The Commissioner of Income Tax vs PR.PL. Palaniappa Chettiar

Alfred Henry Lionel Leach, C.J.—The assessee is the kartha of a joint Hindu family which tarried on a money-lending business in Muar and

Seramban in the Federated Malay States. The year of account is from the 13th April, 1940, to the 12th April, 1041. The kartha went to Muar in

the month of November, 1938, and remained there until the 20th October, 1940, during which time he had control of the family''s business in the

Federated Malay States. He returned to this Presidency on the 24th October, 1940, which means that he was here for a little less than six months

of the account year. The Income Tax Officer was of the opinion that the business at Muar and Seramban was controlled by the kartha from

Madras and consequently the case fell within the second proviso to Section 4(1.) of the Indian Income Tax Act. The Appellate Assistant

Commissioner held that there was no evidence that the kartha after his return to this Presidency, had exercised control over the business in Muar

and Seramban. Consequently he overruled the Income Tax Officer''s assessment. His decision was concurred in by the Income Tax Appellate

Tribunal Calcutta Bench. At the request of the Commissioner of Income Tax, the Tribunal has referred u/s 66(1) of the Act the following question:

Whether when it is found that there is no act of control in British India the mere presence of the manager of the joint Hindu family as such in British

India will lead to the finding that there has been control and management within British India.

This question was framed because the Commissioner contended that where the kartha is in British India it must be presumed that he has control of

a foreign business of the family. The Tribunal expressed its dissent from this proposition and we consider that it was justified in so doing.

The second proviso to Section 4(1) states that in the case of a person not ordinarily resident in British India, income which arises to him without

British India shall not be included in the assessment unless it is derived from a business controlled or set up in British India or unless it is brought

into or received in, British India during the year. There is no question here of income having been brought into British India. The word "" control

must be given its ordinary meaning. Unless there is control in BritishIndia of a foreign business the proviso does not apply. The mere fact that the

manager of a joint Hindu family happens to be within British India for part of the account year does not necessarily imply that during that period he

has exercised control over the management of the business abroad. In fact in this case the kartha left his eldest son to manage the businesses in

Muar and Seramban.

In a recent case, The Commissioner of Income Tax Vs. Gangabishan Mohanlal, , we had occasion to discuss the meaning of the words "" control

and management "" used in Section 4-A (b) and we held that there must be some evidence of an act of control or management before the clause

applied. We cannot go behind the finding of theTribunal that in the present case no control was exercised by the kartha after he had returned to

Madras on the 20th October, 1940. Mr. Rama Rao Sahib on behalf of the Commissioner has suggested that we should re-frame the question. He

has pointed to a statement in the order of the Appellate Assistant Commissioner that after the kartha returned to Madras copies of the day books

kept in the Federated Malay States were sent to him. learned Counsel argues on this that the question should be whether there is evidence on the

record to justify a finding that control was exercised. We are not prepared to fall in with the suggestion. In the first place, the Commissioner''s case

is that the mere presence here of the kartha is sufficient to justify a Court in holding that there was control in British India of the foreign business of

the family during the account year and it was on this contention that the Tribunal framed the question now before us. In the second place, we do

not consider that the mere receipt by the kartha of the copies of the day books would be sufficient to justify a finding that the control had been

exercised by him after his return from the Federated Malay States, especially when he had left his eldest son in management of the business there.

For these reasons, we hold that the presence of the manager of a joint Hindu family in British India will not in itself justify a finding that control of a

foreign, business is exercised within British India. The assessee is entitled to his costs, Rs. 250.