THE COMMISSIONER OF INCOME-TAX, BOMBAY CITY, BOMBAY vs. NANDLAL GANDALAL.

CIVIL APPEAL No. 788/1957Supreme Court[1960] 3 S.C.R. 62021 April 1960Bench: 3 JudgesAuthor: S.K. DAS, J.L. KAPUR, M. HIDAYATULLAH21 pages
AI SummaryDismissed

What were the facts?

The assessee is the Hindu undivided family (HUF) of Gandalal, which conducted business in Kathiawar, outside British India. For the assessment year 1945-46, the Income-tax Officer held the HUF resident in taxable territories, including Rs. 1,50,000 remitted from family funds to Nandlal, a coparcener, for a partnership business in Bombay. Nandlal's brother also joined this partnership, which later started another firm in Banaras with a third brother. The Appellate Assistant Commissioner affirmed the assessment. However, the Income-tax Appellate Tribunal deleted the sum, finding the HUF not resident in taxable territories. The High Court upheld the Tribunal's decision.

What did the Supreme Court hold?

The Supreme Court, by a majority, held that the expression 'control and management' in Section 4A(b) means de facto control and management, and 'affairs' refers to the affairs of the HUF capable of being controlled and managed by the family as such. It was established that a HUF cannot exercise direct control or management over a partnership entered into by a coparcener with strangers under the Indian Partnership Act or Hindu law. Therefore, these partnerships, in themselves, do not constitute 'affairs' of the HUF for determining its residence. However, the Court also noted that if coparceners residing in taxable territories manage the family's affairs, the family can be treated as resident. In this case, the Court found that a part of the control and management of the family's affairs, vis-à-vis the partnership business, was exercised in British India by the coparceners who managed the business. This activity was permanent and constituted control and management of the 'affairs' of the HUF within British India, making the family resident. The High Court's decision was considered erroneous, and the answer to the reference was directed to be in the affirmative. The appeal was dismissed.

What were the issues?

1. Whether the expression 'control and management' in Section 4A(b) of the Indian Income-tax Act, 1922, refers to de facto control and management, and whether 'affairs' of the HUF include partnerships entered into by coparceners with strangers, for the purpose of determining residence. Assessee's contention (as understood from the High Court's decision and the Tribunal's finding): The HUF was not resident in the taxable territories. The partnerships in Bombay and Banaras, though financed by HUF funds and involving coparceners, were not 'affairs' of the HUF in the sense of control and management by the HUF as such, and therefore, did not determine its residence. The income from these partnerships, while belonging to the HUF, did not make the HUF resident. Revenue's contention (as understood from the Income-tax Officer's initial assessment and the High Court's dissenting opinion): The HUF was resident in the taxable territories because its coparceners, residing in British India, managed the partnership businesses which constituted the 'affairs' of the HUF, thereby establishing control and management within British India. The remittances of family funds and the involvement of multiple coparceners indicated the HUF's active participation and control over these ventures.

Which sections of the Income-tax Act were involved?

Section 4A(b),Section 4(1)(b)(iii),Section 66(1)

AI-generated summary — verify with the full judgment below

1960 Sahetzi!da Mohammad Kamgar _Shah v.

Jagdish Chandra Deo Dhabal Deo Das Gupta J. 1960 April 21. 620 SUPREME COURT REPORTS [1960] In the present case the suit .is based on the second lease of 1919 which was executed in favour of the then Receiver.

The acknowledgments by which limitation is claimed to have been saved is by a previous Receiver of the Estate through whom the appellant who is the present Receiver has derived his liability to pay the debt.

Section 19 is therefore in terms appli- cable as the acknowledgments have been signed personally by those previous Receivers, and no recourse is needed by the p!Jintiff to the second part of Expla- nation II.

This position was indeed fairly concluded by Mr. .Jha who agreed that in view of this it was not necessary for us to decide whether the Receiver of an Estate is by that fact itself an agent of the owners of the estate duly authorised to make acknowledgments under s. 19 of the Limitation Act.

There can be no' doubt that the acknowledgments on which the plaintiff relies are acknowledgments within the meaning of s. 19 of the Limitation Act and save limitation in respect of the period prior to

The order continues below.

Read the full judgment

A free account opens 10 full judgments a month. Re-reading one you have already opened does not count again.

Create a free accountSign in

See plans and prices

The summary, the parties, the sections and the citations above are open to everyone and always will be. Only the text of the order and the PDF are metered.

More judgments on Section 66(1)

All 184 judgments and leading authorities on Section 66(1) →

Recent GST High Court judgments

Search GST case law →