Case: M/s. Mecleod and Company Limited Vs. State of Orissa and Others

a legal test.DomicileThe place of registration is like-wise the domicile of a company, and this domicile clings to it throughout its existence. It is, however, possible that by operation of the law of the Companys domicile, another system of law may be substituted for the law of the place of registration.Unlike an individual, a company cannot have a domicile of choice.Residence8.11 The residence of a company is not as easily established as its nationality or its domicile. The test of residence is mainly used if questions pertaining to taxation, the character of the company as an overseas trading corporation, service of process on the company and attribution of enemy character to the company arise. In these cases, the residence of the company is not determined by the application of a uniform test but a different meaning is given to those words in each of them. Moreover, a company-like an individual-may have several residences at the same time, whereas it can have one domicile and one nationality only. Tax Law8.12 In tax law a company is ordinarily resident where the actual management of the company is carried on, even though it ought to be managed elsewhere according to its constitution. If this is done at several places, the company has a dual residence (or possibly even more residences), but in that case at least some part of the superior and directing authority of the company must be present in the country in which it is sought to establish the residence of the company.From what is stated above it will be clear that so far as law of taxation is concerned-and in the instant case we are concerned with tax law, namely, the Orissa Taxation Act ordinarily the residence of a company win be at the place where the actual management of the company is carried on and that if this is done at several places it may have a dual residence but in that case at least some part of the superior and directing authority of the company must be present at the place where its residence is sought to be established.In Buckly on the Companies Act (14th Edn.), Vol.1 at page 299 the following passage occurs.For the purpose of the Income Tax Acts, the place of registration of a company is not, any more than the birth place of an individual, conclusive as to its residence. A company registered here (in England), with a registered office here, (in England) and governed by a board which meets here, is no doubt resident here. But also a company registered abroad, whose head office and directors meeting are here, is resident here. The test of residence is not registration, but where the company does its real business, where the central management and control abides. It is the actual place of management of the company and not the place where it ought to be managed which fixes its residence." The underlined portion in the passage quoted from Buckley is based on the decision of the House of Lords in the leading case of Egyptian Delta Land and Investment Co. v. Todd. In that case the company was incorporated in England, had its registered office in England and fulfilled its statutory obligations in that country but 1) had transferred the whole of its business to Egypt which was entirely controlled and managed from Cairo where the director and the secretary permanently resided and the question arose whether for the purposes of Income Tax Acts the company could be regarded as a resident: in Eng land. After exhaustive survey of the earlier case law on the point the House of Lord took the view that the incorporation under the Companies. Acts, with the attendant statutory obligations did not in itself, as a matter of law, constitute a British company a person residing in the United Kingdom within the meaning of the Income Tax Acts; that it was merely a factor to be considered in determining residence, and was a matter for the Commissioners to decide. It also took the view that it was settled by authority that the residence of a company, whether British or foreign, for income tax purposes was, preponderantly and if not exclusively, determined by the place where its real business was carried on and since the whole of the companys business was controlled from Cairo the company was not resident in England and it upheld the Commissioners decision of discharging the assessments. In taking the aforesaid view the House of Lords approved and followed the criteria that had been laid down in an earlier decision in the case of De Beers Consolidated Mines v. Howe to the effect "the test of residence is not registration but where the company does its real business, where the central management and control abides." Applying the aforesaid criteria to the facts of the present case it was not disputed before us that both the principals (the jute companies) had their registered offices in Calcutta (West Bengal), that their principal businesses were carried on in Calcutta (West Bengal) and that the central management and control of the businesses was done from Calcutta It is true that these two jute companies had storage equipment and godowns at Kendupatna in the State of Orissa but on their awn showing (vide certificates of Registration? at Kendupatna they had additional places of businesses. It was not even the appellant companys case that the central management and the control of the two jute companies businesses was in the State of Orissa. The test laid down in the House of Lords decision does not suggest that at every place where some business of the company is carried on it shall have its residence there. As pointed out above, the central management and control of the two companies businesses obtained in Calcutta (West Bengal) and that being the position the two jute companies would be nonresident dealers in the State of Orissa. The second contention of the counsel for the appellant company, therefore, fails.5

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

Explanation:
0[ds]For the purpose of the Income Tax Acts, the place of registration of a company is not, any more than the birth place of an individual, conclusive as to its residence. A company registered here (in England), with a registered office here, (in England) and governed by a board which meets here, is no doubt resident here. But also a company registered abroad, whose head office and directors meeting are here, is resident here. The test of residence is not registration, but where the company does its real business, where the central management and control abides. It is the actual place of management of the company and not the place where it ought to be managed which fixes itsunderlined portion in the passage quoted from Buckley is based on the decision of the House of Lords in the leading case of Egyptian Delta Land and Investment Co. v. Todd. In that case the company was incorporated in England, had its registered office in England and fulfilled its statutory obligations in that country but 1) had transferred the whole of its business to Egypt which was entirely controlled and managed from Cairo where the director and the secretary permanently resided and the question arose whether for the purposes of Income Tax Acts the company could be regarded as a resident: in Eng land. After exhaustive survey of the earlier case law on the point the House of Lord took the view that the incorporation under the Companies. Acts, with the attendant statutory obligations did not in itself, as a matter of law, constitute a British company a person residing in the United Kingdom within the meaning of the Income Tax Acts; that it was merely a factor to be considered in determining residence, and was a matter for the Commissioners to decide. It also took the view that it was settled by authority that the residence of a company, whether British or foreign, for income tax purposes was, preponderantly and if not exclusively, determined by the place where its real business was carried on and since the whole of the companys business was controlled from Cairo the company was not resident in England and it upheld the Commissioners decision of discharging the assessments. In taking the aforesaid view the House of Lords approved and followed the criteria that had been laid down in an earlier decision in the case of De Beers Consolidated Mines v. Howe to the effect "the test of residence is not registration but where the company does its real business, where the central management and controlthe aforesaid criteria to the facts of the present case it was not disputed before us that both the principals (the jute companies) had their registered offices in Calcutta (West Bengal), that their principal businesses were carried on in Calcutta (West Bengal) and that the central management and control of the businesses was done from Calcutta It is true that these two jute companies had storage equipment and godowns at Kendupatna in the State of Orissa but on their awn showing (vide certificates of Registration? at Kendupatna they had additional places of businesses. It was not even the appellant companys case that the central management and the control of the two jute companies businesses was in the State of Orissa. The test laid down in the House of Lords decision does not suggest that at every place where some business of the company is carried on it shall have its residence there. As pointed out above, the central management and control of the two companies businesses obtained in Calcutta (West Bengal) and that being the position the two jute companies would be nonresident dealers in the State of Orissa. The second contention of the counsel for the appellant company, therefore, fails.