Residence of a foreign firm depends on de facto control and management, including partner acts in India, not formal place alone.

A firm was treated as resident under section 4A(b) of the Indian Income-tax Act, 1922 because its control and management were not shown to be wholly outside the taxable territories. The presumption of non-residence was rebutted by correspondence showing that a partner in India negotiated and settled contractual terms, directed delivery and labelling, and acted as the firm's effective representative. Those acts, binding on the firm under the Partnership Act, demonstrated de facto control and management exercised at least partly within India, so section 18(3B) read with section 18(7) applied and the tax direction was upheld.

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Issues: Whether the non-resident status of the foreign firm was rebutted by evidence showing that the control and management of its affairs were exercised, at least partly, within the taxable territories, so as to attract section 18(3B) read with section 18(7) of the Indian Income-tax Act, 1922.

Analysis: Under section 4A(b) of the Indian Income-tax Act, 1922, a firm is resident in the taxable territories unless its control and management are situated wholly outside those territories. The presumption of residence is rebuttable, and what matters is de facto control and management actually exercised in the conduct of the firm's affairs. The correspondence showed that a partner of the firm, acting from India, negotiated and settled contractual terms, gave directions regarding delivery and labelling, and functioned as the firm's effective representative in India. By virtue of sections 18 and 19 of the Indian Partnership Act, 1932, his acts bound the firm and formed part of its controlling authority. On these facts, the control and management were not situated wholly outside the taxable territories.

Conclusion: The firm was resident within the meaning of section 4A(b) of the Indian Income-tax Act, 1922, and the challenge to the tax direction failed.

Ratio Decidendi: A firm is resident if its de facto control and management is exercised even partly within the taxable territories, and such control may be established through the acts of a partner acting within India.

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