TaxTMI 
TaxTMI 
TaxTMI 
1949 (11) TMI 21
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....tory deduction of as. 4500, the balance of Rs. 14,500 was treated as income from sources other than agricultural income from outside British India to which the interest from money-lending business was added thus making a total income of Rs. 14,630. The assessment was made on the basis that the undivided family is resident in British India. This position was contested by the assessee before the Income Tax authorities and the Appellate Tribunal, but he was unsuccessful in his contention. 2. The present Section 4 A, Income Tax Act was inserted by Section 5, Income Tax Amendment Act, 1939 and Clause (b) of that section, which is the relevant section for the purpose of this case, reads as follows: "A Hindu undivided family, firm or other association of persons is resident in British India unless the control and management of its affairs is situated wholly without British India." It is common ground that the control and management of the affairs must be during the accounting period though it is not so expressly stated in the section. The expression "control and management" implies the direction of the affairs of the family or the brain of the management of the family affairs. The use....
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....cally a seat of the control or management of the affairs of the undivided family in British India. From this point of view, stray acts or occasional visits for something connected with the property of the family would not by reason of the presence of the manager in connection with such matters in British India bring the control and management into British India. The section itself was introduced in 1939, that is during the accounting period, and it is for that reason that we find that the Income Tax Officer in dealing with the question, as will be presently pointed out, misdirected him-self regarding the interpretation of the section as there was no light thrown upon the section by any decided cases at that time. 3. In the course of the argument before us reference was made to a few decisions bearing upon the interpretation of the section. The case mostly relied on is the decision in Commissioner of Income Tax, Madras v. Subbiah Chettiar 1947-15 I.T.R. 602 : (A.I.R. (35) 1948 Mad. 307). In that case an undivided family owned property in British India and the karta lived in Ceylon with his wife and children and carried on business in partnership with a stranger from the year 1928. ....
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....ta lived whenever he visited British India. The affair of a family means not merely attending to particular acts such as defending or filing suits, but something in the nature of a series of acts such as the controlling of a business or looking after the sales and purchase of properties and allied matters. 4. The other learned Judge after adverting to the import of the section as stated above considered that the facts of that particular case justified the inference that the management and control of the affairs of the undivided family were not wholly without British India and that the Income Tax Appellate Tribunal approached the case from a wrong angle. This case as already stated is helpful in that it throws light on the interpretation of the section, particularly the judgment of Patanjali Sastri J, 4. Of the earlier cases, the case Commissioner of Income Tax, Madras v. Gangabishan Mohanlal [1945] 13 ITR 20 (Mad), was a case in which a joint family had its residence in Secunderabad outside British India, but carried on business at Guntur and Bombay through agents. During the accounting year, the assessee was no doubt resident in Secunderabad but paid visits to Guntur and stayed ....
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.... R. Naik v. Commissoner of Income Tax, Bombay [1946] 14 ITR 334 (Bom). In that case, the de jure manager was living in British India, though the business was carried on in Africa. The test that was laid down by the learned Judges was that the control and management required by the section must be the control and management in fact and not merely the right to control and the right to give directions. In other words, it must be de facto control and management and not merely de jure. This is also the view of this Court as expressed in Commissioner, Income Tax, Madras v. Gangabishan Mohanlal [1945] 13 ITR 20 (Mad). These two decisions are authorities for holding that what is required is actual exercise of the control and management of an affair of the family such as a business or other dealings or transactions relating to the family. 7. The Income Tax Officer in the present case did not pay sufficient attention to the language of Section 4-A (b) of the Act. He held that the evidence adduced in the case, namely, that the karta was visiting British India off and on in recent years in connection with civil suits filed by or against him and that his second son was maintaining a dwelling h....
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....state. They then proceeded to observe that the appellant "does money-lending in British India and borrows money here." From the evidence given by the assessee it would be seen that 90 per cent, of his money-lending business is to residents in Hyderabad and if by the expression money-lending in British India is meant that the assesses lent money to persons resident in British India it would be correct; but the assumption that the money-lending business was in British India does not seem to be warranted by anything on record. 8. The Tribunal next found that suits have to be filed by the assessee for recovery of amounts due and sometimes in connection with his dealings. It has not been stated in the order whether these suits were suits which were pending or which were instituted in the accounting year or were instituted before or later. In the deposition of the assessee all that be says is that in the current year, meaning the year in which he gave evidence, 1941, he had suits at Ellore. There is therefore nothing on record to justify the conclusion that the assessee was attending to suits in the accounting year at any place in British India. We do not also know the nature of the sui....
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....hich it is used in the section. The test to be applied is the one which has already been stated and to be found in the judgment of Patanjali Sastri J., in Commissioner of Income Tax, Madras v. V. V. R. N. M. Subbaiah Chettiar [1947] 15 ITR 502 (Mad). Applying that test I think that the inference that the control and management of the affairs of this undivided family is in British India is not justified. 11. For these reasons, I am of opinion that the question referred to us should be answered in the negative and in favour of the assesses. The assessee is entitled to his costs, which I fix at Rs. 250. Viswanatha Sastri J.--I agree. For the assessment year 1939-40 the revenue authority has assessed a joint Hindu family represented by its manager as a resident in British India during the year of account 1938-89. The assesses disputed the legality of the assessment on the ground that the family was non-resident during the relevant period. It is common ground that the ancestral and permanent home of the family is at Aswaraopet in Hyderabad State, and that the manager of the family, Sri K. V. Narasimha Rao, is a permanent resident of that place. The family owns lands in Hyderabad State....
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....tion of persons once a resident always a resident and liable to Income Tax on the basis of residence for all time to come. 13. Section 4-A (b) makes the place of residence of a joint Hindu family depend upon the place of control and management of its affairs and further provides that it is only if the control and management is wholly situated outside British India that the family can be classed as a non-resident. To some extent, firms, undivided Hindu families, and associations of persons were assimilated to the position of companies with this important difference that in the case of companies the control and management of their affairs must be situated wholly in India to make them resident. Even so, the tests and principles which had been laid down by the English Courts to find out the place of control and management of companies would also be useful in finding out the place of control and management in the case of firms, undivided families and associations of individuals. This would be so, especially when regard is had to the history of legislation since 1922. A company, wherever it may be incorporated, is deemed to reside for purposes of income tax, at the place from which the ....
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....laniappa Chettiar [1945] 13 ITR 269 (Mad) and Commissioner of In-come-tax, Madras v. Gangabishan Mohanlal (1945) 1 MLJ 61 and by the Bombay High Court in Bhimji R. Naik v. Commissioner of Income Tax, Bombay [1946] 14 ITR 334 (Bom). The decisions in Muhammad Jamaluddin v. Commissioner of Income Tax, Madras [1942] 10 ITR 484 (Mad) and Commissioner of Income tax v. Shanmugham Rubber Estates, Kaula lumpur, I. L. R. (1946) Mad. 162 A. I. R. 1945 Mad. 366 were cases where the supervision of the partnership business was exercised, or could effectively be exercised by one of two partners who was resident in British India. Therefore in those cases the control and management of the business could not be said to have been situated wholly outside British India. These decisions however, are no authority for the proposition that mere temporary visits of a partner or the karta of a joint Hindu family to a place where the business of the firm or the family is carried on would be sufficient to constitute the firm or the joint Hindu family a resident of that place. The question of the residence of individual partners or members of a joint Hindu family is immaterial in considering whether the firm or....