Control-and-management test for tax residence: HUF held resident where directing power and seat of management remained in British India.

The article addresses tax residence of a Hindu undivided family under Section 4A(b) of the Income-tax Act, 1922, applying the control-and-management test: a family is resident in British India unless the directing and controlling power and seat of management are wholly situated abroad with some degree of permanence. Temporary activities or short visits in India do not suffice to shift the seat of control. The assessee bore the onus to prove control and management were wholly outside British India but failed to produce correspondence or other material evidence; accordingly the presumption of residence in British India applied and the family was held resident.

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Issues: Whether, for the assessment year 1942-43, the Hindu undivided family of which the appellant is karta was "resident in British India" within the meaning of Section 4A(b) of the Income-tax Act, 1922 (i.e., whether the control and management of the family's affairs was situated wholly outside British India).

Analysis: Section 4A(b) treats a Hindu undivided family as resident in British India unless the control and management of its affairs is situated wholly without British India; the correct test is where the directing and controlling power (the head and seat of management) functions with some degree of permanence. Mere activity or temporary presence in British India (attendance on litigation, income-tax proceedings, short visits totaling 101 days, or starting partnership businesses) does not by itself establish that the seat of control and management has been shifted or that there are two centres of control. The onus lay on the assessee to prove that control and management were wholly situated outside British India; the assessee failed to produce correspondence or other material evidence showing that the family's affairs in India were normally controlled from Colombo. In these circumstances the presumption in favour of residence in British India applies.

Conclusion: The assessee did not discharge the onus of proving that the control and management of the family's affairs was wholly situated outside British India; therefore the family was resident in British India within the meaning of Section 4A(b) of the Income-tax Act, 1922. The decision is against the assessee.

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