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V.VR.N.M. SUBBAYYA CHETTIAR V. C.I.T. AIR 1951 SC 101

 

V.V.R.N.M. SUBBAYYA CHETTIAR V. C.I.T. AIR 1951 SC 101

FACTS

  • The appellant is the leader of a joint Hindu family in Ceylon, having business interests and investments in British India.
  • He visited India seven times and spent 101 days there dealing with legal and tax issues and initiating partnerships.
  • The appellant did not provide the file of correspondence with the business in Colombo, which would have helped determine the location of the management and control of the business. Additionally, the individual started two partnership businesses in India on 25th February 1942 and remained in India after their commencement.
  • The Income Tax Authorities and Assistant Commissioner claimed he should be considered a resident for tax purposes under Section 4-A(b) of the Income Tax Act.
  • The Income Tax Appellate Tribunal disagreed with the authorities. However, the Madras High Court upheld the tax authorities' decision.
  • The court stated that control and management of the family's affairs were not entirely outside British India.
  • The principles applied by HC include:
    • The central management and control signify the directing power and must be situated with some degree of permanence.
    • Mere activity in a place does not create residence.
    • Management and control may be divided, and a family may have multiple residences if vital functions are performed in different places.
    • It's necessary to show that essential functions are carried out in multiple places to establish dual residence.
  • Section 4-A(b) states that a joint Hindu family is a resident of British India unless its affairs are wholly managed outside the country. "Affairs" refers to tax-related income matters. The term "wholly" implies multiple residences are possible.

ISSUE

  • Whether in the circumstances of the case, the assessee (a Hindu undivided family) is resident in British India under Section 4-A(b) of the Income Tax Act?

RULE

  • As Appellant failed to prove that control and management of the family's affairs were entirely outside British India. The assessee is resident in British India under Section 4-A(b) of the Income Tax Act.

HELD

  • The appellant's stay in British India for legal matters and partnership initiation does not constitute a shift in the management and control of the family's affairs. Mere activity in British India cannot determine residence status.
  • The appellant-controlled businesses in Burma and Saigon during the relevant period. There is no evidence supporting control solely from Colombo. Lack of correspondence or evidence suggests that the appellant personally oversaw affairs in British India during visits.
  • The burden of proving that control and management of the family's affairs were entirely outside British India rested on the appellant. However, the evidence presented did not conclusively demonstrate this. While the appellant permanently resided in Colombo and the family was domiciled in Ceylon, actions taken by the appellant in British India were relevant but not sufficient to prove sole control from outside India.
  • Thus, the Assistant Commissioner's conclusion, that the appellant failed to discharge the burden of proof and that the normal presumption of residence should apply, was deemed legitimate. 
  • The appeal was dismissed with costs. However, it was noted that this decision only applied to the specific assessment year in question, leaving room for the appellant to provide evidence in future years to establish that the control and management of the family's affairs are wholly outside British India.

COMMENTARIES RATIO/NOTES

  • Onus of proof- Whether an assessee is a resident or a non-resident is a question of fact and it is the duty of the assessee to place all relevant facts before the Income-tax authorities -Rai Bahadur Seth Teomal v. CIT [1963] 48 ITR 170 (Cal).

 

the burden of proving that an individual or a company is resident in India lies on the department- Moosa S. Madha & Azam S. Madha v. CIT [1973] 89 ITR 65 (SC).