Bhagwati, J.
1. This reference arises out of proceedings for the assessment to income-tax of the assessee for the assessment year 1948-49. The assessee is private limited registered under the Dhrangadhra State Companies Act, 1939, and carries on business as an authorized dealer of the products of Dhrangadhra Chemical Works Limited at Dhrangadhra. During the relevant period Dhrangadhra was a native Indian state outside what was then know as British India. The assessee was thus a nonresident for the assessment year with which we are concerned. During the financial year 1947-48, which was the relevant previous year for that assessment year, the assessee effected to the sales of the aggregate value of Rs. 40,58,445 out of which sales to the extent of Rs. 6,63,545 were made to buyers in Native India States while the balance of the sales aggregating to Rs. 33,94,900 were made to the British Indian buyers. These sales to British Indian buyers were again divisible in to the categories : (1) sales to the extent of Rs. 5,30,460 were such that in the bills in respect of those sales there was a request that the sale proceeds should be paid by 'demand draft on Rajkot'; and (2) so far as the remaining sales were concerned, neither the mode nor the place of payment was the specified in the bill in respect of those sales since the sale proceeds were received by the assessee in advance of the sales. The goods which formed the subject matter of these sales were sent by rail from Dhrangadhra to various places in British India. The prices charged were f.o.r. Dhrangadhra and the railway receipts were taken in the name of the buyers and were either agents. The sale proceeds in respect of the first category of sales where the payment was required 'by the demand draft on Rajkot' where in fact received by the assessee by cheques sent by buyers through post to the assessee in Dhrangadhra. The assessee being a non-resident company, its liability to British Indian tax depended upon its of income within British Indian under section 4(1)(a) of the Income-tax Act 1922. According to the assessee on part of its income was received in the British Indian and the assessee, 1922. The Income-tax Officer, Surendranagar, was however, prima facie of the opinion that the sale proceed in respect of the sales effected to British India and merchants were received by the assessee in British India and that profit embedded in those sale proceeds must, therefore, be regarded as received by the assessee in British India and hence, taxable under section 4(1)(a). He, therefore, issued a notice to the assessee under section 34(1)(a) on 27th March, 1957, and served it on the assessee on 28th March, 1957. By the notice the assessee was required to submit a return within thirty-five days, i.e., on or before 2nd May, 1957. On 22nd April, 1957, assessee requested the Income-tax Officer to grant extension of time up to the end of May, 1957. It does not appear from the record whether such extension of time was granted, but we are told by Mr. S. P. Mehta, learned advocate appearing on behalf of the assessee, that in fact such extension of time was granted. But even if that be sum the return was not filed by the assessee within the extended time but was filed but was filed as late as 3rd June, 1957. No objection was taken at that time by the assessee to the jurisdiction of the Income-tax Officer, Suredranagar. The Income-tax Officer, thereafter, went into the merits of the case and by his letter dated 13th February, 1958, wrote to the assessee saying that in some specific instances of sales there were clear directions to remit the sale proceeds from Part A States and there was, therefore, a strong presumption that such directions must have existed in respect of all payments from Part A States. The assessee replied by its chartered accountant's letter dated 18th February, 1958, denying the correctness of the presumption of the Income-tax Officer, that directions must have existed in respect of all objection to the jurisdiction of the Income-tax Officer on the ground that by reason of entry 78A in the notification dated 1st July, 1952, issued under section 5(6), it was the Income-tax Officer, Central Circle IV, Delhi, who had jurisdiction to assess the assessee and not the Income-tax Officer, Surendranagar. Thereafter there was some further correspondence between the Income-tax Officer and the assessee, but it is not necessary to refer to it in any detail since it does not throw any light on the question before the Income-tax Officer its books of account and bill books in respect of sales effected by it during the year of account. The Income-tax Officer on this material came to the conclusion that the sale proceeds were sent by British Indian buyers to the assessee by cheques and demand drafts through post pursuant to an express or implied request from the assessee and the post office, therefore, acted as agent of the assessee in the matter of transmission of the cheques and demand drafts and since the cheques and demand drafts were posted in British India and the profit of Rs. 1,56,808 embedded in the sale proceeds was accordingly taxable under section 4(1)(a). The Income-tax Officer also negatived the objection of the assessee as to jurisdiction on the ground that the objection raised a question as to the place of assessment and not having been raised within the time prescribed in section 64(3), it could not be entertained by him. The jurisdiction of the Income-tax Officer to act under section 34(1)(a) was also challenged but that was also negatived by the Income-tax Officer. The Income-tax Officer accordingly made an assessment on the assessee bringing to tax the profit of Rs. 1,56,808 embedded in the sale proceeds received from British Indian buyers.
2. The assessee thereafter carried the matter in appeal to the Appellate Assistant Commissioner. The same two preliminary objections which were urged before the Income-tax Officer were also urged before the Appellate Assistant Commissioner. The Appellate Assistant Commissioner negatived the objection as to the jurisdiction of the Income-tax Officer broadly on two grounds, namely, (1) that the objection was really an objection to the place of assessment and was, therefore, covered by section 64(3) and, since it was made beyond the time limit prescribed by that section, the Income-tax Officer was right in not entertaining it; and (2) that in any event this question could not form the subject matter of appeal before him under section 30. The objection to action under section 34(1)(a) was raised in a slightly different form and the argument was that the notice under section 34(1)(a) having been served on the assessee on 28th March, 1957, no order of assessment could be made after 27th March, 1958, and the order of assessment made on 7th April, 1958, was, therefore, invalid. But the short answer given to this argument by the Appellate Assistant Commissioner was that having regard to section 34(3) as it stood at the time when the notice under section 34(1)(a) was issued, there was no bar of limitation and the assessment could be completed after 27th March, 1958. The Appellate Commissioner thus negatived both preliminary objections of the assessee, but on the merits he took the view that there was nothing to show that any part of the sale proceeds were received by the assessee in British India and he accordingly annulled the assessment.
3. The revenue thereupon preferred an appeal to the Tribunal. Before the Tribunal the assessee sought to support the order of the Appellate Assistant Commissioner on the ground decided against it, namely, that the Income-tax Officer, Surendranagar, had no jurisdiction to assess the assessee by reason of Entry 78A in the notification dated 1st July, 1952. The Tribunal, however, rejected this ground and in addition to the reasons given by the Appellate Assistant Commissioner, the Tribunal gave a further reason, namely, that the burden of showing facts necessary to bring the case within entry 78A was on the assessee and the assessee had failed to discharge that burden as no facts relating to the control or exercise of the affairs of the company relating to the period 1st September, 1939, to 31st March, 1946, were placed before the revenue authorities to determine the applicability of section 78A. The Tribunal then examined the merits of the case and held that, so far as the sale proceeds to the extent of Rs. 5,30,460 were concerned, since there were instructions in the bills that the sale proceeds should be paid by 'demand drafts on Rajkot,' the case fell within the ratio of the decision of the Supreme Court in Shri Jagdish Mills Ltd. v. Commissioner of Income-tax, and the sale proceeds must be regarded as having been received in British India where the demand drafts were posted. In regard to the balance of the sale proceeds the Tribunal held that 'in the absence of any express or implied request to make the payment at a particular place in any particular manner, where the assessee requires or accepts the cheques sent by post then the post office which is the normal agency for such purposes will be employed in respect of such transmission of cheques and the post office will be the agent of the assessee and accordingly treated the balance of the sale proceeds as having been received in British India. The Tribunal, in the result, set aside the order of the Appellate Assistant Commissioner and restored that of the Income-tax Officer bringing the profit embedded in the sale proceeds to tax under section 4(1)(a). The assessee being dissatisfied with this decision of the Tribunal made an application for a reference, but the application was rejected and the assessee, therefore, moved this court under section 66(2) and this court, by consent of parties, made an order requiring the Tribunal to refer certain questions of law for the opinion of this court. Hence the present reference.
4. Out of the nine questions which have been referred to us, the first five relate to the objection to jurisdiction based on Entry 78A in the notification dated 1st July, 1952, questions Nos. 6 and 7 raise the point of assessability of the profit embedded in the sale proceeds of Rs. 33,94,900 received from British Indian buyers, question No. 8 embodies the challenge to the validity of the proceedings under section 34(1)(a) and question No. 9 raises a point as regards the correctness of a statement made in the order of the Tribunal. Mr. S. P. Mehta, learned advocate appearing on behalf of the assessee, stated before us that he was not pressing questions Nos. 8 and 9 and it is, therefore, not necessary for us to go into those questions. We will accordingly confine our attention only to the other questions which arise before us.
5. Now the first question which requires to be considered is as to whether the objection raised by the assessee to the jurisdiction of the Income-tax Officer, Surendranagar, to assess the assessee was an objection which fell within sub-section (3) of section 64. It was not disputed on behalf of the assessee that if the question raised by this objection was a question within sub-section (3) of section 64, the Income-tax Officer was right in refusing to consider the objection since it was raised beyond the time prescribed by the sub-section. The time prescribed by the sub-section expired on or before 2nd May, 1957, and even if any extension of time was granted by the Income-tax Officer on the application of the assessee, such extended time also expired at the end of May, 1957, and it was not until 18th February, 1958, long after the return was filed, that the assessee for the first time raised objection to the jurisdiction of the Income-tax Officer, Surendranagar. The objection was, therefore, clearly beyond the time prescribed by sub-section (3) of section 64 and the Income-tax Officer was not bound to entertain the objection and to refer it to the Commissioner for his determination under the provisions of the sub-section. Mr. S. P. Mehta, however, contended that the objection raised by the assessee was an objection to the jurisdiction of the Income-tax Officer, Surendranagar, and did not raise any question as to the place of assessment within the meaning of sub-section (3) of section 64. He tried to make a distinction between a question as to place of assessment and a question as to jurisdiction of a particular Income-tax Officer to assess the assessee. But we do not think there is any real distinction between these two concepts. When section 64 speaks of the place of assessment what it really does is to say which particular Income-tax Officer shall have jurisdiction to assess the assessee. The determination of the place of assessment under section 64 decides which particular Income-tax Officer-whether one situate at place A or one situate at place B-has jurisdiction to assess the assessee. As the marginal note to section 64 indicates, that section deals with place of assessment. Sub-section (1) lays down that where an assessee carries on a business, profession or vocation at any place, he shall be assessed by the Income-tax Officer of the area in which that place is situate or where the business, profession or vocation is carried on in more than one, by the Income-tax Officer of the area in which the principal place of his business, profession or vocation is situate. In all other cases, sub-section (2) provides that the assessee shall be assessed by the Income-tax Officer of the area in which he resides. These two sub-sections embody the general rule as regards the place of assessment of an assessee, i.e., as regards which particular Income-tax Officer shall have jurisdiction to assess the assessee. But in cases covered by sub-section (5), the applicability of this general rule is displaced and the assessment in those cases has to be made by the Income-tax Officer specified in the notification issued under section 5(6). A question may be raised by an assessee whether he is liable to be assessed by an Income-tax Officer in sub-section (1) or sub-section (2) or whether he is liable to be assessed by an Income-tax Officer specified in any notification issued under section 5(6) as provided in sub-section (5). That would clearly be a question as to the place of assessment and it would have to be determined in accordance with the procedure set out in sub-section (3). It is, therefore, clear that there is no real difference between a question as to the place of assessment and a question as to which particular Income-tax Officer has jurisdiction to assess the assessee. The objection raised in the present case, though styled as an objection to the jurisdiction of the Income-tax Officer, Surendranagar, was, therefore, in reality and substance an objection as to the place of assessment and being covered by sub-section (3) of section 64, it could not be raised beyond the time-limit prescribed by that sub-section. We are, therefore, of the opinion that the Tribunal was right in taking the view that the objection of the assessee to the Income-tax Officer, Surendranagar, assuming jurisdiction over the assessee was nothing but an objection about the place of assessment and was, therefore, rightly not entertained by the Income-tax Officer. We must, therefore, answer question No. 2 in the negative. In view of this answer to question No. 2, it is not necessary to go into questions Nos. 1, 3, and 4, and so far as question No. 5 is concerned, it must obviously be answered in the affirmative.
6. That takes us to the next question as regards the assessability of the profit embedded in the sale proceeds of Rs. 33,94,900 received by the assessee from British Indian buyers. Now the principles applicable to the determination of the question as to when and where payment can be said to have been received by a creditor when he receives payment by negotiable instrument sent through post are now well-settled by several decisions of the Supreme Court and we analysed those decisions in a case which we decided last year. That case is Petaled Turkey Red Dye Works Co. Ltd. v. Commissioner of Income-tax. We pointed out in that case that when a payment is received by negotiable instrument, the negotiable instrument may be received as unconditional payment or as conditional payment, but in either case it operates as payment to the creditor, the only condition in the latter case being that it should be paid and honoured on presentation. In such a case payment received by the creditor at the time when the negotiable instrument is delivered to the creditor and not when the negotiable instrument is encashed and this, quite irrespective of the fact whether it is taken by the assessee as unconditional payment or as conditional payment. Since it is the receipt of the negotiable instrument which constitutes the receipt of payment, the place of receipt of the negotiable instrument would determine the place of receipt of payment. Now in order to determine the place where the negotiable instrument can be said to have been received by the creditor, the court must first inquire whether there is any agreement between the parties as regards the place of payment. If there is an agreement between the parties, it must determine the place of payment and in such a case there is no room for implication. Such was the case in Commissioner of Income-tax v. Patney & Co. If there is no agreement between the parties in regard to the place of payment the court must see whether the negotiable instrument was posted by the debtor pursuant to a request made by the creditor. If is shown that the creditor authorized the debtor to send the negotiable instrument by post, the post office would be agent of the creditor for the purpose of receiving payment and the property in the negotiable instrument would pass to the creditor as soon as it is posted with the result that payment would be received by the creditor at the place where the negotiable instrument is posted by the debtor. The request which would constitute the post office the agent of the creditor may be express or it may even be implied from the facts and circumstances of the case. In Commissioner of Income-tax v. Ogale Glass Works Ltd. the request was an express request whereas in the case of Shri Jagdish Mills Ltd. v. Commissioner of Income-tax, the request was implied from the facts and circumstances of that case.
7. These are the principles which we must apply to the fact of the present case. Now when we turn to the facts we find that the sale proceeds are divided into two categories, one category being of sales to the extent of Rs. 5,30,460 where there were instructions in the bills to pay the sale proceeds by 'demand draft on Rajkot' and the other category being of the remaining sales where there were no instructions as regards either the mode or the place of payment and the sale proceeds were received in advance. We will consider these two categories of sales separately as the application of the principle set out above to the facts of the two categories of sales might lead to different consequences. Taking up first the case of sales where the bills contained instructions from the assessee to pay the sale proceeds by 'demand draft on Rajkot' we must first examine whether there was any agreement in regard to the place of payment between the parties. The argument of Mr. S. P. Mehta on behalf of the assessee was that the instructions 'payable by demand draft on Rajkot' contained in the bills which were sent by the assessee to British Indian buyers in respect of there sales required payment by demand draft at Rajkot and since Rajkot was specified by the assessee as the place where it required payment to be made to it, there was an agreement between the parties in regard to the place of payment and the case, therefore, fell within the ratio of the decision in Patney's case. But this argument is in our opinion fallacious and is based on a wrong reading of the instructions contained in the bills. The instructions were that the sale proceeds should be 'payable by demand draft on Rajkot'; they indicated the mode of payment, namely that the sale proceeds should be paid by demand draft which should be drawn on a bank in Rajkot and did not specify and place of payment. As a matter of fact the registered office of the assessee was situate in Dhrangadhra and the bills also showed the address of the assessee at Dhrangadhra. There is nothing on record to show that the assessee had an office at Rajkot nor did the bills set out any address of the assessee at Rajkot. It is therefore impossible to construe these instructions as requiring payment at Rajkot. By these instruction all that the assessee required of the British Indian buyers was that they should pay the sale proceeds to the assessee by demand drafts drawn on a bank in Rajkot; nothing was stated as to where the payment should be made. The present case is, if one may say so, very much akin to Ogale Glass Works' case, where the assessee who was in Aundh, a Native Indian State, required payment to be made by the Government of India by cheques drawn on any bank in Bombay and it was held that since the cheques were posted in New Delhi, the sale proceeds must be regarded as having been received by the assessee in New Delhi, irrespective of the fact that the cheques were required to be drawn on bank in Bombay. Since payment was required to be made by demand drafts (drawn on a bank in Rajkot) and the British Indian buyers were situate in British India and the assessee was situate in Dhrangadhra, the parties must have intended that the demand drafts should, according to the course of business usage in general, be sent by post which is the usual and normal agency for transmission of such articles. If that be so, there must be imported by necessary implication an implied request by the assessee to send the demand drafts by thus constituting the post office its agent for the purpose of receiving those payments : see Shri Jagdish Mills' case. We are, therefore, of the opinion that so far as the sale proceeds to the extent of Rs. 5,30,460 are concerned, they were received by the assessee in British India where the demand drafts were posted by British Indian buyers and the profit embedded in these sale proceeds must, therefore, be regarded as having been received in British India so as to be taxable under section 4(1)(a).
8. The position is, however, different when we come to the second category of sales where sale proceeds were received by the assessee in advance and neither the mode nor the place of payment was specified in the bills or in any letters or documents prior to the receipt of the sale proceeds. In the case of these sales there was obviously no agreement between in the parties in regard to the place of payment. The only question which would, therefore, require to be considered is whether there was any request, express or implied, from the assessee to British Indian buyers to send the sale proceeds by cheques by post. As a matter of fact there was not even an express request by the assessee to remit the sale proceeds by cheques so as to attract the applicability of the ratio of the decision in Shri Jagdish Mills' case As in the case of the sales earlier referred to. The only argument which could, therefore, be urged on behalf of the revenue was that on the facts and circumstances of the case there should be an implied request by the assessee to British Indian buyers to send the sale proceeds by means of cheques through post. The main circumstance relied on by the revenue was that the entire sale proceeds in respect of sales effected to British Indian buyers were remitted to the assessee at Dhrangadhra by cheques and demand drafts sent through post and this, the argument ran, must have been the result of a request made by the assessee for it could not have been an accident that only one mode of payment should have been resorted to by all British Indian buyers, namely, remitting sale proceeds by means of cheques and demand drafts through post. The revenue also sought to support the implication of the request by relying on the fact that where sale proceeds were not received were not received in advance, the assessee required payment to be made by demand drafts drawn on a bank in Rajkot and this, it was contended, lent support to the suggestion that even where the sale proceeds were received in advance, they must have been sent by cheques by post pursuant to the request of the assessee. These circumstances are, however, in our opinion, not sufficient to raise the implication that payment was made by British Indian buyers to the assessee by sending cheques through post pursuant to any request made by the assessee.
9. It is undoubtedly true that the entire sale proceeds in respect of sales effected to British Indian buyers were received by the assessee by cheques and demand drafts sent through post, but it must be remembered that out of these sale proceeds, said proceeds to the extent of Rs. 5,30,460 were in respect of sales there were specific instructions of the assessee to remit the sale proceeds by demand drafts on a bank in Rajkot. The fact that these sale proceeds were remitted by demand drafts by post cannot, therefore, furnish any evidence of an implied request on the part of the assessee to remit the sale proceeds in respect of the remaining sales by cheques by post. As a matter of fact it would show that wherever the assessee required payment in any particular mode, it always gave express and specific instructions to the buyers to make payment in that particular mode and no such express or specific instructions in regard to the mode of payment having been given in respect of these remaining sales, no implication of a request can be made. It is in this connection significant to note that it was not the case of the revenue that any documents or papers were withheld or suppressed by the assessee. Moreover, the instruction contained in the bills relating to the sales of Rs. 5,30,460 showed that the assessee preferred to have payment by demand drafts on a bank in Rajkot and, therefore, if at all any inference could be drawn that the assessee might have given instruction in regard to payment of the remaining sales, such instruction could only be for payment by demand drafts on a bank in Rajkot but the payment in respect of the remaining sales was made by British Indian buyers by cheques and there is nothing to show that those cheques were drawn on a Rajkot - as a matter of fact those cheques must in ordinary course have been drawn on banks situate at the places where British Indian buyers traded or resided - and no inference can, therefore, be drawn as suggested on behalf of the revenue.
10. It must also be remembered that these sale proceeds were received by the assessee in advance before the sales were actually effected. There is absolutely nothing to show that any request was made by the assessee to British Indian buyers to remit the sale proceeds in advance by sending cheques through post. From the mere circumstance that the sale proceeds were received by the assessee in advance by cheques sent by British Indian buyers through post, it cannot be inferred that there was any implied request by the assessee to British Indian buyers to remit the sale proceeds by cheques or to remit them by sending cheques by post. Something more would be necessary before the court can be called upon to draw any such inference. It is quite possible that British Indian buyers who remitted the sale proceeds in advance by despatching cheques by post did so on their own initiative and not pursuant to any request made by the assessee. There is no evidence in the present case even as much as to suggest that there was any stipulation in the agreements between the assessee and British Indian buyers that payment in advance should be made by cheques nor is there any evidence to show that any requisition was made by the assessee that if any British Indian buyers wanted to purchase goods form the assessee, they should remit the sale proceeds in advance by cheques. The mere posting of cheques by British Indian buyers from British India is in our opinion not sufficient to justify an inference that there was an implied request by the assessee to British Indian buyers to send the sale proceeds by means of cheques through post and that the cheques representing the advance payment of the sale proceeds were sent by British Indian buyers to the assessee pursuant to any such request of the assessee. We are, therefore, of the view that, so far as the sale proceeds in respect of the sales belonging to the second category of sales are concerned, there is nothing to show that they were received by the assessee in British India and that the profit embedded in these sale proceeds cannot, therefore, be regarded as received in British India so as to be assessable to tax under section 4(1)(a). Our answer to question Nos. 6 and 7 is, therefore in the affirmative, to the extent to which those question refer to the sale proceeds of Rs. 5,30,460 and is in the negative to the extent to which those question refer to the remaining sale proceeds. There will be no order as to costs of the reference.