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TMI Blog1962 (3) TMI 114X X X X Extracts X X X X X X X X Extracts X X X X ..... 17th August, 1943. His estate devolved upon the two Indian wives, their nine children, the Malayan wife and her only son. Under the will, he had, however, appointed three executors and trustees to administer the properties belonging to him until they were divided and distributed to his heirs-in-laws; and they were (1) Amir Mohideen, (2) Mohamed Noorudeen and (3) Sheik Ahmed. Penang was under Japanese occupation at the time of Mohamed Rowthers death and for some time thereafter. The executors obtained probate of the will from the Japanese court on 12th December, 1944. After the British re-occupation sometime in 1945, this probate was confirmed by the British court. All the three executors, however, did not take up the management of the estate of the deceased, Mohamed Rowther. It was only Amir Mohideen who appears to have carried on the lighterage business in his capacity as executor till it was taken over by the power of attorney agent of the Indian heirs on 18th December, 1946. The news of the death of Mohamed Rowther was received by the Indian heirs only after the British re-occupation in 1945. On 3rd September, 1945, the Indian heirs remitted a sum of $ 15,000 through the Indian ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owther, were wholly outside India, that they should be deemed to be non-resident under section 4A of the Act, and that the orders of assessment made by the Income Tax Officer were illegal and improper. The Appellate Assistant Commissioner in a brief unsatisfactory order, dismissed the appeals. 3. Appeals to the Income Tax Appellate Tribunal were taken by the assessee. The Tribunal reached the conclusion that there was an association of persons which could be the unit of assessment of the facts and circumstances set forth above, but that the association of persons must consist only of the Indian heirs, excluding the Malayan heirs. The Tribunal excluded the rental income from properties in India, acting under section 9(3) of the Act. What was brought to tax by the Tribunal was the income from the foreign business to the extent of 101/120 shares of the Indian heirs, excluding the shares of 19/120 of the Malayan heirs. The assessees plea that they were non-residents was, however, repelled. 4. At the instance of the assessee, the Tribunal referred the following question of law, which forms the subject-matter of T. C. No. 60 of 1958: Whether the assessments of the eleven Indian heirs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for consideration on several occasions before the courts. The words "association" indicates plainly the voluntary combination for a common endeavour and not a mere legal status resulting from operation of law. Co-owners, co-heirs or co-legatees do not constitute such association in respect of the income of the joint or common asset by reason only of their jural relationship. But, if they unite themselves with the objective of earning income, they constitute an association of persons for assessment purposes and they cannot take advantage of their legal position to resist assessment on that basis. The essential criterion that attracts the label of "association of persons" in the Income Tax department is the unity of the income-making purpose rather than the unity of title in the income-yielding asset. 8. This question has been discussed and dealt with elaborately by a Division Bench of this court in Estate of Mohd. Oomer Sahib v. Commissioner of Income Tax. In that case, a Mohammedan who was carrying on business of manufacture and sale of beedies died intestate on December 17, 1942, leaving as his heirs, N, a son by his predeceased wife, L, his widow, and his fou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns by the Tribunal. So far as the Indian heirs are concerned, there is ample evidence to show - and indeed, there is a clear finding of fact on this point by the Tribunal - that Amir Mohideen carried on the business on behalf of the Indian heirs with their concurrence and cooperation. The remittance of $ 15,000 is September, 1945, from India to Penang is significant and is explicable only on the ground that the heirs in India agreed to the business being carried on by one or other of the executors at Penang. In the statement of the case, which is an agreed statement between the department and the assessee, it is observed by the Tribunal as follows : The Indian heirs obtained an overdraft accommodation from the Indian Overseas Bank Ltd. for $ 15,000 with which the executors revived the lighterage business on September 3, 1945, with the eighteen lighters available and continued to carry it on. 10. There is clear indication in the recitals of the power of attorney dated August 26, 1946, executed by the Indian heirs in favour of Dawood Ghani that the business was under the management of executors with the consent of the Indian heirs. Clause 11 of that power reads : To take charge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... carried on and to the part played by the Indian heirs in respect of such management. The interpretation of the term "control and management" occurring in section 4A(b) is found in the decision of the Supreme court in V. V. N. M. Subbayya Chettiar v. Commissioner of Income Tax. Fazl Ali J., delivering the judgment of the court quotes with approval the following observation of Patanjali Sastri J., as he then was : Control and management signifies in the present context, the controlling and directive power, the head and brain as it is sometimes called, and situated implies the functioning of such power at a particular place with some degree of permanence, while wholly seem to recognise the possibility of the seat of such power being divided between two distinct and separated places. 14. At pages 172 Fazl Ali J. observes : ...we take it 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. 15. Ordinarily, the income from a business arises only at the place where the business is carried on. If the owner of the business, however, resides elsewhere, that is, a place outside the business pla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dia has been held not to imply control of the foreign business during that period from India (Commissioner of Income Tax v. Gangabishan Mohanlal). These principles are not doubt fairly clear but their application is not always easy, as there are borderline cases in which it would be very difficult to appreciate to appreciate the precise nature of the so-called activity in India relating to a foreign business. But the onus is upon the assessee, who claims to be a non-resident, to prove that the entire control and management of the affairs of the association or Hindu undivided family or firm was wholly outside the taxable territories. 16. In the present case, its is plain and obvious that, for the calendar years 1945 and 1946, the association of persons, which was represented only by Amir Mohideen at Malaya, must be deemed to be a non-resident. Amir Mohideen was in charge of the business solely and exclusively, no doubt, for and on behalf of the Indian heirs. But, in so far as the conduct of the business was concerned, he was in full and complete charge of the business and was not under the directions of the Indian heirs. This position cannot be disputed in view of the terms of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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