TMI Blog1973 (3) TMI 43X X X X Extracts X X X X X X X X Extracts X X X X ..... t the said order, but was dismissed by the Appellate Assistant Commissioner on the ground that it was not maintainable. This order was upheld by the Income-tax Appellate Tribunal. The respondent, thereafter, instituted a writ petition in this court, inter alia, on the ground that M/s. Nathir Mal and Sons was not a non-resident firm and, as such, the provisions of section 18(3B) read with section 18(7) were not applicable. This ground found favour with the learned single judge who decided the writ petition and without going into the merits of the other grounds raised in the writ petition, the order of the Income-tax Officer was quashed. On appeal, the judgment of the learned single judge was reversed by a Bench of this court on the ground th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... territories. From the use of the word " wholly " it is obvious that even if the control and management of its affairs was situated partly within the taxable territories, the said firm would be a resident firm. Learned counsel for the appellant placed reliance on certain decisions interpreting section 4A(b) aforesaid. They are : Bhimji R. Naik v. Commissioner of Income-tax [1946] 14 ITR 334 (Bom), Subbayya Chettiar v. Com missioner of Income-tax [1951] 19 ITR 168 (SC) and Commissioner of Income-tax v. Erin Estate [1951] 20 ITR 412 (Mad). In the first case referred to above it was held that the control and management mentioned in section 4A(b) of the Act must be de facto control and management and not de jure control and management, and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ebutted by the assessee showing that the control and management of the affairs of the firm is situated wholly without the taxable territories. The onus of rebutting the initial presumption is on the assessee. The 'control and management' contemplated by the section evidently refers to the controlling and directing power. Often enough, this power has been described in judicial decisions as the 'head and brain' ; the affairs of the firm which are subject to the said control and management refer to the affairs which are relevant for the purpose of taxation and so they must have some relation to the income of the firm. When the section refers to the control and management being situated wholly without the taxable territories it implies that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her the control and management thus exercised amounted to a substantial part of the control and management of the affairs of the firm. The exercise of the control and management even in part in the taxable territories would be enough to fix the appellant with the character of a resident within section 4A(b). " In fact, counsel for both the parties relied on the aforesaid observations of the Supreme Court in support of their respective contentions. It is in the light of these observations that the question as to whether M/s. Nathir Mal and Sons was a resident or non-resident has to be decided. The contract in respect of which commission was paid by the respondent to M/s. Nathir Mal and Sons was for the supply of vests to the said firm wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and " H " are signed by N. Lokumal and these letters start with : " Loku mal, Nathir Mal Company, importers, Exporters, Commission Agents, Manufacturers, Representatives, Sole Buying Agents Representatives in India for Messrs. Nathir Mal Sons, Djakarta (Indonesia)". Annexure "I" is a letter from Jwala Fabrics addressed to N. Lokumal, representative in India, M/s. Nathir Mal Sons, Ratnagar Bungalow, Murbad Road, Kalyan. It states : " ......the question of delivery period was fully discussed with you...... It is, therefore, surprising that you are not prepared to extend the delivery period...... We trust you would take up the matter of extension with your Indonesian Government and see to it that it is obtained ....." From a perusal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the purpose of the business of the firm. Section 19 lays down that subject to the provisions of section 22 the act of a partner which is done to carry on in the usual way business of the kind carried on by the firm, binds the firm, and that the authority of a partner to bind the firm conferred by this section is called his " implied authority ". N. Lokumal being a partner of M/s. Nathir Mal and Sons, by virtue of his rights and obligations as a partner, was a part and parcel of the " head and brain " of the firm. From the correspondence referred to above we are clearly of the opinion that the control and management of the affairs of M/s. Nathir Mal and Sons was at the relevant time situated, at any rate, partly within the taxable territo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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