Case: Erin Estate, Galah, Ceylon Vs. Commissioner of Income Tax, Madras

stated there. In other words, the superintendent was asked to confine the purchase of the tea within the limits mentioned in the estimate which had been approved. It appears that, on receiving the opinion of the superintendent about the complaint made by Periasamy in regard to his salary, the superintendent was told to pay him Rs. 2 more per month. This no doubt is a small item but it shows that even where the salary of a clerk had to be increased by Rs. 2, the clerk made a representation to the partner, the partner called for the opinion of the superintendent and, on considering the representation and the opinion together, the partner directed the superintendent to pay the clerk Rs. 2 more per month. By his letter dated July 11, 1940, Andiappa Pillai directed the superintendent as to how the garden income should be adjusted. One in six months Rs. 7,500 to Rs. 10,000 should be retained as reserve and the balance distributed amongst the partners in proportion to their shares. That is the direction given. Then the superintendent is told to engage labourers and to sane Vaidyalingam and the labourers to cut the wild plant growth in both the said garden and Konangodai garden. Certain other directions as to the work to be assigned to the other clerks are also given. On July 13, 1940, Andiappa Pillai told the superintendent to pack and send 70 lbs. F. B. O. P. tea and suggested that, if the tea had not been sent already to Veerappa Pillai, he should carry out the said instruction. In this letter the superintendent is also asked to enquire from other companies the price of Nevvil and he is told that, having regard to the nature of the current sales of tea, manuring need not be stopped. On July 29, 1940, the superintendent is told as to how the account is to be made in regard to the charges for the guards. On August 8, 1940, Andiappa Pillai tells the superintendent that "when the coupon price goes down purchase for our garden 20,000 lbs. This correspondence shows that the entire control and management of the affairs of the firm had not been left with the superintendent. In regard to the manuring of tea gardens, the salary to be paid to the clerk, the purchase to be made, the expenditure to be incurred in constructing a building, the manner in which the goods should be packed and sent, all these are subjects discussed by the partners in their letters to the superintendent and in respect of all these presumably the superintendent had asked for directions and the partners gave him the directions. Besides, we have already referred to the admission made by Andiappa Pillai that, at the beginning of every year, the superintendent sent to the four important partners a budget concerning important and big matters to be attended to during the course of the year. Having regard to this evidence we are unable to accept the appellants argument that the control and management of the appellants affairs was situated wholly in Ceylon.In dealing with this question it would be relevant to bear in mind that the appellant would not succeed even if it is shown that a part of the control and management of the affairs of the company rested in India. The control and management must no doubt be shown to have been actually exercised; and the exercise of the control and management should not be illusory or merely notional. Once it is shown that control and management in the affairs of the firm was exercised by the partners residing in India, it would not be relevant to enquiry whether the control and management thus exercised amounted to a substantial part of the control and management of the affairs of the firm. The exercise of the control and management even in part in the taxable territories could be enough to fix the appellant with the character of a resident within S. 4A(b).We must accordingly hold that the High Court of Madras was justified in holding that the appellant is a firm resident in the taxable territories.9. Mr. Kolan then raised a further point which had not been urged before the High Court. He contended that the control and management mentioned in S. 4A (b) must be control and management valid and effective in law.Under S. 12 of the Partnership Act, it is only the majority of partners who could have given effective directions to the superintendent and since there is no evidence that the alleged control and management has been exercised by the majority of partners acting in concert it would not be possible to hold that any control and management of the firms affairs resided in India. We do not think there is any substance in this argument. Under S.12 (a), every partner has a right to take part in the conduct of the business and it is only where difference arises as to ordinary matters connected with the business of the firm that the same has to be decided by majority of partners under sub.s.(c) of the said section.It has not been suggested or shown that there was any difference between the partners in regard to the matters covered by the individual partners letters of instruction to the superintendent. Indeed the course of conduct evidenced by these letters shows that Andiappa Pillai who holds the maximum number of individual shares had purported to act for the partnership and usually gave instructions in regard to the conduct and management of the firms affairs. On the record we see no trace of any protest against or disagreement with this conduct of Andiappa Pillai. Besides, it was never suggested during the course of the enquiry before the Income-tax Officers that the directions given by Andiappa Pillai were not valid or effective and had not been agreed upon by the remaining partners. That is why we think this technical point raised by Mr. Kolah must fail.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]Having regard to this evidence we are unable to accept the appellants argument that the control and management of the appellants affairs was situated wholly in Ceylon.In dealing with this question it would be relevant to bear in mind that the appellant would not succeed even if it is shown that a part of the control and management of the affairs of the company rested in India. The control and management must no doubt be shown to have been actually exercised; and the exercise of the control and management should not be illusory or merely notional. Once it is shown that control and management in the affairs of the firm was exercised by the partners residing in India, it would not be relevant to enquiry whether the control and management thus exercised amounted to a substantial part of the control and management of the affairs of the firm. The exercise of the control and management even in part in the taxable territories could be enough to fix the appellant with the character of a resident within S. 4A(b).We must accordingly hold that the High Court of Madras was justified in holding that the appellant is a firm resident in the taxable territories.9.Mr. Kolan then raised a further point which had not been urged before the High Court. He contended that the control and management mentioned in S. 4A (b) must be control and management valid and effective inS. 12 of the Partnership Act, it is only the majority of partners who could have given effective directions to the superintendent and since there is no evidence that the alleged control and management has been exercised by the majority of partners acting in concert it would not be possible to hold that any control and management of the firms affairs resided in India. We do not think there is any substance in this argument. Under S.12 (a), every partner has a right to take part in the conduct of the business and it is only where difference arises as to ordinary matters connected with the business of the firm that the same has to be decided by majority of partners under sub.s.(c) of the said section.It has not been suggested or shown that there was any difference between the partners in regard to the matters covered by the individual partners letters of instruction to the superintendent. Indeed the course of conduct evidenced by these letters shows that Andiappa Pillai who holds the maximum number of individual shares had purported to act for the partnership and usually gave instructions in regard to the conduct and management of the firms affairs. On the record we see no trace of any protest against or disagreement with this conduct of Andiappa Pillai. Besides, it was never suggested during the course of the enquiry before theOfficers that the directions given by Andiappa Pillai were not valid or effective and had not been agreed upon by the remaining partners. That is why we think this technical point raised by Mr. Kolah must fail.