Mansarovar Commercial Pvt ltd Vs CIT New Delhi(Supreme Court)
Date-10th April, 2023
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. The Supreme Court brushed aside the arguments of Senior Advocate Arvind Dattar including those on territorial jurisdiction of Delhi AO to issue the notice by holding that the management and control of the Company was situated at the office of the Chartered accountant and thus the commission was taxable in India and not in Sikkim. The court also upheld the argument of department that following Sun Engineering’s case (1992) 4 SCC 363(SC) where it was held that the escaped income includes both under assessment and non assessment.

This judgement other academic in nature but will be important from the following angles:-

1. Determination of the residence of a Company based on the test of situation of control and management of a company.
2. Jurisdiction to issue notice u/s 148 of the Income-tax Act, 1961
3. The functions that a Professional is expected to perform in discharge of his professional services.

Ramesh Patodia
11-04-2023