# V. V. R. N. M. SUBBAYYA CHETTIAR v. COMMISSIONER OF INCOME.TAX, MADRAS

- **Citation:** [1950] 1 S.C.R. 961
- **Court:** Supreme Court of India
- **Decided:** 1947-08-22
- **Case number:** Civil Appeal No. XXXVIII of 1949
- **Bench:** SAIYID FAZL Au, Mukherjea, Chandrasekhara Aiyar Jj
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/v-v-r-n-m-subbayya-chettiar-v-commissioner-of-income-tax-madras-164
- **Pages:** 8

## Headnote

Indian Income-tax Act (XI of 1922), s. 4A (b)-Hindu undivided
family-Residence-Tests--Occasional visits to India and attending
to family affairs there, effect of-B,wden of proof-" Control and
management",'' situated", "wholly" and
11 affairs", meanings of.
The words used in s. 4A (b) show: (i) that, normally a Hindu
undivided family will be taken to be resident in the taxable territorieE1, but such a. presumption will not apply if the case can be
brought under the second part of the provision, (ii) the word
11 affairs " means affairs which are .relevant for the purpose of the
Income-tax Act and which have some relation to income, (iii) the
question whether the case falls within the exception depends on
whether the seat of the direction and control of the affairs of the
family is inside or outside British India, and (iv) the onus of
proving facts which would bring his case within the exception
which is provided by the latter p.rt is on the assessee.
The expression "control and management" ins. 4A (b) ol the
Income-tax Act signifies the controlling and directive power, the
"head and brain" as it is sometimes called;
11 situated" implies
the functioning of such power at a particular place with some
degree of permanence; and ''wholly" seems to recognise the
possibility ol the seat of such power being divided between two
distinct a.ad separate places and thn.t a Hindu undivided family
may have more than one residence in the same way as a corporation may have.
The karta of a Hindu undivided family lived with bis wife and
children and ca,rried on business in Ceylon, which bad become
their place of domicile. He owned some immoveable property
and bad a house. anil investments in British India. In the year of
account be visited British India and stayed there for periods
amounting in all to 101 days and during his stay started two firms
in British India, personally attended to a litigation relating to tbe
family lands, and appeared before the Income-tax 1rnthorities in
proceedings relating to assessment of the. income of the family:
Held, that these facts were not necessarily conclusive to
establish tbe existence of a centre of control and management of
the affairs of the family in British India, but they were by no
ineans irrelevant to the matter in issue, and inasmuch as the
assessee had not discharged the onus which lay upon him under
the law by producing all' the material evidence which be was
p&lled upon to produce to show that norms.11¥ and s.s a matter of
l l3
1960
Dec, 21.
962
SUPREME COURT REPORTS
[ 1950]
1950
course the affairs in India were also being controlled from
Colombo, the normal presumption under the firot part of s. 4 A (b)
V. V. R. N. M. must be given effect to and the assessee must be treateil as a
SubQayya
resident in British India during the year in question. It was
Gh~ttiar
however open to the assessee to prove in future years by proper
v.
evidence that the seat of control and managerr1ent of the affairs
Oommissiontir of of the fau1ily wa.s wholly out.side British InUia.
Income·ta•,
De.Beere V· Howe 15 Tax Oas. 198), Swedish Central Railway
Madra•.
Co. Ltd. v. Thompson (9.Tax Oas. 373) l'eferred to.
APPELLATE
jURISDICTION:
Civil
Appeal No.
XXXVIII of 1949.
Appeal from a Judgmept of the High Court of Judicature at Madras (Gentle C. J. and Patanjali Sastri J.)
dated August 22, 1947, in a reference under section
66 (1) of the Indian Income-tax Act made by the
Income.tax Appellate Tribunal (Ref. No. 25 of 1946).
K. Rajah Aiyar (K. Srinivasan, with him) for the
appellant.
M. C. Setalvad (G. N. Joshi, with him) for the res.
pondent.
1950: December 21.
The Judgment of the Court
was delivered by
Fa•! A!i J.
FAZL ALI J. -This is an appeal from a judgment of
the High Court of Judicature at Madras on a reference
made to it under section 66 (1) of the Indian Incometax Act by the Income-tax Appellate Tribunal in
connection with the assessment of the appellant to
income-tax for the year 1942-43. The question of law
referred t

## Text

S.C.R.
SUPREME COURT REPORTS
961
V. V. R. N. M. SUBBAYYA CHETTIAR
V.
COMMISSIONER OF INCOME.TAX, MADRAS.
[SAIYID FAZL Au, MUKHERJEA and
CHANDRASEKHARA AIYAR JJ.J
Indian Income-tax Act (XI of 1922), s. 4A (b)-Hindu undivided
family-Residence-Tests--Occasional visits to India and attending
to family affairs there, effect of-B,wden of proof-" Control and
management",'' situated", "wholly" and
11 affairs", meanings of.
The words used in s. 4A (b) show: (i) that, normally a Hindu
undivided family will be taken to be resident in the taxable territorieE1, but such a. presumption will not apply if the case can be
brought under the second part of the provision, (ii) the word
11 affairs " means affairs which are .relevant for the purpose of the
Income-tax Act and which have some relation to income, (iii) the
question whether the case falls within the exception depends on
whether the seat of the direction and control of the affairs of the
family is inside or outside British India, and (iv) the onus of
proving facts which would bring his case within the exception
which is provided by the latter p.rt is on the assessee.
The expression "control and management" ins. 4A (b) ol the
Income-tax Act signifies the controlling and directive power, the
"head and brain" as it is sometimes called;
11 situated" implies
the functioning of such power at a particular place with some
degree of permanence; and ''wholly" seems to recognise the
possibility ol the seat of such power being divided between two
distinct a.ad separate places and thn.t a Hindu undivided family
may have more than one residence in the same way as a corporation may have.
The karta of a Hindu undivided family lived with bis wife and
children and ca,rried on business in Ceylon, which bad become
their place of domicile. He owned some immoveable property
and bad a house. anil investments in British India. In the year of
account be visited British India and stayed there for periods
amounting in all to 101 days and during his stay started two firms
in British India, personally attended to a litigation relating to tbe
family lands, and appeared before the Income-tax 1rnthorities in
proceedings relating to assessment of the. income of the family:
Held, that these facts were not necessarily conclusive to
establish tbe existence of a centre of control and management of
the affairs of the family in British India, but they were by no
ineans irrelevant to the matter in issue, and inasmuch as the
assessee had not discharged the onus which lay upon him under
the law by producing all' the material evidence which be was
p&lled upon to produce to show that norms.11¥ and s.s a matter of
l l3
1960
Dec, 21.
962
SUPREME COURT REPORTS
[ 1950]
1950
course the affairs in India were also being controlled from
Colombo, the normal presumption under the firot part of s. 4 A (b)
V. V. R. N. M. must be given effect to and the assessee must be treateil as a
SubQayya
resident in British India during the year in question. It was
Gh~ttiar
however open to the assessee to prove in future years by proper
v.
evidence that the seat of control and managerr1ent of the affairs
Oommissiontir of of the fau1ily wa.s wholly out.side British InUia.
Income·ta•,
De.Beere V· Howe 15 Tax Oas. 198), Swedish Central Railway
Madra•.
Co. Ltd. v. Thompson (9.Tax Oas. 373) l'eferred to.
APPELLATE
jURISDICTION:
Civil
Appeal No.
XXXVIII of 1949.
Appeal from a Judgmept of the High Court of Judicature at Madras (Gentle C. J. and Patanjali Sastri J.)
dated August 22, 1947, in a reference under section
66 (1) of the Indian Income-tax Act made by the
Income.tax Appellate Tribunal (Ref. No. 25 of 1946).
K. Rajah Aiyar (K. Srinivasan, with him) for the
appellant.
M. C. Setalvad (G. N. Joshi, with him) for the res.
pondent.
1950: December 21.
The Judgment of the Court
was delivered by
Fa•! A!i J.
FAZL ALI J. -This is an appeal from a judgment of
the High Court of Judicature at Madras on a reference
made to it under section 66 (1) of the Indian Incometax Act by the Income-tax Appellate Tribunal in
connection with the assessment of the appellant to
income-tax for the year 1942-43. The question of law
referred to the High Court was as follows:-
" Whether in the circumstances of the case, the
assessee (a Hindu undivided family) is 'resident' in
British India under section 4A (b) of the Income-tax
Act."
The circumstances of the case may be briefly stated
as follows. The appellant is the karta of a joint Hindu
family and has been living in Ceylon with his wife,
son and three daughters, and they are stated to be
domiciled in that country. He carries on business in
Colombo under the name ano style of the General
Trading Corporation, and he owns a house, some immoveable property and investments in British India.
.-
2J
S.C.R.
SUPREME COURT REPORTS
963
He has also shares in two firms situated at Vijaya1950
puram and Nagapatnam in British India. In the year
of account, 1941-42, which is the basis of the present v.;;,::;Y:~ M.
assessment, the appellant is said to have visited
Oh•ttiar
British India on seven occasions and the total period
v.
of his stay in British India was 101 days. What he Commissioner of
did during this period is summarized in the judgment
Incom•·tax,
of one of the ]earned Judges of the High Court in
Madras.
these words : -
Fazl Ali J.
" During such stays, he personally attended to a
litigation relating to the family lands both in the trial
Court and in the Court of appeal. He was also attending
the income tax proceedings relating to the assessment
of the family income, appearing before the income. tax
authorities at Karaikudi and Madras.
On one of these
occasions, he obtained an extension of time for payment of the tax after interviewing the authority
concerned ....... "
The other facts relied upon by the income-tax
authorities were that he did not produce the file of
correspondence with the business in Colombo so as to
help them in determining whether the management
and control of the business was situated in Colombo
and he had started two partnership businesses in India
on 25th February, 1942, and remained in India for some
time after the commencement of those businesses.
Upon the facts so stated, the Income-tax Officer and
the Assistant Commissioner of Income-tax held that
the appellant was a resident within the meaning of
section 4A (b) of the Income-tax Act, and was therefore
liable to be assessed in respect of his foreign income.
The Income-tax Appellate Tribunal however came to a
different conclusion and held that in the circumstances ·
of the case it could not be held that any act of management or control was exercised by the appellant during
his stay in British India and therefore he was not
liable to assessment in respect of his income outside
British India. This view was not accepted by a Bench
of the Madras High Court consisting of the learned
Chief Justice and Patanjali Sastri]. They held that
the Tribunal had misdirected itself in determining the
964
SUPREME COURT REPORTS
[1950]
1950
question of the " residence" of the appellant's family
and that on the facts proved the control and managev. ;~b~~Y~~ M. ment of the affairs of the family cannot be held to have
Ghettiar
been wholly situated outside British India, with the
v.
result that the family must be deemed to be resident
Commissioner of in British India within the meaning of section 4A (b)
Income-ta•,
of the Income-tax Act.
In this appeal, the appellant
Ma.dra"
has questioned the correctness of the High Court's
Fa•I Ali J.
decision :-
Section 4A (b) runs thus:-
"For the purposes of this ActA 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."
It will be noticed that section 4A deals with
" residence ", in the taxable territories, of (a) individuals, (b) a Hindu undivided family, firm or other
association of persons, and (c) a company. In each of
these cases, certain tests have been laid down, and the
test with which we are concerned is that laid down in
section 4A (b ).
This provision appears to be based
very largely on the rule which has been applied in
England to cases of corporations, in regard to which
the law was stated thus by Lord Loreburn in De Beers
v. Howe(').
"A company cannot eat or sleep, but it can keep
house and do business. We ought, therefore, to see
where it really keeps house and does business ...... The
decision of Chief Baron Kelly and Baron Huddleston
in The Calcutta jute Mills v. Nicholson and The Cesena
Sulphur Company v. Nicholson('), now thirty years
•
ago, involved the principle that a company resides for
purposes of income-tax where its real business is
carried· on. Those decisions have been acted upon ever
since. I regard that as the true rule, and the real
business is carried on where the central management
and control actually abideS"."
It is clear that what is said in section 4A (b) of the
Income-tax Act is what Lord Loreburn intended to
(1) 5 Tax C••· 198.
(2; (18761 1 Ex. D. 428,
S.C.R.
SUPREME COURT REPORTS
965
convey by the words " where the central management
!950
and control actually abides."
.
h"
~~&~•
The principles w ich are now well-established in
subbayya
England and which will be found to have been very
Ohettiar
clearly enunciated in Swedish Central Railway Comv.
pany Limited v. Thompson(1), which is one of the Commissioner of
1 d ·
th
b · t
Income-tax
ea mg cases on
e su 1ec , are:-
Madra•.'
(1) that the conception of residence in the case of a
fictitious "person ", such as a company, is as artificial
Farl Ali J.
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. What these words mean have been
explained by Patanjali Sastri J. with very great clarity
in the following passage where he deals with the
meaning of section 4A (b) of the Income-tax Act:-
"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"
would seem to recognize the possibility of the seat of
such power being divided between two distinct and
separated places."
As a general rule, the control and management of a
business remains in the hand of a person or a group of
persons, and the question to be asked is wherefrom
the person or group of persons controls or directs the
business.
(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
Ill 9 T•x Oas. R73.
•
966
SUPREME COURT REPORTS
[ 1950]
1950
functions incidental to its existence as such in both
the places, so that in fact there are two centres of
V.~R.N M.
t
Subbayya
managemen .
Ghettiar
It appears to us that these principles have to be
v.
kept in view in properly construing section 4A(b) of
Gommi,,fon.r afthe Act.
The words used in this provision clearly
Income.ta~. show firstly, that, normally, a Hindu undivided family
Madras.
will be taken to be resident in the taxable territories,
Fa•t Ali J.
but such a presumption will not apply if the case can
be brought under the second part cf the provision.
Secondly, 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.
Thirdly, in order to bring the case under the
exception, we have to ask whether the seat of the
direction and control of the affairs of the family is
inside or outside British India. Lastly, the word
" wholly " suggests that a Hindu undivided family
may have more than one "residence" in the same
way as a corporation may have.
The question which now arises is what is the result
of the application of these principles to this case, and
whether it can be held that the central control and
management of the affairs.of the assessee's family has
been shown to be divided in this case.
It seems to us that the mere fact that the assessee
has a house at Kanadukathan, where his mother lives,
cannot constitute that place the seat of control and
management of the affairs of the family. Nor are we
inclined in the circumstances of the present case to
attach much importance to the fact that the assessee
had to stay in British India for 101 days in a particular year. He was undoubtedly interested in the
litigation with regard to his family property as well as
in the income-tax proceedings, and by merely coming
out to India to take part in them, he cannot be said to
have shifted the seat of management and control of the
affairs of his family, or to have started a second centre
for such control arid management. The same remark
must apply to the starting of two partnership businesses, as mere" activity " cannot be the test of residence.
-
S.C.R.
SUPREME COURT REPORTS
967
It seems to us that the learned Judges of the High
1950
Court have taken rather a narrow view of the meaning
of section 4A(b). because they seem to have proceeded v. v. R. N. M.
.
Subbavya
on the assumption that merely because the assessee
Chsttiar
attended to some of the affairs of his family during his
v.
visit to British India in the part!cular year, he brought Oommissw•er of
himself within the ambit of the rule.
On the other · focoms-tax,
hand, it seems to us that the more correct approach to
Madras.
the case was made by the Appellate Assistant ComFaz! Ali J.
missioner of Income-tax in the following passage which
occurs in his order dated the 24th February, 1944 :-
" During a major portion of the accounting period
(year ending 12th April, 1942) the appellant was controlling the businesses in Burma and Saigon and there
is no evidence that such control was exercised only from
Colombo. No correspondence or other evidence was
produced which would show that any instructions were
issued from Colombo as regards the management of the
affairs in British India especially as it was an unauthorized clerk who was looking after such affairs.
The presumption therefore is that whenever he came to
British India the appellant was looking after these
affairs himself and exercising control by issuing instructions ............... It has been admitted that there are
affairs of the family in British India. Has it been
definitely established in this case that the control and
management of such affairs has been only in Colombo?
I have to hold it has not been established for the
reasons already ~tated by me."
There can be no doubt that the onus of proving facts
which would bring his case within the exception, which
is provided by the latter part of section 4A (b), was on
the assessee. The appellant was called upon to adduce
evidence to show that the control and management of
the affairs of the family was situated wholly outside
the taxable territories, but the correspondence to which
the Assistant Commissioner of Income-tax refers and
other material evidence which might have shown that
normally and as a matter of course the affairs in India
were also being controlled from Colombo were not produced. The position therefore is this.
On the one
968
SUPREME COURT REPORTS
[1950]
1950
hand, we have the fact that the head and karta of the
assessee's family who controls and manages its affairs
v. v. R. N. M. permanently lives in Colombo and the family is domi-.
Subbayya
.
Oh•ttiar
ciled in Cey Ion. On the other hand, we have cert am
v.
acts done by the karta himself in British India, which,
Oommisaioner o[though not conclusive by themselves to establish the ·
In"me-ta>, existence of more than one centre of control for the
Madras.
affairs of the family~ are by no means irrelevant to the
Faz! Ali J.
matter in issue and therefore cannot be completely
ruled out of consideration in determining it.
In these
circumstances, and in the absence of the material evidence to which reference has been made, the finding of
the Assistant Commissioner, that the onus of proving
such facts as would bring his case within the exception
had not been discharged by the assessee and tlie normal presumption must be given effect to, appears to
us to be a legitimate conclusion. In this view, the
appeal must be dismissed with costs, but we should
like to observe that as this case has to be decided mainly
with reference to the question of onus of proof, the
decision in this appeal must be confined to the year of
assessment to which this case relates, and it would be
open to the appellant to show in future years by
proper evidence that the seat of control and management of the affairs of. the family is wholly outside
British India.
Mukherjea J.
MuKHERJEA J.-1 agree with my learned brother,
:f:azl Ali J., both in his reasoning and in his conclus10n.
d
kh
CHANDRASEKHARA AIYAR J.-I concur in the 1'udgChan rase ara
f
I
.
Ai.yar 1.
ment o my earned brother, Faz! Ah J.
Appeal dismissed.
Agent for the appellant : M. S. K. Sastri.
Agent for the respondent: P.A. Mehta.
-