Actual control and management determines firm residence; partnership deed alone is insufficient, and incomplete findings require remand.

Residence of a firm under Section 4-A(b) of the Indian Income-tax Act, 1922 depends on the actual situs of control and management of its affairs in the relevant year, not merely on a partner's contractual right or power to control the business. A partnership deed may be relevant evidence, but it cannot replace proof of where control in fact existed. The High Court also held that the statement of case was deficient because it did not set out sufficient proved or admitted facts to support the finding of residence in British India. The reference was therefore sent back to the Tribunal for completion of the factual record and further consideration.

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Issues: (i) Whether, for the purposes of Section 4-A(b) of the Indian Income-tax Act, 1922, the expression "control and management of its affairs" refers to actual control and management or merely the legal right or power to control and manage; (ii) whether the statement of case contained sufficient findings of fact to support the conclusion that the firm was resident in British India, warranting remand under Section 66(4) of the Indian Income-tax Act, 1922.

Issue (i): Whether, for the purposes of Section 4-A(b) of the Indian Income-tax Act, 1922, the expression "control and management of its affairs" refers to actual control and management or merely the legal right or power to control and manage.

Analysis: The provision was construed as a rule of actual residence for firms, making the factual situs of control and management decisive. The phrase was held to require the place where control and management in fact subsist in the relevant year, not merely where a partner has a contractual right or capacity to exercise control. The possibility that a partner residing in British India could, under the deed, control the business was treated as relevant evidence, but not as a substitute for proof of actual control and management.

Conclusion: The expression denotes actual control and management, not merely the legal right or power to control. The contention that a resident partner's contractual authority alone made the firm resident in British India was rejected, in favour of the assessee.

Issue (ii): Whether the statement of case contained sufficient findings of fact to support the conclusion that the firm was resident in British India, warranting remand under Section 66(4) of the Indian Income-tax Act, 1922.

Analysis: The material placed before the Court did not disclose adequate factual findings apart from the partnership deed. The Tribunal's conclusion that control had not been shown to be absent was not supported by a clear statement of proved or admitted facts, and the factual basis necessary to determine the situs of actual control and management was missing. In such circumstances, the High Court could not finally answer the reference on the existing record.

Conclusion: The reference had to be sent back to the Tribunal for completion of the statement of facts and further consideration.

Final Conclusion: The partnership deed could be used as evidence, but the decisive inquiry remained the actual residence of the firm's control and management. As the factual foundation was inadequate, the matter was remanded to the Tribunal for fresh findings.

Ratio Decidendi: For a firm, residence under Section 4-A(b) depends on the actual situs of control and management of its affairs in the relevant year, and a reference cannot be finally answered unless the Tribunal states the proved or admitted facts supporting that conclusion.

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