K V NARASIMHA RAO BAHADUR SRI RAJA Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE following question was referred to us by the Income-tax Appellate Tribunal, Madras Bench:

(2.) THE present Section 4 A, Income-tax Act was inserted by Section 5, Income-tax Amendment Act, 1939 and Clause (b) of that section, which is the relevant section for the purpose of this case, reads as follows:

(3.) THERE is a decision of the Bombay High Court in Bhimji R. Naik v. Commissoner of Income-tax, Bombay, 1946-14-I. T. R. 334; (A. I. R. (34) 1947 Bom. 24). In that case, the de jure manager was living in British India, though the business was carried on in Africa. The test that was laid down by the learned Judges was that the control and management required by the section must be the control and management in fact and not merely the right to control and the right to give directions. In other words, it must be de facto control and management and not merely de jure. This is also the view of this Court as expressed in Commissioner, Income-tax, Madras v. Gangabishan Mohanlal, 1945-13-I. T. R. 20: (A. I. R. (32) 1945 Mad. 174). These two decisions are authorities for holding that what is required is actual exercise of the control and management of an affair of the family such as a business or other dealings or transactions relating to the family.