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SUPREME COURT OF INDIA
21 st December 1950
FAZL ALI, B.K. MUKHERJEA AND CHANDRASEKHARA AIYAR JJ.
V. VR. N. M. Subbayya Chettiar - Appellant
Versus
Commissioner of Income-tax, Madras - Respondent.
Civil Appeal No. 38 of 1949.
Advocates appeared
Shri K. Rajah Aiyar, Senior Advocate (Shri K. Srinivasan, Advocate, with him), instructed by Shri M. S. K. Sastri, Agent for Appellant; Shri M. C. Setalvad Attorney-General for India (Shri G. N. Joshi, Advocate, with him) instructed by Shri P. A. Mehta, Agent - for Respondent.
The appellant was the karta of a joint Hindu family and had been living in Ceylon with his wife and children and were stated to be domiciled in that country. He carried on business in Colombo and owned a house, some immovable property and investments in British India, he had also shares in two firms in British India. In the year of accounts, 1941-42, the appellant was said to have visited British India n seven occasions and the total period of his stay in British India was 101 days. During these stays he personally attended to a litigation relating to the family lands and also attended the income-tax proceedings relating to the assessment of the family income. It was also stated that he had started two partnership businesses in India on 25.2.1942 and remained in India for Sometime after the commencement of those businesses.
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1. From (1952) I. T. R. 303.
Held1: (1) The words used in S. 4A(b) of the Act clearly show firstly, that, normally a Hindu undivided family will be taken to be resident in the taxable territories, but such a presumption will not apply if the case can be brought under the second part of the provision. Secondly, we take it that the word" affair" must mean affairs which are relevant for the purpose of Income-tax Act and which have some relation to income. Thirdly, in order to bring the case under the exception, we have to ask whether the seat of the direction and control of the affairs of the family is inside or outside British India. Lastly, the word "wholly" suggests that a Hindu undivided family may have more than one "residence" in the same way as a corporation may have. "It seems to us that the mere fact that the assessee has a house at Kanadukathan, where his mother lives, cannot constitute that place the seat of control and management of the affairs of the family; Nor are we inclined in the circumstances of the present case to attach much importance to the fact that the assessee had to stay in British India for 101 days in a particular year. He was undoubtedly interested in the litigation with respect to his family property as well as in the income-tax proceedings, and by merely coming out to India to take part in them, he cannot be said to have shifted the seat of management and control of the affairs of his family, or to have started a second centre for such control and management. The same remark must apply to the starting of two partnership businesses, as mere "activity" cannot be the test of residence." (per Fazl Ali J.)
(2) But the onus of proving facts which would bring his case within the exception which is provided by the latter part of S. 4A (b), was on the assessee. "The appellant was called upon to adduce evidence to show that the control and management of the affairs of the family was situated wholly outside the taxable territories, but the correspondence to which the Asstt. Commr. of Income-Tax refers and other material evidence which ought have shown that normally and as a matter of course the affairs in India were also being controlled from Colombo were not produced,. The position, therefore, is this, On the one hand, we have the fact that the head and karta of the assessees family who controls and manages its affairs permanently lives in Colombo and the family domiciled in Ceylon. On the other hand, we have certain acts done by the karta himself in British India, which ought not conclusive by themselves to establish the existence of more than one centre of control for the affairs of the family, are by no means irrelevant to the matter in issue, and therefore, cannot be completely ruled out of consideration in determining it. In these circum. stances, and in the absence of the material evidence to which reference has been made, the finding of the Assistant Commissioner that the onus of proving such facts as would bring his case within the exception has not been discharged by the assessee and the normal presumption must be given effect to, appears to us to be a legitimate conclusion. "
Judgment
Fazl Ali, J. :- This is an appeal from a judgment of the High Court of Madras on a reference made to it under S. 66 (1), Income-tax Act, by the Income-tax Appellate Tribunal in connection with the assessment of the appellant to income-tax for the year 1942-43. The question of law referred to the High Court was as follows : "Whether in the circumstances of the case, the assessee (a Hindu undivided family) is resident in British India under S. 4A (b), Income-tax Act."
2. The circumstances of the case may be briefly stated as follows. The appellant is the karta of a joint Hindu family and has been living in Ceylon with his wife, son and three daughters, and they are stated to be domiciled in that country. He carries on business in Colombo under the name and style of the General Trading Corporation, and he owns a house, some immovable property and investments in British India. He has also shares in two firms situated at Vijayapuram and Nagapatnam in British India. In the year of account, 1941-42, which is the basis of the present assessment, the appellant is said to have visited British India on seven occasions and the total period of his stay in British India was 101 days. What he did during this period is summarized in the judgment of one of the learned Judges of the High Court in these words : "During such stays, he personally attended to a litigation relating to the family lands both in the trial Court and in the Court of appeal. He was also attending the income-tax proceedings relating to the assessment of the family income, appearing before the Income-tax authorities at Karaikudi and Madras. On one of these occasions, he obtained an extension of time for payment of the tax after interviewing the authority concerned... . ."
3. The other facts relied upon by the income-tax authorities were that he did not produce the file of correspondence with the business in Colombo so as to help them in determining whether the management and control of the business was situated in Colombo and he had started two partnership businesses in India on 25-2-1942 and remained in India for some time after the commencement of those businesses.
4. Upon the facts so stated, the Income-tax Officer and the Assistant Commissioner of Income-tax held that the appellant was a resident within the meaning of S. 4A (b), Income-tax Act. and was therefore liable to be assessed in respect of his foreign income. The Income-tax Appellate Tribunal, however, came to a different conclusion and held that in the circumstances of the case it could not be held that any act of management or control was exercised by the appellant during his stay in British India and, therefore, he was not liable to assessment in respect of his income outside British India. This view was not accepted by a Bench of the Madras High Court consisting of the learned Chief Justice and Patanjali Sastri J. They held that the Tribunal had misdirected itself in determining the question of the "residence" of the appellant s family and that on the facts proved the control and management of the affairs of the family cannot be held to have been wholly situated outside British India, with the result that the family must be deemed to be resident in British India within the meaning of S. 4A (b), Income-tax Act. In this appeal, the appellant was questioned the correctness of the High Court s decision.
5. Section 4A (b) runs thus : "For the purposes of this Act - 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."
6. It will be noticed that S. 4A deals with "residence" in the taxable territories, of (a) individuals, (b) a Hindu undivided family, firm or other association of persons, and (c) a company. In each of these cases, certain tests have been laid down, and the test with which we are concerned is that laid down in S. 4A (b). This provision appears to be based very
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