- (1.) The short question which this appeal raises for our decision is whether the appellant assessee is resident in the taxable territories within the meaning of S. 4-A (b) of the Income-tax Act. This question arises in this way.
(2.) 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 Cl. (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 his name and he receives the income and makes the requisite disbursement from time to time.
(3.) The assessment proceedings for the assessment years 1939-40 to 1942-43 were started by the Additional Income-Tax Officer, Tiruchirapalli Circle. The appellant submitted its returns before the Income-Tax Officer and claimed that the firm was not resident in British India and so the income arising in Ceylon from the appellant's estate was not assessable to tax in India. The Income-Tax Officer rejected the appellant's contention and held that the appellant was a resident under the provisions of S. 4A(b) of the Act and so he proceeded to tax the entire income accruing to and arising from the appellant's estate in Ceylon. The returns submitted by the appellant were accepted as substantially accurate and the appellant was assessed on its income from Ceylon with some minor adjustments considered necessary by the Income-Tax Officer. The appellant filed appeals against the several assessment thus made before the Appellate Assistant Commissioner of Income-Tax, Tiruchirapalli. These appeals, however, failed and were dismissed. The appellant then went in appeal before the Income-Tax Appellate Tribunal, Madras: the Tribunal dealt with the appeal for 1941-42 assessment in the first instance and allowed it. The Tribunal took the view that the evidence produced in the case showed that the control and management of the appellant's affairs was situated wholly without the taxable territories and so it reversed the finding of the Income-Tax authorities that the appellant was a firm resident in the taxable territories. For the other years in question the same order was passed by the Tribunal.;