Law:

Section:

Section 6 of the Income-tax Act, 1961 [Corresponding to section 4A(b) of the Indian Income-tax Act, 1922] - Residential status - Whether when a coparcener enters into partnership with strangers, Hindu undivided family exercises no controlling power of management over partnership-firm - Held, yes - Whether, therefore, if a coparcener becomes a partner on behalf of joint family with strangers in a firm which carries on business in taxable territories, that by itself will not determine residence of family unless control and management of firm is at least in part, with HUF - Held, yes FACTS The Hindu undivided family of one 'G' carried on business in cloth at a place which at the relevant time was outside British India. The family consisted of 'G' and his four sons, 'I', 'H', 'N' and 'R'. In 1944, 'N' came to Bombay and started a cloth business in partnership with other persons. A sum of Rs. 1,50,000 was received by 'N' from the HUF. The case of the assessee was that a sum of Rs. 1,00,000 was given to each son by the father and the balance money received were a loan by the Hindu undivided family to him. Therefore, he was became the partner of the firm in his individual capacity. However, the case of the Department, was that the total sum of Rs. 1,50,000 sent to 'N' by the Hindu undivided family was utilised as capital in the cloth business of the partnership. Firm, then started a cloth business at Banaras, and the partners of the firm at Banaras were the partners of the Bombay firm. A brother of 'N' also joined the Banaras firm but he did not bring any capital. The AO held that the Hindu undivided family of 'G' was resident in the taxable territories (namely, British India), and hence he included the sum of Rs. 1,50,000 in the income of the family under section 4(1)(b)( iii) of 1922 Act as having been brought into or received in British India in the relevant year and made an assessment on that basis. Appeal of assessee was also dismissed. On further appeal the Tribunal held that for the assessment year 1945-46, the assessee's status would be Hindu undivided family but non-resident. In so far as the assessed income was concerned the sum of Rs. 1,50,000 which was…

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