COMMISSIONER OF INCOME TAX Vs. RATNASWAMY K S
LAWS(MAD)-1970-4-11
HIGH COURT OF MADRAS
Decided on April 24,1970

COMMISSIONER OF INCOME-TAX Appellant
VERSUS
K.S. RATNASWAMY Respondents

JUDGEMENT

Ramaprasada Rao, J. - (1.) AT the instance of the Commissioner of Income-tax, Madras, and on a direction by this court, the Income-tax Appellate Tribunal, Madras Bench, has referred to us the following questions of law and stated to us the case thereof: "1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee was non-resident? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that there was no liability to penalty under Section 28(1)(a)?"
(2.) THE facts are as follows: Subramania Kadavirar and Arumuga Kadavirar were brothers. THE assessee and two others, Ganapathi and Velayudam, were the sons of Subramania, and Ganesa is the only son of Arumuga. After the death of Subramania and Arumuga their sons formed a Hindu undivided family. But it is admitted that Subramania himself was born and bred in Ceylon and so is the assessee. THE assessee has his own business in Ceylon and has properties therein. All his eight children were born in Ceylon and, educated there. THE family had several non-residential buildings and one ancestral house in Qrathanad, Thanjavur District; It had also lands. All the joint family properties were managed by Ganesa, son of Arumuga. THE house was occupied by the step-mother of the assessee and his brothers. THE joint family properties were maintained out of the agricultural and rental income and the assessee never enjoyed any portion of the family income. THE assessee's movements, since 1946, were as under: JUDGEMENT_303_ITR78_1970Html1.htm The assessee started constructing a theatre in, Orathanad in 1953, which was completed in 1957. During the said construction the assessee made occasional visits and stayed sometimes in the family house, sometimes in a chatram in Thanjavur and sometimes in a hotel. In July, 1958; the assessee on the one hand and other members of the family on the other executed mutual deeds of ' release, relinquishing each party's rights in favour of the other. Inter alia, the assessee released all his right, title and interest in the family properties in favour of his brothers, reciting therein that the family property was not enjoyed by the assessee but only by others. The Tribunal finds that the deed of release is an instrument bona fide entered into between the parties. In the above circumstances, the assessee filed returns for the assessment years 1952-53, 1953-54, 1956-57 and 1957-58, for the first two years, after proceedings were initiated under Section 34(1)(a) of the Income-tax Act, 1922, hereinafter referred to as " the Act", and for the later two years on his own. The status declared in all the returns was that of " resident and ordinarily resident person". The Income-tax Officer completed the assessment. On appeal, ; though initially the appeal was directed against the rejection of the claim of the assessee for double taxation relief, later on additional but a substantial ground was taken that the assessee should have been treated as a non-resident in all the years. The additional ground found favour with the Appellate Assistant Commissioner, who found that during his sojourn in India, he was staying in the family house more as a guest and that he did not maintain nor had a house maintained for him and that, in consequence, Section 4A(a)(ii) of the Act was inapplicable. On a further appeal by the department the subject was remitted for a report by the Appellate Assistant Commissioner after a fuller examination as to the factual position whether the assessee did maintain the premises in India or the same was maintained for him by others, as it appeared to the Tribunal that the department did not have an effective opportunity to meet the aspect raised for the first time before the Appellate Assistant Commissioner. In the remand proceedings oral evidence was recorded by examining the assessee and two others and the final report was forwarded to the Tribunal. The Tribunal, on the evidence, found: "... .the assessee as well as his father were natural born Ceylon citizens staying in Ceylon most of the time; that the visits to India amounted to 137 days in the period, April 1, 1940, to March 31/1957; that the evidence supported the theory that the assessee was more a guest in the family house in India than an inhabitant of his own house or home; that there was nothing to show that the assessee enjoyed any of his family income or had any separate portion reserved for him on his sojourn in India and that there was not enough materials to say that there was a residence either run or maintained by the assessee in India." In the result the Appellate Assistant Commissioner's order of cancellation of the assessment orders were upheld.
(3.) IN the earlier assessment proceedings action under Section 28(1) was also contemporaneously initiated by the revenue and penalty for the respective assessment years was imposed. The Tribunal in the view they have taken in the main proceedings, cancelled the levy of penalty as well. There were, therefore, eight appeals before the Tribunal in all of which the assessee succeeded. The subject has then come up before us to render an answer on the questions already referred to. The facts are not in dispute. The assessee was sporadically visiting India for the purpose of looking after his construction of a theatre in Orathanad. In his evidence before the Appellate Assistant Commissioner the assessee has stated that he is a permanent resident of Ceylon, that his family and children were in Ceylon and that when the assessee visited India he used to stay with his brother and relatives in the family house or at hotels and he never maintained the ancestral house nor did he cause it to be maintained for him. His brother, Ganesa, is emphatic that when the assessee came to the family house, he was considered only as a guest, because the assessee was not connected with the management of the family's properties or the house. We have already referred to the finding of fact arrived at by the Tribunal and, inter alia, to the observation that the family house was not maintained by or for the assessee and that he was a non-resident for all the years under consideration. It is common ground that the application and interpretation of Section 4A(a)(ii) is the only aspect which has to be considered in the case and not any other limb of Section 4A of the Act. Relying mainly upon Zackariah Sahib v. Commissioner of Income-tax, 1952 22 ITR 359 and Ramjibliai Hansjibhai v. Income-tax Officer, Ahmedabad, 1964 53 ITR 547 Mr. Balasiibrahmanyan contends that the assessee being a member of the joint family has a right to dwell and indeed he can undoubtedly exercise on his volition his tendency to occupy it and so long as there is no evidence of exclusion or denial of admission into the family house the assessee should be deemed to have maintained the house or in the alternative had a house maintained for him. The argument proceeds that, as the Sub-section is silent about the dwelling and residence, there is no necessity to, a priori, conceive of an overt act on the part of the co-sharers to set apart an apartment in the house for the benefit of the assessee and approach the subject. Even if the other coparcener maintains the same, so long as the benefit of dwelling in the family house is available that is sufficient to raise the statutory presumption prescribed in the Sub-section. When the assessee chose to come to the family house, a dwelling was available and he was accommodated. This is sufficient and the story of the coparceners playing a guest to their brother or providing hospitality as. if he is a stranger are all after-thoughts and ought not to be given credence. An organised house, as is popularly understood, is not necessary, because it is stated that the second limb of Section 4A(a)(ii) says that any individual is resident in the taxable territory in any year if he is there for any time in that year. Mr. Rarim argues contra and relies upon Commissioner of Income-tax v. Fulabhai Khodabhai Patefi, [1957] 31 I.T.R. 771 (Bom.). Commissioner of Income-tax v. Janab A. P. Mohamed Noohu, [1961] 43 I.T.R. 88 (Mad.). and J. M. Abdul Aziz v. Commissioner of Income-tax, [1963];48 I.T.R. 602/Mad.). and states that a mere colourable theory of maintenance of a family house by a circuitous reasoning based on the conception of Hindu undivided family is not permissible under the section. According to him concrete evidence is required to prove the factum of maintenance or proof of the maintenance of the house for the benefit of the assessee and there being no evidence in this case, and as the Tribunal as a fact has found that there was no such maintenance of the family house by the assessee, the answer to the questions should be in his favour. The application of the personal law of Hindus cannot change the pattern of the fiscal law as both an individual as well as a Hindu undivided family are independent assessable units. Once a distinction is sought to be made, as sought by the revenue counsel, says that a Muslim who is a co-sharer will escape from the impinge of taxation whereas a coparcener in a Hindu undivided family will be caught in its clutches. ;


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