Treating individuals as resident of taxable territories.

JAGADISAN J.

The question that has been referred to us under section 66(1) of the Indian Income-tax Act is

"Whether the assessee is a resident for the assessment year 1950-51 within the meaning of section 4A(a)(ii) of the Act?" *

The assessee is a native of Koothanallur in Tanjore district, owning properties in India, and also having a business interest in a foreign firm called J. M. Mohammad Ismail Fils Aziz & Co. carrying on business at Saigon, Indo China. His main source of income is from his foreign assets. For the assessment year 1950-51 in respect of the previous year 1949-50, he declared his status as that of a non-resident. The department as well as the Income-tax Appellate Tribunal have now declared him as "a resident but not ordinarily resident". The contention of the assessee is that on the materials on record he should not be declared as "a resident" within the meaning of section 4A(a)(ii)

The following facts are not in dispute. The assessee is a co-owner of a residential house at No. 16, Jinnah Street, Koothanallur. The house belonged to his deceased father, and during the relevant period, namely, the assessment year 1950-51, himself, his mother and other heirs of his deceased father were co-owners of this house. His mother was living in the house till her death in 1951. The assessee owns another house at Koothanallur, No. 11, Jinnah Street. This house belongs to him exclusively. During the relevant period the house was in the occupation of one Fathima Bibi. The nature of the possession of the house, No. 11, Jinnah Street, Koothanallur, with Fathima Bibi is a matter of controversy between the revenue and the assessee. The assessee's case is that Fathima was a monthly tenant of the said premises having agreed to pay a rent of Rs. 5 per month. The assessee has however been unable to produce any rental deed evidencing the lease. He also failed to include the rental receipt which he alleged he received from Fathima in returning the income for the relevant year. It is the absence of such a written instrument and the non-inclusion of the rental income in the assessee's return that mainly influenced the department in disbelieving the case of the lease put forward by the assessee. Fathima herself filed a statement before the department claiming that she has been residing in the premises as a tenant under the assessee from 1940 onwards on a monthly rent of Rs. 5 but this was rejected as untrue. The Income-tax Officer on this part of the case merely surmised that this Fathima Bibi must have been remaining in possession all these years only as a care-taker of the house. It cannot be said that this is a proper finding by the Income-tax Officer as there is no evidence to warrant that inference. As stated already, we are inclined to treat it as a mere speculation on the part of the Income-tax Officer but unfortunately that speculative opinion has been affirmed both by the Appellate Assistant Commissioner and by the Income-tax Appellate TribunalNow on these facts the question arises whether the first limb of section 4A(a)(ii) has been satisfied. It will now be convenient to set out that provision in its entirety

"Section 4A. --- For the purposes of this Act ---

(a) any individual is resident in the taxable territories in any year if he --

(i) is in the taxable territories in that year for a period amounting in all to one hundred and eighty-two days or more ; or

(ii) maintains or has maintained for him a dwelling place in the taxable territories for a period or periods amounting in all to one hundred and eighty-two days or more in that year, and is in the taxable territories for any time in that year ; or

(iii) having within the four years preceding that year been in the taxable territories for a period of or for periods amounting in all to three hundred and sixty-five days or more, is in the taxable territories for any time in that year otherwise than on an occasional or casual visit ; or

(iv) is in the taxable territories f