dedol-hf/india-case-legal-rag huggingface dataset:
Thompson(1),  which  is  one of the' leading  cases  on  the
subject, are :--
    (1)  that the conception of residence in the case  of  a
fictitious "person ", such as a company, is as artificial as
the  company itself, and the locality of the  residence  can
only  be determined by analogy, by asking where is the  head
and seat and directing power of the affairs of the  company.
What  these  words  mean have been  explained  by  Patanjali
Sastri  J. with very great clarity in the following  passage
where  he  deals with the meaning of section 4A (b)  of  the
Income-tax Act :--
    "Control  and  management"  signifies,  in  the  present
context, the controlling and directive power, "the head  and
brain' as it is sometimes called, and "situated" implies the
functioning  of such power at a particular place  with  some
degree of permanence, while "wholly" would seem to recognize
the  possibility  of the seat of such  power  being  divided
between two distinct and separated places."
As  a  general  rule, the control and  management  of  a
business  remains  in  the hand of a person or  a  group  of
persons,  and  the  question to be asked  is  wherefrom  the
person or group of persons controls or directs the business.
    (2)  Mere  activity by the company in a place  does  not
create residence, with the result that a company
may be "residing" in one place and doing a great deal  busi-
ness in another.
    (3) The central management and control of a company  may
be  divided,  and it may keep house and do business  m  more
than one place, and, if so, it may have more than one  resi-
dence.
    (4)  In case of dual residence, it is necessary to  show
that the company performs some of the vital organic
(1) 9 Tax Cas 373
966
    functions  incidental to its existence as such  in  both
the  places, so that in fact there are two centres of  'man-
agement-
    It  appears to us that these principles have to be  kept
in  view in properly construing section 4A(b) of   the  Act.
The words used in this provision clearly show firstly, that,
normally,  a  Hindu  undivided family will be  taken  to  be
resident in the taxable territories, but such a  presumption
will  not apply if the case can be brought under the  second
part  c,f the provision. Secondly, we take it that the  word
"affairs"  must  mean  affairs which are  relevant  for  the
purpose  of the Income-tax Act and which have  some-relation
to  income.  Thirdly, in order to bring the case  under  the
exception, we have to ask whether the seat of the  direction
and  control of the affairs of the family is inside or  out-
side  British  India.  Lastly, the  word  "wholly"  suggests
that a Hindu undivided family may have more than One  "resi-
dence" in the same way as a corporation may have.
The  question which now arises is what is the result of  the
application of these principles to this case, and whether it
can  be held that the central control and management of  the
affairs of the assessee's family has been shown to be divid-
ed in this case.
     It seems to us that the mere fact that the assessee has
a  house  at Kanadukathan, where his  mother  lives,  cannot
constitute that place the seat of control and management  of
the  affairs of the family. Nor are we inclined in the  cir-
cumstances of the present case to attach much importance  to
the fact that the assessee had to stay in British India  for
101 days in a particular year.  He was undoubtedly interest-
ed  in the litigation with regard to his family property  as
well as in the income-tax proceedings, and by merely  coming
out to India to take part in them, he cannot be said to have
shifted the seat of management and control of the affairs of
his  family,  or to have started a second  centre  for  such
control  and management. The same remark must apply  to  the
starting  of two partnership businesses, as mere"  activity"
cannot be the test of residence.
      967
It  seems  to us that the learned Judges of the  High  Court
have  taken rather a narrow view of the meaning  of  section
4A(b), because they seem to have proceeded on the assumption
that  merely because the assessee, attended to some  of  the
affairs of his family during his  visit t.o British India in
the particular year, he brought to himself within the  ambit
of  the  rule.  On the other hand. it seems to us  that  the
more correct approach to the case was made by the  Appellate
Assistant  Commissioner of Income-tax in the following  pas-
sage which occurs in his order dated the 24th February, 1944
:--
    "During  a major portion of the accounting period  (year
ending  12th April, 1942) the appellant was controlling  the
businesses in Burma and Saigon and there is no evidence that
such  control  was exercised only from Colombo.   No  corre-
spondence  or other evidence was produced which  would  show
that  any instructions were issued from Colombo  as  regards
the management of the affairs in British India especially as
it  was  an unauthorized clerk who was  looking  after  such
affairs. The presumption therefore is that whenever he  came
to  British  India  the appellant was  looking  after  these
affairs  himself and exercising control by issuing  instruc-
tions...............   It has been admitted that  there  are
affairs  of the family in British India.  Has it been  defi-
nitely established in this case that the control and manage-
ment  of such affairs has been only in Colombo ? I  have  to
hold  it  has not been established for the  reasons  already
stated by me."
    There  can  be no doubt that the onus of  proving  facts
which  would bring his case within the exception,  which  is
provided  by  the latter part of section 4A(b), was  on  the
assessee.  The appellant was called upon to adduce  evidence
to  show that the control and management of the  affairs  of
the family was situated wholly outside the taxable  territo-
ries, but the correspondence to which the Assistant  Commis-
sioner  of  Income-tax refers and  other  material  evidence
which  might  have shown that normally and as  a  matter  of
course the affairs in India were also being controlled  from
Colombo were not produced.  The position therefore is  this.
On the one
968
hand, we have the fact that the head and karta of the asses-
see's family who controls and manages its affairs permanent-
ly  lives in Colombo and the family is domiciled in  Ceylon.
On  the other hand, we have certain  acts done by the  karta
himself  in British India, which,  though not conclusive  by
themselves  to  establish the  existence of  more  than  one
centre  of control for the ' affairs of the family, are  by'
no  means  irrelevant to the matter in issue  and  therefore
cannot be completely ruled out of consideration in determin-
ing it.  In these circumstances, and in  the absence of  the
material  evidence  to which reference has  been  made,  the
finding  of  the Assistant Commissioner, that  the  onus  of
proving such facts as would bring his case within the excep-
tion had not been discharged by the assessee and the  normal
presumption  must be given effect to, appears to us to be  a
legitimate  conclusion.   In this view, the appeal  must  be
dismissed with costs, but we should like to observe that  as
this  case  has to be decided mainly with reference  to  the
question of onus of proof, the decision in this appeal  must
be  confined  to the year of assessment to which  this  case
relates,  and it would be open to the appellant to  show  in
future years by proper evidence that the seat of control and
management  of the affairs of the family is  wholly  outside
British India.
     MUKHERJEA J.--I agree with my learned brother, Fazl Ali
J., both in his reasoning and in his conclusion.
     CHANDRASEKHARA AIYAR J.  I concur in the judgment of my
learned brother, Fazl Ali J.
                Appeal dismissed.
Agent  for  the  appellant:  M.S.K. Sastri.
Agent for the respondent:  P.A. Mehta.
969
PETITIONER:
MANGAN LAL DEOSHI
        Vs.
RESPONDENT:
MOHAMMAD MOINUL HAOQUE & OTHERS.
DATE OF JUDGMENT:
01/12/1950
BENCH:
SASTRI, M. PATANJALI
BENCH:
SASTRI, M. PATANJALI
KANIA, HIRALAL J. (CJ)
DAS, SUDHI RANJAN
CITATION:
 1951 AIR   11            1950 SCR  833
ACT:
    Indian Registration Act, 1908, 8.17 (1) (b) and (d),  s.
17  (2)-"Lease  "--Compromise decree  creating  under  lease
between  A and B on condition that A pays a sum of money  to
C--Whether compulsorily registrable--Agreement to lease  not
creating immediate interest land--Whether "lease".
HEADNOTE:
    An agreement for a lease, which a lease is by the Indian
Registration  Act  declared to include, must be  a  document
which effects an actual demise and operates as a lease.   It
must create present and immediate interest in land.
Where  a litigation between two persons A and B who  claimed
to be tenants under C was settled by a compromise decree the
effect of which was to create a perpetual underlease between
A  and B which was to take effect only on condition  that  A
paid Rs. 8,000 to C within a fixed period:
    Held, that such a contingent agreement was not "a lease"
within el. (a) of s. 17 (t) of the Indian Registration  Act,
and  even though it was covered by cl. (b) of the said  sec-
tion it was exempt from registration under el. (vi) of subs.
(2) of s. 17.
 Hemanta  Kumari Debi v. Midnapur Zamindari Co. (I  L.R.  47
Cal. 485 P.C.) relied on.
JUDGMENT:
 CIVIL   APPELLATE   JURISDICTION: Civil  Appeal  No.94   of
1949.
107
834
Appeal from a judgment and decree of the High Court of Judi-
cature  at Patna in Appeal from Appellate Decree No.  97  of
1946   (Mannohar  Lall  and Mukherji JJ.) dated 23rd  Decem-
ber,  1947, confirming the judgment of the District    Judge
of Purulia in Appeal No. 159 of 1944.
   S.P.  Sinha (P. K. Bose,     with  him)  for  the  appel-
lant.
    N.C.  Chatterjee  and Panchanan Ghosh  (Chandra  Narayan
Naik, with them) for the respondent.
1950.  December 1. The Judgment of the Court was  deliv-
ered by
    PATANJALI  SASTRI J.--This appeal arises out of  a  suit
brought  by the respondent in the court of  the  Subordinate
Judge, Dhanbad, for recovery of arrears of royalty and  cess
from  the  appellant and another alleged to be due  under  a
compromise decree passed on the 6th March, 1923, in a previ-
ous  suit between the predecessors in interest of  the  par-
ties.   The only plea which is material for the  purpose  of
this  appeal is that the compromise decree not  having  been
registered  was inadmissible in evidence.  The courts  below
held that the document did not require registration and gave
effect  to  its  terms in decreeing the  suit.   The  second
defendant has preferred this appeal.
    The  facts  are not now in dispute and  may  be  briefly
stated.   On  11th  March, 1921, one  Kumar  Krishna  Prasad
Singh (hereinafter  referred to  as Kumar) granted a  perma-
nent  lease  of the right to the underground coal  in  5,800
bighas  of  land  belonging to him to  Shibsaran  Singh  and
Sitaram  Singh (hereinafter referred to as the Singhs) by  a
registered  patta stipulating for a salami of Rs. 8,000  and
royalty at the rate of 2a. per ton of coal raised subject to
a  minimum  of Rs. 8,000 and for certain  other  cesses  and
interest.  On 7th June, 1921, Kumar executed another  perma-
nent  patta leasing the right to the coal in 500 bighas  out
of  the 5,800 bighas referred to above to one Prayngji  Bal-
lavji  Deoshi  and his son  Harakchand  Deoshi  (hereinafter
referred to as the Deoshis).  By this document.
835
the Deoshis agreed inter alia to pay royalty at the rate  of
2a.  per  ton  on all classes of coal raised  subject  to  a
minimum  of  Rs. 750 a year. The Singhs  feeling  themselves
aggrieved  by  the latter transaction brought a  title  suit
(No. 1291 of 1921) in the Court of the Subordinate Judge  of
Dhanbad for a declaration of their title and for  possession
of the 500 bighas leased to the Deoshis under the  aforesaid
patta  of  7th June, 1921.  To that suit Kumar  was  made  a
party as defendant No. 3, the Deoshis being defendants 1 and
2.  The suit was however cornpromised on 6th March, 1923, by
all  the  parties and a decree based on the  compromise  was
also passed on the same day.  The interest of the Singhs was
brought  to sale in 193S in execution of a  decree  obtained
against  them and was purchased by the plaintiff who  insti-
tuted  the presnt  suit on 3rd October, 1942,  claiming  the
royalty  and cesses payable under the compromise decree  for
the period from Pous 1345 to Asadh 1349 B.S. from defendants
1  and 2 as the representatives of the Deoshis  who  entered
into the compromise of March, 1923.
    In  order to appreciate the contentions of the  parties,
it is necessary to set out the relevant terms of the compro-
mise decree which are as follows :--
    "The plaintiffs (the Singhs) within two months from this
date  shall  pay  Rs. 8,000 as salami  to  defendant  No.  3
(Kumar).  Otherwise  all the terms of  the  compromise  Will
stand cancelled and the plaintiffs shall not be competent to
claim  any right to or possession over the.land  covered  by
the patta dated 11th March, 1921... The patta which  defend-
ant No. 3 executed in favour of the plaintiffs in respect of
5,800 bighas of coal land in village Rahraband shall  remain
in  force, and the plaintiffs will get a decree of  declara-
tion of their right and title to the 500 bighas of coal land
in  dispute but defendants 1 and 2 (the Deoshis) shall  hold
possession  as tenants.  Besides the terms mentioned  below,
defendants  1 and 2 shall remain bound by all the  remaining
terms under which they took settlement of the 500 bighas  of
coal land from defendant No. 3 under
836
patta  and Kabuliyat, and both the defendants 1 and 2  shall
possess  the  same under the plaintiffs from  generation  to
generation and all the terms of the said patta and Kabuliyat
shall remain effective and in force between them.  Both  the
defendants  1 and 2 shall remain bound to pay to the  plain-
tiffs commission at the rate of 2a. 6p. per ton on all sorts
of  coal instead of 2a. a ton as stated before in the  patta
of  5,800  bighas of land settled  with  the  plaintiffs.The
plaintiffs shall pay to defendant No. 3 in future the  mini-
mum royalty of Rs. 6,000 instead of Rs. 8,000 as  stipulated
in the original patta of 11 th March 1921 and commission  at
the rate of la. 9p. a ton in place of 2a. a ton as stipulat-
ed  in the patta of March 21  ......  Unless the  plaintiffs
pay  to the defendant No. 3 Rs. 8,000 within 2  months  from
this  day they shall not be competent to take out  execution
of this decree, nor shall they be competent to take  posses-
sion  of the land in dispute. The defendants 1 and 2  within
one month from the date of payment of Rs. 8,000 as aforesaid
to  defendant No. 3 shall execute a new Kabuliyat in  favour
of  the  plaintiff in respect of the modified  terms  stated
above, i.e., on the condition to pay commission at the  rate
of 2a. 6p. per ton...In the new patta which defendant No.  3
will execute in favour of the plaintiffs he shall embody the
condition that the annual minimum royalty will be Rs.  6,000
instead  of Rs. 8,000 and commission will be at the rate  of
la. 9p. per ton in place of 2a. per ton as mentioned in  the
aforesaid  patta.  If the defendant No. 3 does  not  execute
the  parts on the aforesaid modified terms in favour'of  the
plaintiffs within the time aforesaid and both the defendants
1  and  2 also do not execute a kabuliyat on  the  aforesaid
modified terms, then this very rafanama shall be treated  as
the  parts and kabuliyat, and the plaintiffs  in  accordance
with the terms of the rafanama shall pay to defendant No. 3,
Rs. 6,000 only as minimum royalty and commission at the rate
of  la. 9p. per ton with respect to 5,800 bighas  and  shall
continue  to realise commission at the rate of 2a.  6p.  per
ton  from defendants 1 and 2 who shall remain bound  to  pay
the same."
837
The  answer to the question whether this  compromise  decree
requires  registration  depends on the legal effect  of  the
changes in the status quo ante of the parties brought  about
by  the document.  A careful analysis reveals the  following
alterations :--
    (1)  In the lease to the Singhs, the rate of royalty  or
commission  was reduced from 2a. per ton of coal  raised  to
la. 9p. per ton and the minimum royalty was reduced from Rs.
8,000 to Rs. 6,000 while the area of coal land in their khas
possession was reduced by 500 bighas.
(2)  In the lease to the Deoshis the rate of royalty  or
commission was enhanced from 2a. per ton to 2a. 6p. per  ton
and tiffs was made payable to the Singhs.
    The Singhs and the Deoshis were brought into a new legal
relationship,  the  former accepting the latter  as  tenants
holding the disputed 500 bighas under them in  consideration
of  the latter agreeing to pay the enhanced royalty  to  the
former.
    (4)  The whole arrangement was made conditional  on  the
Singhs  paying Rs. 8,000 to Kumar within 2 months  from  the
date of the compromise, it being expressly provided that the
Singhs  were not to be entitled to execute the decree or  to
take  possession  of the disputed area of 503  bighas  which
evidently had not till then passed into their possession.
Now,  sub-section (1) of section 17 of the  Registration
Act, enumerates five categories of documents of which regis-
tration  is  made compulsory which include"  (d)  leases  of
immoveable  property  from  year to year, or  for  any  term
exceeding  one year, or reserving a yearly rent;". Sub  sec-
tion  (2) however provided that "nothing in clauses (b)  and
(c) of sub-section (1)applies to ......  (vi) any decree  or
order  of court." It may be mentioned in passing  that  this
clause was amended with affect from the 1st April, 1930,  by
the  Transfer  of Property  (Amendment)  Supplementary  Act,
1929,  so  as  to exclude from the scope  of  the  exception
compromise decrees comprising immovable property other  than
that which is the subject-matter of the suit.  But
838
the  amendment cannot affect the document here  in  question
which  came into existence in 1923.  Before  the  amendment,
the  clause  was  held to  cover  even  compromise   decrees
comprising   immovable  property which was not  the  subject
matter  of the suit:  [Vide Hemanta Kumari Debi v.  Midnapur
Zamindari  Co.  (')]. That decision applies to  the  present
case and obviates the objection that because the  compromise
in  question covered also the remaining 5,300  bighas  which
were  not the subject-matter of the title suit of  1921,  it
was  outside the scope of the exception in sub-section  (2),
clause (vi).
The only question, therefore, is whether the  compromise
decree is a "lease" [which expression includes "an agreement
to  lease"  by the definition in section 2 (7)]  within  the
meaning of el. (d) of sub-section (1). It is obvious that if
the compromise decree fails within clause (d) of sub-section
(1)  it  would not be protected under clause  (vi)  of  sub-
section  (2) which excepts only documents falling under  the
categories  (b) and (c) of sub-section (1).  The High  Court
was  of opinion that, on a proper construction of the  terms
of the compromise, it did not fall under clause (d).   Mano-
har  Lall J., who delivered the leading judgment,  observed:
"It was a tripartite agreement embodied in the decree of the
court and was, therefore, exempt from registration. It  will
be  oh.served also that so far as the defendants  were  con-
cerned,  their possession of the 500 bighas was  not  inter-
fered  with  and they still remained in  possession  as  the
lessees, but instead of paying the royalty to the plaintiffs
it  was agreed between all the parties that  the  defendants
would  pay the royalty in future to Shibsaran  and  Sitcram.
If the matter had stood there, the learned Advocate for  the
appellant  could not have seriously contested the  position,
but he vehemently argued that when the agreement was not  to
pay  the same amount of royalty or commission as  previously
agreed  to but an altered amount of royalty and  commission,
the  document should be held to fall within the mischief  of
section 17 (1)(d)of the
(1) 47 Cal. 485: P.C.
839
Registration  Act.  The answer to this contention is,  as  I
have stated just now, to be found in the Full Bench decision
of  this court :" [see Charu Chandra Mitra's case  ()].   It
was  there held that a mere alteration of the rent  reserved
does not make the transaction a new lease so as to bring  it
within clause (d)of subsection (1).
We are unable to share this view.  It oversimplifies the
compromise transaction which, in our opinion, involves  much
more than a mere alteration of the royalties stipulated  for
in the previous pattas executed by Kumar.  Nor can we accept
the  suggestion of Mr. Chatterjee for the respondents  theft
the  compromise operated as an assignment to the  Singhs  by
Kumar of the latter's reversion under the "lease granted  to
the  Deoshis and all that the latter did was to  acknowledge
the Singhs as their landlords and attern to them.  On  tiffs
view  it was said that the transaction   would    not   fall
under    clause  (d),  although it would fall under   clause
(b)  but  then would  be  saved  by the exception in  clause
(vi)  of   sub-section  (2).    The    argument,    however,
overlooks that Kumar had leased the area of 5,800 bighas  to
the  Singhs  by his patta dated 11th March,  1921,  and  the
compromise  by  providing  that the Singhs  should  pay  the
reduced  royalty of 1a. 9p. per ton in respect of the  whole
area  preserved  Kumar's  reversion intact.   He  could  not
therefore be deemed to have assigned any part of his  inter-
est  in 5,800 bighas as landlord to the Singhs who  continue
to  hold the entire extent as tenants under him.   What  the
compromise  really did was. as stated already, to bring  the
Singhs  and  the Deoshis into a new  legal  relationship  as
underlessor and under lessee in respect of 500 bighas  which
were  the subject-matter of the title suit; in other  words,
its  legal effect was to create a perpetual  underlease  be-
tween  the Singhs and the Deoshis which would  clearly  fall
under  clause  (d) but for the circumstance that it  was  to
take  effect  only on condition float the  Singhs  paid  Rs.
8,000 to Kumar within 2 months
(1) 3 P.L.J. 255
840
thereafter.   As  pointed out by the Judicial  Committee  in
Hemanta Kumar's case (1)  "An agreement for a lease, which a
lease is by the statute declared to include, must, in  their
Lordships'  opinion, be a document which effects  an  actual
demise and operates as a lease  ......  The phrase which  in
the  context where it occurs and in the statute in which  it
is  found,  must in their opinion relate  to  some  document
which  creates a  present  and  immediate  interest  in  the
land." The compromise decree expressly provides that  unless
the sum of Rs. 8,000 was paid within the stipulated time the
Singhs were not to execute the decree or to take  possession
of the disputed property.  Until the payment was made it was
impossible  to determine whether there would be  any  under-
lease  or not.  Such a contingent agreement  is  not  within
clause  (d)  and although it is covered by  clause  (b).  is
excepted  by clause (vi) of sub-section ('2).  We  therefore
agree  with the conclusion of the High Court though on  dif-
ferent grounds and dismiss the appeal with costs.
                  Appeal dismisseel.
Agent for the appellant: P.K. Chatterjee.
Agent for the respondent: Sukumar Ghose.
PETITIONER:
SARJU PERSHAD
        Vs.
RESPONDENT:
RAJA JWALESHWARI PRATAP NARAIN  SINGH AND OTHERS
DATE OF JUDGMENT:
14/11/1950
BENCH:
MUKHERJEA, B.K.
BENCH:
MUKHERJEA, B.K.
FAZAL ALI, SAIYID
MAHAJAN, MEHR CHAND
CITATION:
 1951 AIR  120            1950 SCR  781
 CITATOR INFO :
 R          1960 SC 115  (13)
 F          1974 SC  66  (55)
 F          1983 SC 114  (8)
 RF         1985 SC  89  (8)
 RF         1988 SC 103  (12)
 F          1988 SC1845  (18)