TMI Blog1958 (4) TMI 1X X X X Extracts X X X X X X X X Extracts X X X X ..... resident in the taxable territories within the meaning of section 4A(b) of the Income-tax Act. This question arises in this way. The appellant is a registered firm owning a tea estate called "The Erin Estate" at Galah in Ceylon. The firm consists of seven partners all of whom are permanent residents of certain villages in Tiruchirapalli District. The total sum paid by the partners amounts to Rs. 25,00,000 and the same is divided into 147 shares. Out of these 147 shares, Andiappa Pillai owns 50 shares, Veerappa Pillai owns 43 shares, Nagalingam Pillai owns 18 shares and the remaining four partners own 9 shares each. The estate owned by the firm produces tea which is sold to the authorities under the regulations prevailing in Ceylon. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llant applied for and obtained a certificate from the High Court under section 66A(2) that the present case is a fit one to appeal to the Supreme Court of India. That is how this appeal has come before us and the only point which it raises for decision is whether the appellant is a firm resident in the taxable territories under section 4A(b) of the Act. This appeal was argued before this court on February 9, 1956 ; but after arguments were heard for some time, the court adjourned the hearing of the appeal sine die, "to enable the parties to compile an agreed paper-book containing letters which they respectively relied upon in support of their respective cases". In pursuance of this direction, by consent the parties have filed an additional 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 pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndia before it can be held that the control and management is not situated wholly without the taxable territories. (vide B. R. Naik v. Commissioner of Income-tax, Bombay. The effect and scope of the provisions of section 4A(b) has been considered by this court in V. VR. N. M. Subbayya Chettiar v. Commissioner of Income-tax, Madras. After examining the relevant decisions on this point, Fazl Ali, J., who delivered the judgment of the court, has observed "(1) that the conception of residence in the case of a fictitious 'person' such as a company, is as artificial as the company itself and the locality of the residence can only be determined by analogy, by asking where is the head and seat and directing power of the affairs of the company ................ (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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs of the firm had been left to him by the partners. He, however, admitted that, if anything done by him appeared to them to be irregular, they had the right to check him or to give him directions as to how he should carry on the business. He also added that so far there had been no occasion for them to disagree with anything done by him. Whilst Andiappa Pillai thus claimed that no control has been exercised from India, he had to concede that at the beginning of every year the superintendent sends to the four partners mentioned by him a budget concerning any important or big matter to be attended to in connection with the estate. It was usual for them, said Pillai, to approve of the budget. It would thus be clear that this statement shows that 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 on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h in both the said garden and Konangodai garden. Certain other directions as to the work to be assigned to the other clerks are also given. On July 13, 1940, Andiappa Pillai told the superintendent to pack and send 70 lbs. F. B. O. P. tea and suggested that, if the tea had not been sent already to Veerappa Pillai, he should carry put the said instruction. In this letter the superintendent is also asked to enquire from other companies the price of Nevvil and he is told that, having regard to the nature of the current sales of tea, manuring need not be stopped. On July 29, 1940, the superintendent is told as to how the account is to be made in regard to the charges for the guards. On August 8, 1940, Andiappa Pillai tells the superintendent that "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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
