Case Law Details
Mansarovar Commercial Pvt. Ltd. Vs CIT (Supreme Court of India)
Sub- What is the meaning of management and control for the purpose of determining residency of a company? Whether simply registered office of a company can be the criterion ?
The Supreme Court in this case was considering interesting question as to taxability of alleged commission earned prior to the year 1990(whereafter the Income-tax Act,1961 was amended and income earned in Sikkim became taxable under the Act subject to certain exemptions) which was shown to have been earned in Sikkim and thus taxable as per Sikkim Mannual 1948, as against department’s contention that the income was earned in India as the management and control of the company was situated in Delhi at the office of a Chartered accountant from where the Company was functioning. The department relied on the voluminous evidence collected during search at the office of Chartered Accountant where the rubber stamp, blank signed cheques , books of accounts , statutory registers etc were found.
‘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 recognise the possibility of the seat of such power being divided between two distinct and separated places.
Control and management is where the head and seat and directing power of the affairs of the company and the control and management is must be shown is not merely theoretical control and power, i.e., not de jure control and power, but de facto control and power actually exercised in the course of the conduct and management of the affairs of the firm; that the domicile or the registration of the company is not at all relevant and the determinate test is where the sole right to manage and control of the company lies.
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