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TMI Blog1985 (2) TMI 216X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee were from interest and rent. The said assessment was made on the official liquidator. Being aggrieved by the said assessment, the official liquidator preferred an appeal before the AAC. It was submitted on behalf of the assessee that the ITO was wrong and unjustified in taking the status of the assessee as non-resident. The AAC, however, following his appellate order for the earlier year in the assessee's own case, held that the ITO was right and justified in taking the status of the assessee as non-resident company for the year under reference. The AAC for the earlier year (1974-75), in disposing of the contention of the assessee, observed as follows: "According to the provisions of the Income-tax Act, a company can be treated as resident if the control and management of its affairs is situated wholly in India in the accounting year. The affairs of this company are carrying on of banking business. The bank went into liquidation in 1962 due to hostilities between India and China. The official liquidator of the Calcutta High Court has been realising the interest on fixed deposits and making payments towards the liabilities. The liquidator has been merely actin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expression "control and management" signifies the controlling and directive power, "the head and brain", as it is sometimes called, and "situated" implies the functioning of such power at a particular place with some degree of permanence. The word "wholly" as used in section 6(3) would indicate that the seat of such power may be divided between two distinct and separate places. The expression "control and management" means de facto control and management and not merely the right or power to control and manage. In order to hold that a non-Indian company is resident in India during any previous year, it must be established that such company de facto controls and manages its affairs in India. The principles are by now well settled. Lord Loreburn L. C. in De Beers Consolidated Mines Ltd. v. Howe [1906] 5 TC 198 (HL) at page 212, observed as follows : "Mr. Cohen propounded a test which had the merits of simplicity and certitude. He maintained that a company resides where it is registered, and nowhere else............I cannot adopt Mr. Cohen's contention. In applying the conception of residence to a company, we ought, I think, to proceed as nearly as we can upon the analogy of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. (See Egyptian Hotels Ltd. v. Mitchell [1915] 6 TC 542 (HL)). Under section 449 of the Companies Act, 1956, on a winding-up order being made in respect of a company, the official liquidator shall, by virtue of his office, become the liquidator of the company. Under section 178 of the I.T. Act, 1961, every liquidator of a company which is being wound up, whether official liquidator, provisional liquidator or others, must within 30 days of his becoming a liquidator give notice of his appointment to the ITO, who is entitled to assess the income of the company. Section 456 of the said Act provides that upon the appointment of a liquidator, he becomes the custodian of the company's property. The company's assets are to be treated as being in the custody of the court. Although under rule 233 of the Companies (Court) Rules, 1959, the position of the official liquidator is the same as that of the receiver, yet the property of the company does not vest in him as in the case of the official assignee on an insolvent's estate. The property of the company continues to vest in the company itself and on the winding-up order, all the proper lies and effects of the company will be custodia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... il or criminal, in the name and on behalf of the company; ( b )to carry on the business of the company so far as may be necessary for the beneficial winding-up of the company; ( c )to sell the immovable and movable property and actionable claims of the company by public auction or private contact, with power to transfer the whole thereof to any person or body corporate or to sell the same in parcels ; ( d )to raise on the security of the assets of the company any money requisite; ( e )to do all such other things as may be necessary for winding-up the affairs of the company and distributing its assets. (2) The liquidator in a winding-up by the court shall have power ( i )to do all acts to execute, in the name and on behalf of the company, all deeds, receipts, and other documents, and for that purpose to use, when necessary, the company's seal; ( i-a )inspect the records and returns of the company on the files of the Registrar without payment of any fee ; ( ii )to prove, rank and claim in the insolvency of any contributory, for any balance against his estate, and to receive dividends in the insolvency, in respect of that balance, as a separate debt due from the insol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ject to the control of the court. Sanction of the court may be obtained before or after the exercise of the power. But if the court does not accord sanction, the exercise of the power by the liquidator will have no effect at all. The company court exercises control over the acts and deeds of the liquidator and the method and manner of exercise of powers by the liquidator. Thus under the provisions of the Companies Act, the control and management of the affairs of the company in liquidation vests in the official liquidator who only is empowered to do all acts and deeds for winding-up the affairs of the company subject to sanction and/or control of the court. In course of the winding-up if the company earns any income, it is liable to pay tax under the I.T. Act. The word "affairs" within the meaning of section 6(3) of the I.T. Act, 1961, means affairs which have some relation to income. In this case, the company in liquidation has income from interest and rent in India and the affairs relating to the earning of such income are being controlled and managed in India by the official liquidator. By virtue of the provisions of the Companies Act, the liquidator has not only the right or ..... 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