The Supreme Court held that, considering the general course of business usage, there was an implied request by the appellant for the Government to send the cheques by post. The Court reasoned that in the normal course of affairs, given the Government's location in Delhi and the appellant's in Baroda, sending cheques by messenger or personal delivery was not practical. Therefore, the parties must have intended for cheques to be sent by post, which is the usual agency for transmitting such articles. This implied request constituted the Post Office as the appellant's agent for receiving payments. The Court applied the principle from Commissioner of Income-tax, Bombay South v. Messrs. Ogale Glass Works Ltd. [1955] 1 S.C.R. 185, stating that the absence of specific words like "to remit the amount by cheque" did not alter the position. Consequently, the amounts of the cheques were considered received in the taxable territories and were liable to tax under Section 4(1)(a) of the Act. The appeals were dismissed.

What were the issues?

1. Whether, in the facts and circumstances of the case, the stipulation that payments should be made by cheques implied a request by the appellant to the Government to send the cheques by post, thereby constituting the Post Office as the appellant's agent for receiving such payments, making the income taxable in the taxable territories under Section 4(1)(a) of the Indian Income-tax Act, 1922? Assessee's contentions: The appellant argued that the posting of a cheque does not legally amount to payment and that there was no express or implied request to send cheques by post. They also referred to provisions of the Post Office Act, 1898, and postal regulations to argue that the Post Office was an agent of the Government, not theirs. Revenue's contentions: The revenue contended that the course of business usage implied a request to send cheques by post, making the Post Office the appellant's agent for receipt of payment. They relied on the Supreme Court decision in Commissioner of Income-tax, Bombay South v. Messrs. Ogale Glass Works Ltd. [1955] 1 S.C.R. 185.

Which sections of the Income-tax Act were involved?

Section 4(1)(a)

AI-generated summary — verify with the full judgment below

1959 The Centr11l Bank of India v. Their WorktiZeJJ S.K. Das J. I9S9 May u. 2~6 SUPREM.E COURT REPORTS [1960(1)] to any other law for the time being in force, provided there is no express provision to the contrary in the Banking Act. If, as we hold. unamended s. 10 of the Banking Act expressly prohibits the employment of any person by a bank whose remuneration takes the form of a share in the profits of the compa~y, then s. 2 of the Banking Act is of no help and cannot permit something which i~ expressly prohibited by s.

10.

For the reasons given above, we allow these seven appeals to the extent already indicated, namely, (1) the reference of 1952 is not now pending for determin~ ing the question of bonus for the relevant years in respect of particular banks and (2) section 10 of the Banking Act prior to the amendment of 1956 pro~ hib~ts the grant of industrial bonus to bank employees when such bonus is remuneration which takes the form of a share in the profits of the banking company. In the circumstances of these cases and in view of the long drawn out nature of the dispute, we make no direction as to costs. Appeal.s aUCYWed in part. SHlU JAGDISH MI

The order continues below.

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