1970 (4) TMI 34 - HC - Income Tax

Maintaining dwelling place in India - assessee residing in Ceylon staying in ancestral family house as guest during visit to India - it cannot be said that the assessee maintained a dwelling house

Summary

Issues Involved:
1. Whether the assessee was non-resident.
2. Whether there was liability to penalty under section 28(1)(a).

Issue-Wise Detailed Analysis:

1. Non-Resident Status of the Assessee:

The Tribunal had to determine whether the assessee was a non-resident based on his movements and the maintenance of a dwelling place in India. The assessee, a natural-born Ceylon citizen, sporadically visited India between 1946 and 1957, primarily to oversee the construction of a theatre. His stays in India during this period were minimal, amounting to 137 days in total.

The Tribunal found that the assessee's visits were more in the nature of a guest's stay rather than that of an inhabitant. The family house in Orathanad, Thanjavur District, was not maintained by him nor maintained for him. The Tribunal concluded that the assessee did not enjoy any family income or have any reserved portion of the family house for his use. Consequently, the Tribunal upheld the Appellate Assistant Commissioner's order that the assessee was a non-resident for the years under consideration.

The court discussed the application of section 4A(a)(ii) of the Income-tax Act, which states that an individual is resident in the taxable territories if he maintains or has maintained for him a dwelling place in the taxable territories for 182 days or more in a year. The court emphasized that mere sporadic visits or temporary stays do not constitute maintaining a dwelling place. The court cited multiple precedents, including Zackariah Sahib v. Commissioner of Income-tax and Commissioner of Income-tax v. Fulabhai Khodabhai Patel, to support its interpretation that the maintenance of a dwelling place requires a sense of continuity, periodicity, or permanence.

The court concluded that the assessee's occasional stays in the family house did not meet the criteria for maintaining a dwelling place under section 4A(a)(ii). Therefore, the assessee was correctly deemed a non-resident.

2. Liability to Penalty under Section 28(1)(a):

The Tribunal also addressed the issue of penalty under section 28(1)(a) of the Income-tax Act, which was imposed by the revenue for the respective assessment years. Given the Tribunal's finding that the assessee was a non-resident, the penalty orders were also canceled.

The court noted that the penalty issue was contingent on the main issue of the assessee's residential status. Since the Tribunal found that the assessee was a non-resident and did not maintain a dwelling place in India, the penalty under section 28(1)(a) could not be sustained. The court upheld the Tribunal's decision to cancel the penalty orders.

Conclusion:

The court answered both questions in favor of the assessee and against the department. The assessee was deemed a non-resident, and there was no liability to penalty under section 28(1)(a). The department was ordered to pay costs, with counsel's fee set at Rs. 250.