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TMI Blog1958 (4) TMI 1X X X X Extracts X X X X X X X X Extracts X X X X ..... Under clause (3) of the partnership deed, the superintendent, Ponnambalam Pillai, who was himself a co-owner in the said estate previously, manages the estate and looks after its working from day to day. Ponnambalam Pillai permanently stays in Ceylon. He looks after the estate from day to day and it is by him that all sales are effected through commission agents by name Gordon and Company. The pass books for the bank account for the estate are kept in his name and he receives the income and makes the requisite disbursements from time to time. The assessment proceedings for the assessment years 1939-40 to 1942-43 were started by the Additional Income-tax Officer, Tiruchirapalli Circle. The appellant submitted its returns before the Income-tax Officer and claimed that the firm was not resident in British India and so the income arising in Ceylon from the appellant's estate was not assessable to tax in India. The Income-tax Officer rejected the appellant's contention and held that the appellant was a resident under the provisions of section 4A(b) of the Act and so he proceeded to tax the entire income accruing to and arising from the appellant's estate in Ceylon. The returns submit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ional paper-book containing some more correspondence. There is no doubt that the question raised for our decision is a question of law. Whether or not the appellant is a resident firm under section 4A(b) would depend upon the legal effect of the facts proved in the case. The status of the appellant which has to be determined by reference to the relevant section of the Act is a mixed question of fact and law and in determining this question the principles of law deducible from the provisions of the said section will have to be applied. This position has not been disputed before us in the present proceedings. Section 4A(b) provides inter alia that "for the purpose of the Act, a firm is resident in the taxable territories unless the control and management of its affairs is situated wholly without the taxable territories". This provision shows that, where the partners of a firm are residents of this country, the normal presumption would be that the firm is resident in the taxable territories. This presumption is rebuttable and it can be effectively rebutted by the assessee showing that the control and management of the affairs of the firm is situated wholly without the taxable territ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ............. (2) Mere activity by the company in a place does not create residence, with the result that a company may be 'residing' in one place and doing a great deal of business in another. (3) The central management and control of a company may be divided and it may keep house and do business in more than one place, and, if so, it may have more than one residence. (4) In case of dual residence it is necessary to show that the company performs some of the vital organic-functions incidental to its existence as such in both the places so that in fact there are two centres of management." It is in the light of these principles that section 4A(b) has to be construed. Thus the only question which remains to be considered is whether the High Court of Madras was right in holding that the appellant was resident in India under section 4A(b). On behalf of the appellant, Mr. Kolah has contended that the only conclusion which can be legitimately drawn from the evidence in the case is that the control and management of the appellant's affairs resided wholly in Ceylon. In support of this argument he has laid considerable emphasis on clause (3) of the partnership deed. This clause provides ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat in regard to important and big matters a budget was required to be submitted by the superintendent to the four principal partners and it was after the budget was approved by them that the superintendent was at liberty to act upon it. In our opinion, the fact that the budget thus submitted by the superintendent was usually approved by the partners does not detract from the position that the budget had to be submitted and could be acted upon only after it was approved. The act of approval in the context is undoubtedly an act of exercising the right of control and management of the affairs of the firm. That the estimate for 1940 had been submitted to the partners appears from the letter written by Veerappa Pillai to the superintendent on January 2, 1940. In this letter Veerappa Pillai had told the superintendent that only the school building should be built during the year and that the plan about the stable may be considered and attended to after April or May. Andiappa Pillai's letter to the superintendent written on December 31, 1939, gives instructions about manuring and asks the superintendent to undertake the building works mentioned in the letter as economically as possible e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at "when the coupon price goes down purchase for our garden 20,000 lbs." This correspondence shows that the entire control and management of the affairs of the firm had not been left with the superintendent. In regard to the manuring of tea gardens, the salary to be paid to the clerk, the purchase to be made, the expenditure to be incurred in constructing a building, the manner in which the goods should be packed and sent, all these are subjects discussed by the partners in their letters to the superintendent and in respect of all these presumably the superintendent had asked for directions and the partners gave him the directions. Besides, we have already referred to the admission made by Andiappa Pillai that, at the beginning of every year, the superintendent sent to the four important partners a budget concerning important and big matters to be attended to during the course of the year. Having regard to this evidence we are unable to accept the appellant's argument that the control and management of the appellant's affairs was situated wholly in Ceylon. In dealing with this question it would be relevant to bear in mind that the appellant would not succeed even if it is shown tha ..... 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