THE COMMISSIONER OF INCOME-TAX BOMBAY SOUTH BA,Y BOMBAY vs. MESSRS OGALE GLASS WORKS LTD OGALE WADL

CIVIL APPEAL No. 19/1953Supreme Court[1955] 1 S.C.R. 18519 April 1954Bench: 3 JudgesAuthor: SUDHI RANJAN DAS, NATWARLAL HARILAL BHAGWATI, B. JAGANNADHADAS21 pages
AI SummaryAllowed

What were the facts?

The assessee, Messrs. Ogale Glass Works Ltd., is a limited liability company incorporated and operating in Aundh State, outside British India, making it a non-resident for Indian Income-tax Act purposes. For assessment years 1941-42 to 1945-46, the assessee supplied goods to the Government of India. Payments were made by cheques drawn on the Reserve Bank of India, Bombay, which were received by the assessee in Aundh. The Income-tax Officer and Appellate Assistant Commissioner held that income was received in British India as cheques were drawn on a Bombay bank and cashed there, taxing the assessee under Section 4(1)(a). The Income-tax Appellate Tribunal upheld this. The assessee appealed to the High Court, which remanded the case to the Tribunal for further findings on whether cheques were received in full satisfaction and discharged the debt in Aundh.

What did the Supreme Court hold?

The Supreme Court held that when a creditor requests payment by cheque sent by post, the post office acts as the agent of the creditor (addressee). In this case, the assessee's request to the Government of India to 'remit' amounts by cheques, coupled with the general course of business usage, implied an intention that cheques should be sent by post. Therefore, the posting of cheques in Delhi by the Government of India constituted payment in Delhi to the post office, which was the agent of the assessee. This performance of the contractual obligation in the manner sanctioned by the assessee discharged the debt. The Court found no material difference between the Indian Post-Office Act, 1898, and the Indian Contract Act, 1872, illustration (d) to Section 50, which supports this principle. Consequently, the income was deemed to have been received in British India. The appeal was allowed, and the question was answered in the affirmative.

What were the issues?

1. Whether, on the facts of the case, income, profits, and gains in respect of sales made to the Government of India were received in British India within the meaning of Section 4(1)(a) of the Indian Income-tax Act. The assessee contended that profits accrued and were received in Aundh State upon receipt of cheques, which constituted full satisfaction and discharge of the debt. The revenue contended that the drawing of cheques on a Bombay bank and their subsequent encashment in Bombay constituted receipt of income in British India. The High Court initially remanded the case to the Tribunal for further factual findings regarding the discharge of debt and receipt of cheques. The Supreme Court, in appeal, considered the legal implications of posting cheques as payment and the agency of the post office.

Which sections of the Income-tax Act were involved?

Section 4(1)(a),Section 50

AI-generated summary — verify with the full judgment below

... ,- .. • 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-resi- dent 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 depend- ed upon its receipt of income within British India. On the express request of the assessee· to remit the . amount· of ·the 'bills

The order continues below.

Read the full judgment

A free account opens 10 full judgments a month. Re-reading one you have already opened does not count again.

Create a free accountSign in

See plans and prices

The summary, the parties, the sections and the citations above are open to everyone and always will be. Only the text of the order and the PDF are metered.

More judgments on Section 4(1)(a)

All 47 judgments and leading authorities on Section 4(1)(a) →

Recent GST High Court judgments

Search GST case law →