COMMISSIONER OF INCOME-TAX Vs. SHANMUGHAM RUBBER ESTATE KAULALAMPUR BY PARTNER SRI SPSRMRAMASWAMI CHETTIAR

JUDGEMENT

(1.) The question in this reference is whether the respondent firm was resident in British India within the meaning of Section 4-A (b) of the Indian Income-tax Act. That section says that for the purposes of the Act a Hindu undivided family, firm or other association of persons is resident in British India unless the control and management of its affairs is situated wholly without British India. In other words, if the control and management of its affairs is partly within British India the family, firm or association of persons as the case may be, is deemed to be resident in British India for the purposes of the Act.

(2.) The partners in the assessee firm are six Nattukottai Chettiars. The partnership was formed on the 19 December, 1935, for the purpose of acquiring and working a rubber plantation in Malacca known as the Shanmugham Rubber Estate. The partnership deed provided that two of the partners should in rotation have control of the partnership business. All the partners had money-lending businesses in the Federated Malay States and the deed permitted a controlling partner to act, if he so desired, through the agent of his own money- lending business in that country. This provision, however, would not affect the legal position if the controlling partners or one of them was resident in British India and retained control of his agent. In this case the question does not, however, turn, on whether the controlling partners acted through their individual agents and therefore no further reference need be made to this matter.

(3.) The year of account, was the year 1940-41. The controlling partners during that period were M. RM. S. Chockalingam Chettiar and SP. M. Ramanathan Chettiar. The former lived throughout the year at Karaikudi in this presidency. The latter lived in the Native State of Pudukottah which lies some 25 miles away from Karaikudi. The Income-tax Officer held that the firm was resident in British India within the meaning of Section 4-A (b) because part of the control was exercised by M. RM. S. Chockalingam Chettiar from Karaikudi. On an appeal by the assessee the Appellate Assistant Commissioner held that there was no control exercised from British India and this opinion was accepted by the Appellate Tribunal. The reference has been made at the instance of the Commissioner of Income-tax, Madras, under Section 66(1) of the Act, as the Commissioner maintains that wrong conclusions have been drawn from admitted or proved facts. The question referred is widely drawn and is in these terms: Whether in the circumstances of the case the respondent firm was resident in British India under Section 4-A (b) of the Act?