1977 (8) TMI 69 - AT - Income Tax

Bank in liquidation deemed resident for tax purposes due to Official Liquidator's control.

The Tribunal allowed the appeal, determining the residential status of the assessee bank in liquidation for the assessment year 1974-75 as a resident in ... - Issues:Residential status determination of an assessee bank in liquidation for the assessment year 1974-75.Analysis:The initial assessment by the Income Tax Officer (ITO) treated the assessee as a non-resident company with income from interest and rent. The assessee appealed before the Appellate Assistant Commissioner (AAC) arguing that the control and management of its affairs were wholly in India due to liquidation and appointment of the Official Liquidator by the High Court at Calcutta. However, the AAC upheld the non-resident status based on the temporary suspension of banking activities and lack of evidence of changes in the Board of Directors.The assessee then appealed to the Appellate Tribunal, citing legal provisions and court orders to support the claim that the Official Liquidator had full control and management of the bank's affairs in India. The Tribunal considered the scope of 'control and management' as per the Income Tax Act and Supreme Court precedents. It concluded that the Official Liquidator, under the Companies Act, had de facto control over the bank's affairs in India, leading to the determination that the assessee should be treated as a resident for taxation purposes.The Departmental Representative argued that the Official Liquidator was assessed as a representative assessee under specific IT Act provisions, but the Tribunal found this argument lacking merit. The Tribunal reiterated that the crucial issue was whether the control and management of the bank's affairs were wholly in India, which, based on the evidence presented, led to the decision in favor of treating the assessee as a resident. Consequently, the Tribunal directed the ITO to compute taxes considering the assessee as a resident under the relevant IT Act provision.In conclusion, the Tribunal allowed the appeal, overturning the earlier decisions and determining the residential status of the assessee bank in liquidation for the assessment year 1974-75 as a resident in India.