Tulzapurkar, J. - (1.) These appeals by certificate under S. 66-A (2) of the Indian Income Tax Act, 1922 (hereinafter referred to as the 'the Act') raise the question whether the respondent-assessee was a resident in the taxable territories under S. 4-A (a) (ii) of the Act for the concerned assessment years
(2.) The facts giving rise to the aforesaid question are these:Subramania and Arumuga were two brothers; the former had three sons Ratnaswamy, the assessee, Ganapathi and Velayudham while the latter had only one son Ganesa. After the death of Subramania and Arumuga their sons formed a Hindu undivided family; that family owned an ancestral house at Orthanad in Tanjore District, which was used as dwelling by the step-mother of the assessee, his full brothers and his cousin Ganesa; the family also owned shops and agricultural lands. The family properties were managed by Ganesa and were maintained by him out of the agricultural and rental income. Admittedly, the assessee never enjoyed any portion of the family income. Born and brought up the Ceylon, the assessee had his own business and properties in Ceylon. He had eight children all born and educated in Ceylon. It appears that he started constructing a theatre in Orthanad in 1953 which was completed in 1957 and during the said construction he paid occasional visits and stayed sometimes in the family house, sometimes in a Chatram in Tanjore and at times in a hotel. Thus, from 1-4-1952 to 31-3-1953 he stayed for 8 days in India, from 1-4-1953 to 31-3-1954 he did not come to India at all, from 1-4-1954 to 31-3-1955 he stayed for 28 days in India, from 1-4-55 to 31-3-56 he stayed for 47 days in India and from 1-4-1956 to 31-3-1957 he stayed for 23 days in India. In July, 1958 the assessee on the one hand and other members of the family on the other executed a mutual deed of release, relinquishing each party's rights in favour of the other; inter alia, the assessee released all his rights, title and interest in the family properties in favour of his brothers, reciting therein that the family properties were never enjoyed by him but only by others. There is no dispute and the Tribunal has also found that the deed of release was an instrument bona fide entered into between the parties.
(3.) In the above circumstances for the assessment years 1952-53, 1953-54, 1956-57 and 1957-58, the assessee filed returns, but for the first two years after proceedings were initiated under S. 34 (1) (a) of the Act and for the later two years on his own offering his income in Ceylon for assessment. The status declared in all the returns was that he was a 'a resident and ordinarily resident person.' The Income-tax Officer completed the assessments on the basis of the returns filed. He also initiated penalty proceedings against the assessee under S. 28 (1) (a) for not filing the returns in time and levied penalties on him. In the appeals preferred by the assessee, which were principally directed against the rejection of the claim made by him in respect of the double taxation relief, an additional ground was taken that the assessee should have been treated as a 'non-resident' in all the years. The Appellate Assistant Commissioner upheld this additional ground taking the view that since during his sojourn in India the assessee was staying in the family house more as a guest, he neither maintained nor had maintained for him a dwelling place in the taxable territories and, therefore, S. 4-A (a) (ii) of the Act was inapplicable. The Department carried the matter in further appeals to the Tribunal but the Tribunal called for a remand report from the Appellate Assistant Commissioner after a fuller examination as to the factual position whether the assessee did maintain a dwelling place in India or the same was maintained for him by others inasmuch as the Tribunal felt 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. On the basis of the material collected and forwarded to it, the Tribunal took the view that the assessee was a natural born Ceylon citizen staying in Ceylon most of the time, that his visits to India in the aggregate were for 137 days in the periodof 11 years (from 1-4-46 to 31-3-57), that the evidence supported the theory that he was more a guest in 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 of the family house reserved for him during his sojourn in India and that there were not enough materials to say that there was a residence either run or maintained by the assessee in India. In this view of the matter the Tribunal upheld the Appellate Assistant Commissioner's order canceling the assessment orders made against the assessee. As a consequence, the Tribunal also cancelled the penalties that were levied on the assessee.;