Residence test under income-tax law requires a maintained home in the territory, not mere occasional guest stays in a family house.

For residence under section 4A(a)(ii) of the Indian Income-tax Act, 1922, the statutory fiction requires both a dwelling place maintained in the taxable territories for the requisite period and some stay there in the previous year. A dwelling place means an abode or home, not a house where the assessee merely stays as a guest. A bare coparcenary interest or right of occupation in a joint family house is insufficient unless the house is maintained as the assessee's home or for his benefit at his instance. On the facts stated, the assessee lived mainly in Ceylon and only visited India occasionally, so he was non-resident; the penalty issue also failed because it depended on the unsustained assessments and residential finding.

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Issues: (i) Whether the assessee was resident in the taxable territories under section 4A(a)(ii) of the Indian Income-tax Act, 1922. (ii) Whether there was liability to penalty under section 28(1)(a) of the Indian Income-tax Act, 1922.

Issue (i): Whether the assessee was resident in the taxable territories under section 4A(a)(ii) of the Indian Income-tax Act, 1922.

Analysis: The provision creates a statutory fiction and requires both a dwelling place maintained in the taxable territories for the requisite period and some stay therein during the previous year. A dwelling place, in this context, means an abode or home and not a mere place where an assessee occasionally stays as a guest. Mere coparcenary interest or a bare right of occupation in a joint family house is insufficient unless the house is maintained as the assessee's home or is maintained for his benefit at his instance. On the facts, the assessee lived mainly in Ceylon, had his business and family there, visited India only occasionally, stayed in the family house as a guest, and the house was maintained for the other family members and not for him.

Conclusion: The assessee was rightly held to be a non-resident; this issue was decided in favour of the assessee.

Issue (ii): Whether there was liability to penalty under section 28(1)(a) of the Indian Income-tax Act, 1922.

Analysis: The penalty question was dependent on the assessments and the finding on residential status. Once the assessee was held to be a non-resident and the assessment orders were not sustained, the basis for penalty did not survive.

Conclusion: There was no liability to penalty; this issue was decided in favour of the assessee.

Final Conclusion: The legal effect of the decision is that occasional stay in a joint family house, without it being maintained as the assessee's home or for his benefit, does not satisfy the residence test under the Act.

Ratio Decidendi: For the purposes of section 4A(a)(ii) of the Indian Income-tax Act, 1922, a dwelling place must be maintained as the assessee's abode or home, or maintained for him at his instance and for his benefit; a mere right of occupation in a joint family house, without more, is not enough.

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