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Commissioner of Income-tax Vs. K.S. Ratnaswamy - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtChennai High Court
Decided On
Case NumberTax Case Nos. 156 of 1967 (Reference No. 54 of 1967)
Judge
Reported in[1970]78ITR303(Mad)
ActsIncome Tax Act, 1922 - Sections 4A
AppellantCommissioner of Income-tax
RespondentK.S. Ratnaswamy
Appellant AdvocateV. Balasubrahmanyan and ;J. Jeyaraman, Advs.
Respondent AdvocateM.R.M. Abdul Karim, ;K.K.M. Md. Yaseem and ;M.M. Abdul Razack, Advs.
Cases ReferredJ. M. Abdul Aziz v. Commissioner of Income
Excerpt:
.....out of the agricultural and rental income and the assessee never enjoyed any portion of the family income. inter alia, the assessee released all his right, title andinterest in the family properties in favour of his brothers, reciting thereinthat the family property was not enjoyed by the assessee but only byothers. the assessee as well as his father were natural born ceylon citizens staying in ceylon most of the time; 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. the tribunal in the view they have taken in the main proceedings, cancelled the levy of..........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.5. in the remand proceedings oral evidence was recorded by examining the assessee and two others and the final report was forwarded to the tribunal......
Judgment:

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:

1-4-1946 to 31-3-1950Stayed wholly in Ceylon1-4-1950 to 31-3-1951Stayed 18 days in India1-4-1951 to 31-3-1952Stayed 12 days in India1-4-1952 to 31-3-1953Stayed 9 days in India1-4-1953 to 31-3-1954NIL1-4-1954 to 31-3-1955Stayed 28 days in India1-4-1955 to 31-3-1956Stayed 47 days in India1-4-1956 to 31-3-1957Stayed 23 days in India.

3. The assessee started constructing a theatre in, Orathanad in 1953,which was completed in 1957. During the said construction the assesseemade occasional visits and stayed sometimes in the family house, sometimesin a chatram in Thanjavur and sometimes in a hotel. In July, 1958; theassessee on the one hand and other members of the family on the otherexecuted mutual deeds of ' release, relinquishing each party's rights infavour of the other. Inter alia, the assessee released all his right, title andinterest in the family properties in favour of his brothers, reciting thereinthat the family property was not enjoyed by the assessee but only byothers. The Tribunal finds that the deed of release is an instrument bonafide entered into between the parties.

4. 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.

5. 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.'

6. In the result the Appellate Assistant Commissioner's order of cancellation of the assessment orders were upheld.

7. 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.

8. 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.

9. 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]22ITR359(Mad) and Ramjibliai Hansjibhai v. Income-tax Officer, Ahmedabad, : [1964]53ITR547(Guj) (Guj.) 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]31ITR771(Bom) (Bom.). Commissioner of Income-tax v. Janab A. P. Mohamed Noohu, : [1961]43ITR88(Mad) (Mad.). and J. M. Abdul Aziz v. Commissioner of Income-tax, : [1963]48ITR602(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.

10. Section 4A(a)(ii) of the Act runs as follows:

' For the purposes of this Act-

(a) any individual is resident in the taxable territories in any year if he-- ... (ii) maintains or has maintained for him a dwelling place in the taxable territories for a period or periods amounting in all to one hundred and eighty-two days or more in that year, and is in the taxable territories for any time in that year.'

11. The section is prefaced by the expression that 'for the purposes of this Act'. This section therefore raises a statutory fiction. While raising such a fiction, it envisages that maintenance of the family house for the benefit of the assessee would be constructive maintenance of the same by him. Constructive maintenance of the dwelling place in the taxable territories in its nature is no more than evidence of such maintenance, the presumptions of which are so apparent and violent that courts will not allow such state of things to be controverted. In the Ultimate analysis facts should establish an irrebuttable presumption. In the instant case, there is no proof of direct maintenance of the place. Therefore, is there evidence of an apparent for violent presumption which is incapable of being controverted? We think not. It is not a mere fortuitous circumstance or a sporadic event of staying in a family house, in which the assessee has a share, that would create such an indelible impression in the minds of courts that he has maintained the house or a part thereof. If such a stay is accidental or prompted by necessitous events then it cannot be said that the place he dwelt in away from his house was his second home or that the portion of the dwelling house occupied by him during his temporary stay was earmarked by the joint family as his place of residence in the dwelling house and was so organised that an inviolable presumption can be raised that he was maintaining such part of the dwelling house. 'Maintenance' and 'dwelling' are not words of art but have a special signification, particularly when they 'are to raise a statutory presumption under the sub-section which has a far-reaching fiscal effect on the status of an individual. The inherent concept in the words provokes a sense of continuity, periodicity or permanence which invariably would prompt a well-instructed judge to declare that the dwelling place is a house away from home, which he should be deemed to be maintaining for his own purposes. Such constructive maintenance leading us to the presumption of quasi-permanent dwelling cannot be lightly confused with accidental residence. A mere right in property does not always lead to the conclusion that the person in whom the right is vested is bound to maintain the same or cause to be maintained for him by others, who are admittedly possessing it. Further, the maintenance is for dwelling. A dwelling house, as the words imply, projects the meaning that the house or a portion thereof is an abode of his, available to him at all times without any let or hindrance by others.

12. A joint family may own many properties. One or more of the coparceners or members may reside in one or the other of the family houses; but as no member of the family can predicate with certainty his share in a joint family until a partition takes place, and even so as no member of the family can earmark for himself by mere residence any such property as his own to the exclusion of others, it is necessary to work up the notional status contemplated in the section of the Income-tax Act on such uncertain hypothesis. As pointed out by Lord Dunedin in Rama Rao v. Rajah of Pittapur, [1918] I.L.R. 41 Mad. 778, (P.C):

'It was admitted on both sides of the Bar that in an ordinary joint family ruled by the Mitakshara law the junior members, down to three generations from the head of the family, have a coparcenery interest accruing by birth in the ancestral property; that this coparcenary interest carries with it the inchoate right to raise an action of partition, and that until partition is de facto accomplished these same persons have a right to maintenance. It seemes clear that this right is an inherent quality of the right of coparcenary--that is, of common property.'

(The word 'maintenance ' in the above passage has nothing to do with the maintenance of a dwelling house).

13. Thus the mere fact the assessee had a right in the joint family property at Orathanad, Thanjavur District, and that he was occasionally lodging there does not mean that he was maintaining the same or had it maintained for his benefit. This-is not the intention of the legislature when it used the expression 'maintenance' or 'has maintained for him' a dwelling house. Thus, a mere fractional interest in a property or any legal entitlement to the same or even physical possession of the place at irregular intervals cannot constitute such interest-cum-residence, a dwelling house. A dwelling place is one where a person inhabits and in law should be his domus mansionalis. The above salient illustrative features of a dwelling house are not present in the instant case. The evidence is not clinching to find that the dwelling house was maintained by the assessee or it was maintained by others for him. On the other hand there is evidence that he was enjoying the hospitality of his kith and kin during his stay in the house and he was treated as a guest. aS the: answer to the question raised depends on a bundle of facts and their cumulative effect we are hesitant to disturb the concurrent findings of fact of the Appellate Assistant Commissioner and the Tribunal.

14. Reliance is placed on Zackanah Sahib v. Commissioner of Income-tax, where Viswanatha Sastri J. observed as follows:

'The expression 'maintains a dwelling place' connotes the idea that the assessee owns or has taken on rent or on a mortgage with possession a dwelling house which he can legally and as of right occupy, if he is so minded, during his visit to British India.'

15. This was referred to and explained by Rajagopalan, Offg. Chief Justice, in Commissioner of Income-tax v. Janab A. P. Mohamed Noohu, at page 90, as follows:

'We do not understand the passage in Zackariah's-case taken in its content, as it should be, to lay down as a proposition of law that mere ownership of a fractional share in a house with nothing more is enough to constitute it a dwelling house of such an owner within the meaning of Section 4A(a)(ii), and it must be remembered that there is a further statutory requirement; not only must it be a dwelling house, but it must also be maintained, either by the assessee himself or by someone else for his benefit. Neither of the requirements was satisfied in this case.'

16. Again, the above observation was considered by another Division Bench of this court in J. M. Abdul Aziz v. Commissioner of Income-tax as wide. We are also of the same view. The observation in Ramjibhai fiansjibhai v. Income-tax Officer, Ahmedabad, which is mainly based on the ratio of Zackanah Sahib v. Commissioner of Income-tax', with respect, does not commend to us and we are constrained to take a different view, as the weight of authorities in this court is otherwise.

17. In Commissioner of Income-tax v. Fulabhai Khodabhai Patel Chagla C.J. explained the rule thus, at page 777 :

'Now it will be noticed that the legislature also requires that it is the assessee himself who must maintain a dwelling place in the taxable territories or if he does not maintain it, someone must maintain it for him. Therefore, it is clear that it is not sufficient in order to satisfy this test that there is a dwelling place in the taxable territories in which the assessee goes and lives. What is necessary and what is essential is that the dwelling place must be maintained for him.'

18. In Commissioner of Income-tax v. Janab A. P. Mohamed Noohu the position is explained by a poser set by the learned judge, at page 89, thus:

'Was the house, a share in which the assessee inherited, but no portion of which he or his family occupied, his home in India, which he could use in his own right? '

19. If the dwelling place is not his second house or the real centre of his life, then the assessee is a non-resident.

20. Again, in J. M. Abdul Aziz v. Commissioner of Income-tax, Jagadisan, J. interpreted the relevant expression as follows:

'To 'maintain' a dwelling place is different from having a dwelling place. The concept of a residence or home ready in hand is implicit in the section. What is referred to as 'dwelling' is not a physical structure, or a brick and mortar construction but the organisation of a household. The word 'is' in the second part of Section 4A(a)(ii) does not necessarily refer to the place of dwelling mentioned in the first part, nor does it merely contemplate a bare physical presence of the individual. The real meaning of the section is that the individual must have maintained or had maintained for him a residence in the taxable territories for 182 days or more and must have resided in the territories at any time in the year of account, however short the duration of the residence might have been. A common thread of animus of residence in the taxable territories holds both the parts of the section together.'

21. In the light of the above catena of decisions, and in the wake of our discussion on the subject and the evidence in the case, it cannot be said that the assessee maintained a dwelling house or had maintained for him one in the taxable territories for any period whatsoever. Maintenance of a place cannot be decided on abstract principles or inducting certain peculiar notions of the personal law of parties but there should be acceptable, positive evidence of such maintenance by the assessee or by any one on his behalf. Unless such an intention is clear and apparent in the record, it would be unreasonable to hazard a conclusion against the assessee and make him a resident in the taxable territories, when he is really not. The Tribunal has rightly found that the assessment orders and the penalty orders cannot stand.

22. We, therefore, answer both the questions in favour of the assessee and against the department with costs. Counsel's fee Rs. 250.


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