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TMI Blog1947 (8) TMI 4X X X X Extracts X X X X X X X X Extracts X X X X ..... ase but is occupied, in part at least, by the assessee's mother and where the karta stays when he visits British India. Other properties are leased at rentals which are collected by a clerk who is employed for the purpose of looking after the family properties. The karta of the family is assessed in British India in respect of its British Indian income. During the assessment years 1940-41 and 1941-42, in addition to income derived from the family properties and the annual value of the ancestral house, the profits of the Ceylon business were included in the assessments on the ground that the joint family was resident in British India. The karta was successful in appeal to the Income-tax Appellate Tribunal against the family being deemed to be resident. Nevertheless, in the assessment for the following year, 1942-43, in respect of the year of account 1941-42, the Income-tax Officer treated the family as resident in British India ; the karta was again successful in an appeal to the Tribunal, which held the family was not resident. This reference arises out of that finding. At the hearing before the Tribunal some extracts from the karta's diary, dealing with his visits in Brit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dian statute is sought, help is seldom obtained from decisions in England upon statutes which are worded differently. Some decisions of this Court were also cited which were given before the new section was incorporated in the Income-tax Act and, in my view, for the present consideration, they are not of any assistance and reference to them is not required. Three decisions in regard to Section 4A(b) were cited. Commissioner of Income-tax, Madras v. The Shanmugham Rubber Estate [1945] 13 ITR 329 (Mad.) related to a firm in Malacca, and the relevant facts in that case were: the partnership deed provided that 2 out of 6 partners should have control of the business in rotation ; one of the controlling partners lived in British India; a letter sent to him during the previous year sought his instructions upon some affairs of the business in Malacca. It was held that the proper inference to draw from those facts was that part of the control was within British India and, consequently, the firm resided within the territory; at page 163 of the report, Sir Lionel Leach, C.J., observed that "if the control and management of its affairs is partly within British India, the family, firm or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... karta's diary. They record the following :- Between 7th April, 1941, and 29th March, 1942, the karta visited British India on seven occasions, spending an aggregate of 101 days in the country; two of those occasions were occupied solely in travelling through British India on journeys from Ceylon to Burma and returning to Ceylon ; during three visits he attended to matters relating to the Palayanad appeal, including a consultation with counsel; one entry in the diary states that the main purpose of the visit was to attend to that appeal and to the income-tax appeal; another entry states that on one visit, he "left for Madras for filing the Palayanad appeal" ; on four occasions, the karta attended to matters connected with the income-tax appeal (two of such occasions being the same as when the Palayanad appeal was dealt with); he interviewed the Inspecting Assistant Commissioner of Income-tax regarding payment of tax (during one of the visits when he dealt with the income-tax appeal). By Section 4A(b) a joint family is "resident" unless the control and management of its affairs are situated wholly outside the territory. The Colombo business is an "affa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded by Act VII of 1939. It reads thus :- "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." The question is whether the control and management of the affairs of the respondent Hindu undivided family was situated wholly outside British India in the year of account as found by the Income-tax Appellate Tribunal. At one stage of his argument, the learned Advocate-General appearing for the respondent assessee insisted that the question was one of fact and that the finding of the Tribunal was conclusive. I cannot assent to that view. Nor, evidently, did the Tribunal which referred the question under Section 66(1) think that its finding was not open to review, or they would not have made the reference. Whether the requirements of the test propounded in Section 4A(b) have been kept in view and whether proper inferences from the proved facts have been drawn as to the control and management of the affairs of the respondent family being situated wholly without British India are matters of law. For determining the residence for income-tax purposes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Pudukottah State and there exercised a general supervision and control over the whole of the business. The branches in British India were generally controlled from Madras where the partners had a house which they occupied when they visited the place for giving instructions to the agent and to supervise the business in British India. On these facts' it was held that the firm was not resident in British India and the foreign profits remitted to the firm were not taxable. Coutts-Trotter, C.J., who delivered the judgment of the Special Bench referred to the English cases cited above and observed:- "Had it been found as a fact that the control of the whole business, that is to say, the business including the branches outside British India, was exercised both from Ramachandrapuram and Madras, it may very well be that the principle of the Swedish Central Railway Company's case (supra) would apply and that the central management of the business as a whole might be considered to be split up between Ramachandrapuram and Madras. I cannot see anything in the findings to give the slightest colour to any suggestion of the kind." Relying on the above passage the learned Adv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... karta who lives abroad is sufficient to bring the family within Section 4A(b) . This view, as applied to clause (c), would lead to the result of a company controlled and managed in British India being relieved of its status as a resident in British India by its directors or other controlling authority proceeding to an Indian State and there exercising stray acts of management in regard to its affairs-a result which could not have been contemplated by the Legislature. The decisions relied on by Mr. Rama Rao Sahib only establish that mere stay in British India of the persons having the right and power of control without an actual exercise of such power is insufficient to bring the family or firm under Section 4A(b) . They lend no support to the suggestion now put forward by counsel. Turning now to the facts found in the present case it appears that the karta of the respondent family has been living in Colombo with his wife and children for some years carrying on a family business there. He owns considerable ancestral immovable property and has sundry investments in British India which are looked after by a clerk who is paid a salary of ₹ 25 per mensem. His ancestral family ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax Appellate Tribunal have, in my opinion, approached the case from a wrong angle. They state, "the only point that we have to find out in this case is whether there was an act of management or control within British India during his stay there." This apparently implies acceptance of the Commissioner's point of view which, as I have already indicated, is not correct. But having thus formulated the point for their decision, their conclusion, in the light of the proved facts of the case, is, to say the least, remarkable. "The evidence relied upon by the departmental representative from which he wants us to draw an inference that there were acts of management have been considered by us and we come to the finding that no act of management or control was exercised by the appellant during his stay in British India." In my opinion, the Tribunal have misdirected themselves in determining the question of "residence" of the respondent family, and, further, they have not drawn the correct inference from the proved facts. On these facts, the control and management of the affairs of the family cannot be held to have been situated wholly abroad, with the resu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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