Actual control and management determines firm residence; theoretical power alone cannot establish residence in British India.

For residence under section 4-A(b) of the Income-tax Act, the decisive inquiry is where the firm's affairs were actually controlled and managed, not whether a partner merely had a theoretical right or power to control. On the facts, the unchallenged affidavits showed that the South African partners alone ated the business, no directions came from the Indian-resident partner, and he did not interfere in management. The tribunal's contrary finding lacked evidentiary support. The reference was therefore answered in favour of the assessee, and the firm was not treated as resident in British India on that footing.

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Issues: Whether, for the purpose of residence under section 4-A(b) of the Income-tax Act, the control and management of a firm's affairs was situated wholly without British India, so as to answer the reference in favour of the assessee.

Analysis: The controlling test was whether the firm's affairs were in fact controlled and managed outside British India, since the statutory phrase requires de facto control and management and not merely a right or power to control. The unchallenged affidavits showed that the South African partners alone managed the business, that no directions were received from the partner resident in India, and that he did not in fact interfere in the conduct of the business. The tribunal's contrary conclusion was held to have no factual evidentiary support, because mere ownership or theoretical power of control does not establish actual control and management.

Conclusion: The question was answered in the negative. The firm was not resident in British India on the footing found by the tribunal, and the decision was in favour of the assessee.

Ratio Decidendi: For residence under section 4-A(b), the decisive inquiry is the actual situs of control and management in fact, and not the existence of a bare legal power or theoretical right to control; a finding unsupported by evidence cannot sustain residence within British India.

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