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TMI Blog1960 (4) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... ily of Amulakh Amichand, six annas. It was stated that the family of Amulakh Amichand, which was a well known business family of Bombay, did not supply any capital to the partnership and Nandlal alone was the financing partner. On April 13, 1944, Nandlal received a sum of Rs. 50,000 from the Hindu undivided family of which he was a member, and a further sum of Rs. 50,000 on April 27, 1944. Two other sums aggregating Rs. 50,000 were also received from the Hindu undivided family on June 8, 1944, and June 29, 1944. The case of the assessee was that a sum of Rs. 1,00,000 was given to each son by the father and the sums of money received on June 8, 1944 and, June 29, 1944, were a loan by the Hindu undivided family to Nandlal. Therefore, the case of the assessee was that Nandlal became the partner of the firm of Amulakh Amichand in his individual capacity. The case of the Department, however, was that the total sum of Rs. 1,50,000 sent to Nandlal by the Hindu undivided family was utilised as capital in the cloth business of the partnership known as Amulakh Amichand & Co. Subsequently, Girdharlal, another brother of Nandlal, came to Bombay and joined the firm. Out of the share of ten an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... family. The businesses in Bombay and Banaras, according to the Partnership Act, belonged to Nandlal and others. We are, therefore, of opinion that for assessment years 1945-46 .... the Hindu undivided family was not resident in the taxable territories. " The actual relief which the Tribunal gave to the assessee was expressed in the following words : " For the assessment year 1945-46, the assessee's status would be Hindu undivided family but non-resident. In so far as the assessed income is concerned the sum of Rs. 1,50,000 which was included under section 4(i)(b)(iii) has to be deleted. The rest of the income accrued to the Hindu undivided family in the taxable territories." At the instance of the Commissioner of Income-tax, Bombay, who is the appellant before us, the Tribunal stated a case and referred the following question of law to the High Court of Bombay for its decision under section 66(1) of the Act. The question was in these terms : " Whether the Hindu undivided family of Gandalal represented by Nandlal in the firm of Amulakh Amichand & Co. of Bombay was resident in the taxable territories in the year of account relevant for the assessment year 1945-46." The ans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es unless the control and management of its affairs is situated wholly without the taxable territories." In Subbayya Chettiar v. Commissioner of Income-tax, this court held that the test for deciding the residence of a Hindu undivided family laid down in section 4A(b) of the Act was based very largely on the rule which had been applied in England to cases of corporations, and though normally a Hindu undivided family would be taken to be resident in British India, such presumption would not apply if the case could be brought under the second part of the provision. It was also observed therein that the word " affairs " must mean affairs which are relevant for the purpose of the Income-tax Act and which have some relation to income ; it was stated that in order to bring the case under the exception, the court has to ask whether the seat of the direction and control of the affairs of the family is inside or outside British India, and the word " wholly " suggests that a Hindu undivided family may have more than one " residence " in the same way as a corporation may have. The position in Hindu law with regard to a coparcener, even when he is the karta, entering into partnership with ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is also quite clear, we think, that if a coparcener becomes a partner (on behalf of the joint family) with strangers in a firm which carries on business in the taxable territories, that by itself will not determine the residence of the family unless the control and management of the firm is, at least in part, in the Hindu undivided family. On the facts of this case, the Hindu undivided family or for that matter, the karta of that family, that is Gandalal, could exercise no power of controlling management over the partnership firm, either under partnership law or under Hindu law. It seems to us that the word affairs in section 4A(b) must mean affairs of a Hindu undivided family which are capable of being controlled and managed by the said Hindu undivided family as such. Where a coparcener enters into partnership with strangers, the Hindu undivided family exercises no controlling power of management over the partnership firm. In that view of the matter the partnership firm cannot be an " affair " of the Hindu undivided family capable of being controlled and managed by the Hindu undivided family as such. It may be here observed that the decision in Subbayya Chettiar v. Commissioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such territories for the purposes of the Act. But where as in this case in respect of the partnership business, the family as such has nothing to do with its control and management, we fail to see how the existence of such a partnership will determine residence of the family within the meaning of section 4A(b). Therefore, we are of the opinion that the High Court correctly answered the question. The appeal fails and is dismissed with costs. HIDAYATULLAH, J.--- The Commissioner of Income-tax Bombay City, has filed this appeal, after obtaining special leave from this court, against the judgment and order of the High Court of Bombay dated February 16, 1955, in a reference under section 66(1) of the Indian Income-tax Act. By the judgment under appeal, the High Court (in agreement with the decision of the Income-tax Appellate Tribunal, Bombay, given earlier) answered in the negative the following question : " Whether the Hindu undivided family of Gandalal represented by Nandlal in the firm of Amulakh Amichand & Co. of Bombay was resident in the taxable territories in the year of account relevant for the assessment year 1945-46." The facts briefly stated are as follows : There w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sinesses belonged to " different entities ", namely, the Bombay and Banaras firms, and that these firms could not be said to be " the affairs of the Hindu undivided family " but the affairs of Nandlal and his brothers under the law of partnership. At the instance of the assessee, the Tribunal referred the above question for the opinion of the High Court. The Bombay High Court referred to the decision of this court in Subbayya Chettiar v. Commissioner of Income-tax, and pointed out that by the expression " the affairs of the Hindu undivided family " was meant not the private or domestic affairs of the family but some affairs, which had some reference to the Income-tax Act. The word " affairs " must, it was held, be construed in relation to taxation. The learned judges then referred to the position of a coparcener entering into partnership with strangers, and observed that when a coparcener carried on such business in partnership on behalf of the Hindu family, " the affair " was of the coparcener and not of the family, but when the business was carried on by the family itself, then it was " the affair " of the family and not of the coparcener or coparceners. They pointed out that i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ish India " showed that even if a part of the control and management, be it ever so small a part, was exercised in British India, the provision was satisfied. So far, there is no dispute, and it is further clear that the " affairs " of the Hindu undivided family refer to something connected with the law of income-tax. The section does not refer to the domestic or private affairs of the Hindu undivided family. It refers to an activity resulting in the making of income. Parties are agreed---and I think rightly---that this aspect of the law is clear and unambiguous. It is also settled after the decision of this court in Subbayya Chettiar's case. Parties are, however, at variance, when one comes to the interpretation of the words " its affairs " in the section, and tries to find the situs of the control and management. In cases where the Hindu undivided family itself or through its karta controls and manages business in the taxable territories, no difficulty arises ; but where, as here, the Hindu undivided family is represented by one of its coparceners as a partner in a firm, one faces some difficulties. Two questions then arise, which are : (a) Is there any " affair " of the Hindu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the death of any one of them the others may well take by survivorship that in which they had during the deceased's lifetime a common interest and a common possession." No doubt, there are other principles also which qualify those quoted, as, for example, the right of a coparcener to claim a partition, or, where such usage obtains, to alienate his interest, which give rise to the expression that the coparcener has a share. In point of Hindu law, however, a coparcener cannot claim any item of property or even a share of it as his own, and his dealings with the assets are, in so far as he is concerned, for the benefit of the family. The law of income-tax makes the sole test for purpose of residence of a Hindu undivided family, the existence of an " affair " and its control and management even partly in the taxable territories. For this purpose, one may look at the actual facts, and an inference from facts in the light of Hindu law is equally open. It is thus plain that whilst in the eye of the law of partnership the coparcener who is a co-partner is everything, in the eye of Hindu law he is no more than a member of a body of owners. In attempting to find out if there is any " af ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as not decided as to whether the " affair ", if there was one, was of the family or of the coparceners, and the case went against the assessee on the burden of proof which he had failed to discharge, to bring his case within the exception. If the karta had lived in India or some other coparcener or coparceners had stayed on permanently to manage the " affairs ", then the question would have been considered, perhaps, differently. In this case, we are not concerned with the " affairs " of the firm of Amulakh Amichand & Co., but with the " affairs " of the Hindu undivided family. The coparceners who became partners could not say that they were not concerned with the Hindu undivided family to which they belonged and an undivided asset of which they owned in common with others. Their investing moneys, becoming partners and running the partnership, starting other partnerships were, from the view point of the coparcenary according to Hindu law, as much the affair of the rest of the family as their own. In view of what I have said, the first of the two questions posed earlier must be answered in the affirmative, that is to say, that there was an " affair " of the Hindu undivided family i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad and brain ". In the case of an individual, the test is not necessary, because his residence for a certain period is enough, it being clear that within the taxable territories he would necessarily bring his " head and brain " with him. The " head and brain " of a company is the board of directors, and if the board of directors exercises complete local control, then the company is also deemed to be resident. In the case of a firm, an association of persons and a Hindu undivided family, the control and management can be exercised by one or more of the group. So long as this control and management (even partly) is found, and it must be so when some coparceners reside in British India and manage the affair, the family must be treated as resident. The necessity for the test is thus obvious. The income-tax law anticipated that control and management of the affairs of Hindu undivided families (firms and association of persons) might easily be in two or more places, one or more coparceners being within the taxable territories and the other or others, without. To prevent the escape of tax and to get at the income of such families having multiple places of control and management, it was ..... X X X X Extracts X X X X X X X X Extracts X X X X
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