Case: Commissioner of Income Tax, Madras Vs. K. S. Ratnaswamy

The facts giving rise to the aforesaid question are these : Subramania and Arumuga were two brothers ; the former had three sons, Ratnaswamy, the assessee, Ganapathi and Velayudham, while the latter had only one son, Ganesa. After the death of Subramania and Arumuga their sons formed a Hindu undivided family ; that family owned an ancestral house at Orathanadu in Tanjore District, which was used as dwelling by the step-mother of the assessee, his full brothers and his cousin, Ganesa ; the family also owned shops and agricultural lands. The family properties were managed by Ganesa and were maintained by him out of the agricultural and rental income. Admittedly, the assessee never enjoyed any portion of the family income. Born and brought up in Ceylon, the assessee had his own business and properties in Ceylon. He had eight children, all born and educated in Ceylon. It appears that he started constructing a theatre in Orathanadu in 1953 which was completed in 1957 and during the said construction he paid occasional visits and stayed sometimes in the family house, sometimes in a chatram in Tanjore and at times in a hotel. Thus, from April 1, 1952, to March 31, 1953, he stayed for 8 days in India. From April 1, 1953, to March 31, 1954, he did not come to India at all, from April 1, 1954, to March 31, 1955, he stayed for 28 days in India, from April 1, 1955, to March 31, 1956, he stayed for 47 days in India and from April 1, 1956, to March 31, 1957, he stayed for 23 days in India. In July, 1958, the assessee on the one hand and other members of the family on the other executed a mutual deed of release, relinquishing each partys rights in favour of the other ; inter alia, the assessee released all his rights, title and interest in the family properties in favour of his brothers, reciting therein that the family properties were never enjoyed by him but only by others. There is no dispute and the Tribunal has also found that the deed of release was an instrument bona fide entered into between the partiesIn the above circumstances for the assessment years 1952-53, 1953-54, 1956-57 and 1957-58, the assessee filed the returns, but for the first two years after proceedings were initiated under s. 34(1)(a) of the Act and for the later two years on his own offering his income in Ceylon for assessment. The status declared in all the returns was that he wasa resident and ordinarily resident person . The ITO completed the assessments on the basis of the returns filed. He also initiated penalty proceedings against the assessee under s. 28(1)(a) for not filing the returns in time and levied penalties on him. In the appeals preferred by the assessee, which were principally directed against the rejection of the claim made by him in respect of the double taxation relief, an additional ground was taken that the assessee should have been treated as ain all the years. The AAC upheld this additional ground taking the view that since during his sojourn in India the assessee was staying in the family house more as a guest, he neither maintained nor had maintained for him a dwelling place in the taxable territories and, therefore, s. 4A(a)(ii) of the Act was inapplicable. The department carried the matter in further appeals to the Tribunal but the Tribunal called for a remand report from the AAC after a fuller examination as to the factual position whether the assessee did maintain a dwelling place in India or the same was maintained for him by others inasmuch as the Tribunal felt that the department did not have an effective opportunity to meet the aspect raised for the first time before the AAC. In the remand proceedings oral evidence was recorded by examining the assessee and two others and the final report was forwarded to the Tribunal. On the basis of the material collected and forwarded to it, the Tribunal took the view that the assessee was a natural born Ceylon citizen staying in Ceylon most of the time, that his visits to India in the aggregate were for 137 days in the period of 11 years (from 1-4-46 to 31-3-57), that the evidence Supported the theory that he 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 of the family house reserved for him during his sojourn to India and that there were not enough materials to say that there was a residence either run or maintained by the assessee in India. In this, view of the matter, the Tribunal upheld the AACs order cancelling the assessment orders made against the assessee. As a consequence, the Tribunal also cancelled the penalties that were levied on the assesseeAt the instance of the revenue and on a direction from the High Court the Tribunal referred the following two questions to the High Court for its opinion1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee was a 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) ?The High Court answered both the questions in favour of the assessee and against the revenue. While dealing with the first question, which was the principal question raised in reference, the High Court took the view that the answer to that question depended upon a bundle of facts and their cumulative effect and in its view the cumulative effect of the totality of facts found by the Tribunal did not lead to the inference that a dwelling place or dwelling house was maintained by the assessee or the same was maintained by others for him but on the other hand the evidence showed that the assessee was enjoying the hospitality of his kith and kin during his stay in the family house where he was treated as a guest. The High Court further held that the mere fact that the assessee had a right in the family house at Orathanadu in Tanjore District and that he was occasionally lodging there did not mean that he was maintaining the same or had it maintained for him and that what the law required was the maintenance of a dwelling place which should be his domus mansionalis ; in other words, if the dwelling place was not his second home or the real centre of his life then the assessee would be a non-resident. It is this view of the High Court that is being challenged before us in these appeals by the revenue

Reasoning: At the outset it may be pointed out that the section uses the expressiondwelling place , a flexible expression, but the expression must be construed according to the object and intent of the particular legislation in which it has been used. Primarily, the expression meanswhere an individual is supposed usually to live and sleep and since the expression has been used in a taxing statute in the context of a provision which lays down a technical test of territorial connection amounting to residence, the concept of an abode or home would be implicit in it. In other words, it must be a house or a portion thereof which could be regarded as an abode or home of the assessee in the taxable territories. In our view, this aspect of the matter has been rightly emphasized by the Bombay High Court in Fulabhai Khodabhais case [1957] 31 ITR 771, 776, 777It is, therefore, not possible to accept the contention of learned counsel for the revenue that it is erroneous to introduce the concept of home or abode into the sectionSecondly, the section uses two expressions :he maintains a dwelling placehas maintained for him a dwelling place . The latter expression obviously means he causes to be maintained for him a dwelling place. This is clear from the fact that the relevant provision in the 1961 Act has now been altered and it sayshe causes to be maintained for himand in the Notes on Clauses to the concerned Bill it has been explained that the wordsin s. 4A(a)(ii) have been replaced in the draft by the wordscauses to be maintained , which express the intention better. Now, in either of these expressions the volition on the part of the assessee in the maintenance of the dwelling place emerges very clearly; whether he maintains it or he causes it to be maintained, the maintenance of the dwelling place must be at his instance, behest or request and when it is maintained by someone else other than the assessee, it must be for the assessee or for his benefitIt is true that the house at Orathanadu was at the material time a joint family house in which the assessee as a coparcener had a share and interest ; it is also true that as a coparcener he had a right to occupy that house without any let or hindrance, but mere ownership of a fractional share or interest in the family house with the consequent right to occupy it without anything more would not be sufficient to satisfy the requirements of s. 4A(a)(ii), for, the requirements thereof are : not only there must be a dwelling place in which the assessee has a right to live but he must maintain it as his home or he must have it maintained for him as his home. The material on record shows that the family house in which he stayed was neither his abode or home nor was it maintained by Ganesa at the instance of the assessee or for his benefitIt is not possible to accept this contention, for, in our view, the aforesaid passage, taken in its content, does not lay down as a proposition of law that mere ownership of a fractional share in a family house with a consequent right to occupy the same with nothing more would constitute it a dwelling house of such owner within the meaning of s. 4A(a)(ii) ; for, it must further be shown that it was maintained by the manager at the instance of the assessee and for his benefit. That is how the aforesaid passage has been partly explained and, in our view, rightly, by the Madras High Court in a subsequent decision in CIT v. Janab A. P. Mohamed Noohu [1961] 43 ITR 88  In the instant case, on the facts, it has been found that the family house was maintained by Ganesa not for the assessee nor for his benefit but for the other family membersHaving regard to the above discussion, it is clear that though the assessee could be said to have had a share in the joint family house with a consequent right to occupy the same, it could not be said that the said family house was maintained by Ganesa as the karta of the family as a dwelling place for the assessee or for his benefit nor was it maintained by him at the instance of the assessee. Moreover, his stay in the family house has been found to be as a guest enjoying the hospitality of his kith and kin rather than as an inhabitant of his abode orn this view of the matter, the assessee, in our, view, was rightly regarded as a non-resident.