THE ERIN ESTATE, GALAH, CEYLON versus THE COMMISSIONER OF INCOME-TAX, MADRAS

Citation: [1959] 1 S.C.R. 573 · Decided: 22-04-1958 · Supreme Court of India · Bench: T.L. VENKATARAMA AIYYAR · Disposal: Dismissed

Judgment (excerpt)

S.C.R. 
SUPREME COURT REPORTS 
573 
THE ERIN ESTATE, GALAH, CEYLON" 
v. 
THE COMMISSIONER O.E' INCOME-TAX, 
MADRAS 
(VENKA'rARAMA A1YAR, GAJENDRAGADKAR and 
A. K. SARKAR JJ.) 
Iucome-tax-Assessment-Firm owning tea estate outside India 
-Partners residing within taxable territories-Residence of jirm-
Presumption -If and when rebuttable-Onus-Control and manage-
ment-Test-Indian Income-tax Act (XI of r922), s. 4A(b). 
Section 4A(b) of the Indian Income-tax Act, 1922, provides 
inter alia that "for the purpose uf the Act, a firm is resident in 
the taxable territories unless the control and management of its 
affairs is situated wholly without the taxable territories". The 
appella11t was a registered firm owning a tea estate in Ceylon. All 
the partners of the firm were permment residents in India. The 
superintendent of the estate who resided permanently in Ceylon 
had the management and control of the affairs of the estate from 
day to day,- but the partners had the right to check him and give 
him directions if anything appeared irregular; they also approved 
the budget sent by him concerning important matters every year, 
after which the superintendent was at liberty to act upon it. The 
appellant claimed before the Income-tax Officer that the firm was 
not resident in the taxable territories, and so the income arising 
in Ceylon from the appellant's estate was not assessable to tax in 
India. The question was whether the appellant was resident in 
the taxable territories within the meaning of s. 4A(b) of thP, Indian 
Income-tax Act, 1922 : 
Held, (1) Whether a firm is resident within the taxable terri-
tories under s. 4A(b) of the Indian Income-tax Act, 1922, is a 
mixed question of fact and law, and depends upon the legal effect 
of the facts proved in each case. 
(2) Where the partners of a firm are residents in the taxable 
territories the normal presumption is that the firm is resident in 
the taxable territories, but this can be rebutted by the assessec, on 
whom the onus lies, by showing that the control and management 
of the affairs of the firm are wholly without th~ taxable terri-
tories. 
(3) The exercise of the control and management even in part 
in the taxable territories would be enough to fix the assessee with 
the character of a resident within s. 4A(b), but such control and 
management must be de facto and not mere de jure and it is not 
relevant to enquire whether it amounted to a substantial part. 
73 
• 
• 
April zz. 
x958 
The Erin Estate, 
Galah, Cejlon 
574 
SUPREME COURT REPORTS 
(1959] 
(4) The appellant was a .firm resident in the taxable terri-
tories within the meaning of s. 4A(b) of the Indian Income-tax 
Act, 
B. R. Naik v. Commissioner of Income-tax, Bombay, [1945] 13 
Th C v.. . 
l.T.R. 124; [1946] i4 l.T.R. 334 and Subbayya Chcttiar v. Com-
e oHuntssioner 
. 
. 
· 
C • 
6 
f 
d 
,, 1 
T 
missioner of Income-tax, Madras, [1950] S . .I,. 9 r, re erre to. 
o1 
nconie-
ax, 
Madras 
Crv1L APPELLA'rE JURISDICTION: Civil Appeal No. 
255 of 1953. 
• 
Appeal from the judgmrnt and decree dated March 
27, 1951, of the Madras High Court in C.R. No. 62 
of 1946. 
R. J. Kolah and R. Ganapathy Iyer, for the appel-
lant. 
H. N. Sanyal, Additional Solicitor-General of India, 
K. N. Rajagopala Sastri and R. H. Dhebar, for tbe res-
pondent. 
1958. April 22. 
The Judgment of the Court was 
delivered by 
Gajcndragadkar J. 
GAJENDRAGADKAR J.-The short question which 
this appeal raises for our decision is whether the appel-
lant assessee is resident in the taxable territories 
within the meaning of s. 4A(b) of the Indian lncome-
tax Act, 1922. 
This question arises in this way. 
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 w horn are 
permanent residents of certttin villages in Timchira-
palli District. 
The total sum paid by the partners 
amounts to lb. 25,00,000 and the same is divided into 
i47 shares.· Out of these 147 shares, Andiappa Pillai 
owns 50 shares, V eera ppa Pillai owns 43 shares, 
N agalingam Pillai owns 18 shares and the remaining 
four partners own 9 shares each. The estate owned by 
the firm pro·duces 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.

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