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Assessment of income-tax and excess profits duty on a Hindu undivided family for the year 1940-41. Determination of whether the family was "ordinarily resident" in British India for taxation purposes. Interpretation of the term "seven years" in Section 4-B of the Indian Income-tax Act. Analysis: The judgment pertains to a reference arising from the assessment of income-tax and excess profits duty on a Hindu undivided family managed by the respondent. The family conducted business in both British India and Ceylon, leading to taxation of income from both sources. The key contention was whether the family was "ordinarily resident" in British India, impacting the inclusion of income from the Ceylon business in the assessment. The legal framework considered the residence status of the family manager to determine ordinary residence status (Section 4-B). The assessee's argument shifted from proving non-residence in British India for nine out of ten years to focusing on the interpretation of the "seven years" requirement in Section 4-B(a). The Tribunal's decision to accept the assessee's claim and exclude foreign income from the assessment was challenged by the Commissioner of Income-tax. Consequently, the Tribunal referred the question of interpreting the "seven years" in Section 4-B to the High Court for resolution. The assessee also raised an alternative argument regarding the computation of the manager's stay in British India, which was not addressed in the judgment. The judgment delves into the taxation scheme under the Income-tax Act, emphasizing the significance of the "previous year" for income assessment. It highlights the distinction between residence and ordinary residence for tax purposes and the computation of total income based on the assessee's residence status during the relevant year. The interpretation of the term "seven years" in Section 4-B(a) was a critical aspect of the case, determining the applicability of the ordinary residence status to the family. The Court rejected the assessee's argument that "year" should be reckoned according to the British calendar, emphasizing the legislative intent behind the provisions of Section 4-B. The judgment clarified that the "seven years" preceding the relevant previous year should be understood as a period of twelve calendar months each immediately preceding the commencement of the relevant year. This interpretation aimed to maintain consistency in assessing an assessee's residence status across different sources of income, ensuring a coherent application of the tax provisions. In conclusion, the High Court answered the reference by affirming that the expression "seven years" in Section 4-B of the Indian Income-tax Act should be construed as referring to a period of seven years of twelve calendar months each preceding the commencement of the relevant previous year.
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