Residence of HUFs, firms, LLPs, AOPs and trusts: control and management

This is Part 3 of a three-Part series on tax residency under the Income-tax Act, 2025 and the Income-tax Act, 1961. Part 1 covers individuals: the day counts, deemed residence, not ordinarily resident status, the treaty tie-breaker and the FEMA contrast. Part 2 covers companies: place of effective management, the earlier control and management test and the dual-resident company after the multilateral instrument. This Part covers every other assessee: Hindu undivided families, firms (including limited liability partnerships), associations of persons, bodies of individuals, trusts and the residual category of every other person.

Three cases show the shape of the dispute. A Hindu undivided family whose karta has lived abroad for years is told that it is resident because the karta came to India, attended a hearing and signed papers. A firm whose only business is outside India is told that it is resident because its partners live here. A family trust with trustees in two countries is assessed on income it earned abroad. In each case the Department’s proposal is the same: the assessee is resident, and its foreign income is taxable.

For these assessees the answer does not lie in days of presence or in where the business is carried on. It lies in one test, applied the same way since 1939: the assessee is resident unless the control and management of its affairs is situated wholly outside India. The word “wholly” makes residence the rule and non-residence the exception, and the decided cases place the burden of proving the exception on the assessee. These disputes are decided on the record of who decided what, and where.

For tax year 2026-27 onwards the test is in section 6(9) and section 6(11) of the Income-tax Act, 2025. The Income-tax Act, 1961 continues to govern every tax year beginning before 1 April 2026, including proceedings for those years begun on or after that date (section 536(2)(c) of the 2025 Act), and the Indian decisions are all on that Act and its 1922 predecessor. Both texts are set out below, the 2025 Act first.

Key points

• A Hindu undivided family, firm or other association of persons is resident in India unless the control and management of its affairs is situated wholly outside India during the year: section 6(9) of the Income-tax Act, 2025, and section 6(2) of the Income-tax Act, 1961 for tax years up to 2025-26. Every other person, including a body of individuals and, unless it is an association of persons, a trust, is tested the same way under section 6(11) of the 2025 Act (section 6(4) of the 1961 Act). Where a trustee is assessed as representative assessee, the tax is levied “in like manner and to the same extent” as on the person represented, subject to section 307 of the 2025 Act (sections 164 and 161(1A) of the 1961 Act), which charges, in most cases at the maximum marginal rate, income whose beneficiaries or shares the instrument of trust does not fix and a trust’s business income; that raises whose residence measures the charge (open question 12).
• The test is the reverse of the one that applied to companies before place of effective management. A company was resident only if control was wholly in India; these assessees are resident unless control is wholly outside India. Any real measure of control exercised in India makes them resident.
• “Control and management” means the controlling and directive power, the “head and brain”, actually exercised at a place with some degree of permanence. It is de facto control, not the legal right to control (Nandlal Gandalal, Supreme Court, 1960; Bhimji Naik, Bombay High Court, 1946).
• “Affairs” means affairs relevant to income and taxation (Subbayya Chettiar, Supreme Court, 1950), and, for a family, affairs the family as such can control (Nandlal Gandalal, by majority).
• The provision presumes residence. The onus of proving that control was wholly outside India is on the assessee (Subbayya Chettiar; Erin Estate, Supreme Court, 1958). Control exercised in India “may be to a small extent” and still be enough, but it must be actually exercised and not “illusory or merely notional” (Erin Estate), and an isolated or casual act of management during a visit is not enough (Patanjali Sastri J in the Madras High Court in Subbiah Chettiar, whose definition the Supreme Court adopted in Subbayya Chettiar).
• A firm includes a limited liability partnership under the Limited Liability Partnership Act, 2008, so such an LLP is tested by control and management, not by place of effective management.
• Only individuals and Hindu undivided families can be not ordinarily resident. A family’s not ordinarily resident status turns on its manager under section 6(13)(a) of the 2025 Act (section 6(6)(b) of the 1961 Act), and the Madras High Court has counted the years of successive managers (Marimuthu Pillai, 1945); it is a separate question from whether the family is resident at all.
• Residence is decided for each year. A finding for one year, especially one decided on onus, does not bind the next.
• The treaty layer for persons other than individuals turns on whether the entity is “liable to tax” in the other country and, for dual residents, on the tie-breaker in each treaty as modified or left untouched by the multilateral instrument.

The provisions under both Acts

Section 6 of the Income-tax Act, 2025 deals with these assessees in three sub-sections. Sub-section (9) covers the Hindu undivided family, the firm and the association of persons:

(9) A Hindu undivided family, firm or other association of persons shall be resident in India in any tax year unless the control and management of its affairs is situated wholly outside India during such tax year.

Sub-section (11) covers everyone not dealt with elsewhere in the section:

(11) Every other person is resident in India in any tax year unless during that tax year the control and management of the affairs of such person is situated wholly outside India.

Sub-section (12) extends a finding of residence across sources:

(12) If a person is resident in India in a tax year for any source of income, he shall be deemed to be resident in India in that tax year for each of his other sources of income.

For tax years beginning before 1 April 2026 the same rules are in clauses (2), (4) and (5) of section 6 of the Income-tax Act, 1961:

(2) A Hindu undivided family, firm or other association of persons is said to be resident in India in any previous year in every case except where during that year the control and management of its affairs is situated wholly outside India.

(4) Every other person is said to be resident in India in any previous year in every case, except where during that year the control and management of his affairs is situated wholly outside India.

(5) If a person is resident in India in a previous year relevant to an assessment year in respect of any source of income, he shall be deemed to be resident in India in the previous year relevant to the assessment year in respect of each of his other sources of income.

The 1961 formula “in every case except where” became “unless” in the 2025 Act. Nothing turns on the change: in both texts residence is the rule, and the assessee is non-resident only if the exception is made out.

Two definitions decide which provision applies. “Firm” in section 2(45) of the 2025 Act has the meaning in section 4 of the Indian Partnership Act, 1932 and includes a limited liability partnership as defined in section 2(1)(n) of the LLP Act; section 2(23)(i) of the 1961 Act has the meaning in the Indian Partnership Act, 1932 and “shall include a limited liability partnership as defined in the Limited Liability Partnership Act, 2008”. “Person” in section 2(77) of the 2025 Act and section 2(31) of the 1961 Act includes an individual, a Hindu undivided family, a company, a firm, an association of persons or a body of individuals whether incorporated or not, a local authority, and every artificial juridical person not falling within the earlier sub-clauses.

Putting the two together:

Assessee	Income-tax Act, 2025	Income-tax Act, 1961	Test
Hindu undivided family	Section 6(9)	Section 6(2)	Resident unless control and management wholly outside India
Firm, including an LLP under the LLP Act, 2008	Section 6(9)	Section 6(2)	Same
Association of persons	Section 6(9)	Section 6(2)	Same
Body of individuals	Section 6(11)	Section 6(4)	Same, as “every other person”
Local authority, artificial juridical person	Section 6(11)	Section 6(4)	Same
Trust (unless assessable as an association of persons, or assessed through its trustee as representative assessee: open question 12)	Section 6(11)	Section 6(4)	Same
Company (for contrast)	Section 6(10)	Section 6(3)	Indian company, or place of effective management in India (Part 2)

A body of individuals is not named in section 6(9) or section 6(2). It falls under the residual rule. Because both rules use the same words, the placement matters only for the reading of “affairs” and of who exercises control, not for the test itself.

The rule runs the other way: residence unless control is wholly outside India

Before the Finance Act, 2015 and the Finance Act, 2016 brought in place of effective management for companies (Part 2 traces that history), a company other than an Indian company was resident under the earlier text of section 6(3) of the 1961 Act only if the control and management of its affairs was situated wholly in India during the year. The Bombay High Court explained the difference between the two rules in Narottam and Pereira Ltd. v. CIT (6 March 1953), construing the corresponding clauses of the 1922 Act, section 4A(b) for families, firms and associations and section 4A(c) for companies:

Therefore, whereas in the case of a Hindu undivided family of firm or association of persons any measure of control and management within the taxable territories would make them resident, in the case of a company any measure of control and management of its affairs outside the taxable territories would make it non-resident.

For a company under the old rule, the Department had to show that every part of the control was in India; a single board meeting abroad that was more than a formality could defeat it. For a family, firm or association, the assessee has to show that no part of the control is in India; a single real act of control here defeats the assessee.

Three consequences follow.

First, the provision creates a presumption. The Supreme Court said in V.V.R.N.M. Subbayya Chettiar v. CIT (21 December 1950) that the words of section 4A(b) “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” of the provision. It said the same of a firm with resident partners in The Erin Estate, Galah, Ceylon v. CIT (22 April 1958): “where the partners of a firm are residents of this country, the normal presumption would be that the firm is resident in the taxable territories.”

Second, the burden of proving the exception is on the assessee. Subbayya Chettiar: “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.” Erin Estate: “The onus to rebut the initial presumption is on the assessee.”

Third, the extent of control exercised in India does not matter once it is real. Erin Estate put it this way: “The exercise of the control and management even in part in the taxable territories would be enough to fix the appellant with the character of a resident within section 4A(b).”

The word “wholly” also means that the assessee can have more than one residence. Patanjali Sastri J said in the Madras High Court, in the passage the Supreme Court adopted in Subbayya Chettiar, that “wholly” would seem to recognise “the possibility of the seat of such power being divided between two distinct and separated places”. A family or firm controlled partly from India and partly from abroad is resident in India, whatever its status in the other country. That is where the treaty tie-breaker comes in, discussed below.

Where the test comes from, and why the 1922 cases still decide it

Section 4A(b) of the Indian Income-tax Act, 1922, as the Supreme Court set it out in Subbayya Chettiar, read:

“For the purposes of this Act---- A Hindu undivided family, firm or other association of persons is resident in British India unless the control and management of its affairs is situated wholly without British India.”

Section 4A was not in the 1922 Act as enacted. Gentle CJ recorded in the Madras High Court’s judgment in Subbiah Chettiar (22 August 1947) that section 4A(b) “was included in the Act by the amending Act of 1939”, and Patanjali Sastri J said in the same case that before that amendment a Hindu undivided family “was held to reside wherever its members lived”, until, in his words, “The amending Act of 1939, however, introduced elaborate definitions of “residence” and “ordinary residence”” for families, firms, companies and associations.

The words “British India” were later replaced by “the taxable territories”, as Hidayatullah J noted in Nandlal Gandalal. Section 6(2) of the 1961 Act kept the test and changed the territorial words to “India” and “outside India”. Section 6(9) of the 2025 Act keeps it again. The operative words, “control and management of its affairs” and “situated wholly”, have not changed since the amending Act of 1939 introduced them. That is why the leading decisions on these assessees are still the decisions under section 4A(b): Subbayya Chettiar (1950), Erin Estate (1958) and Nandlal Gandalal (1960) in the Supreme Court, and the Bombay and Madras High Court decisions of the 1940s and early 1950s on which they drew.

The Supreme Court said in Subbayya Chettiar that section 4A(b) “appears to be based very largely on the rule which has been applied in England to cases of corporations”, and quoted Lord Loreburn’s statement in De Beers Consolidated Mines Ltd. v. Howe that “the real business is carried on where the central management and control actually abides”. It then took four principles from the English decision in Swedish Central Railway Co. Ltd. v. Thompson: residence of an artificial person is determined by asking where the head and seat and directing power of its affairs is; mere activity in a place does not create residence; central management and control may be divided, giving more than one residence; and dual residence requires vital organic functions in both places. The English cases are used in India through these passages. A submission that relies on them should cite the Indian judgments that adopted them.

The Tribunal has applied the same structure under the 1961 Act. In Radha Rani Holdings (P) Ltd. v. Addl. DIT (Delhi, 31 May 2007), a company case decided under the earlier text of section 6(3) and taken by the Revenue in appeal to the Delhi High Court (ITA 106/2008), the Tribunal contrasted the company rule with section 6(2) and said that for a family, firm or association “it is incumbent on the assessee to establish that control is wholly outside India” (para 14). One caution about that order: the passage it sets out at para 15 as the Supreme Court’s guidance in Nandlal Gandalal is taken from Hidayatullah J’s dissenting judgment, not from the majority. An assessing officer or a Tribunal applying section 6(9) or section 6(2) is applying the law as Subbayya Chettiar, Erin Estate and the majority in Nandlal Gandalal declared it.

What “control and management” means

The controlling and directive power

The definition that every later decision uses is Patanjali Sastri J’s, in the Madras High Court’s judgment in CIT v. V.V.R.N.M. Subbiah Chettiar (22 August 1947), adopted by the Supreme Court when it heard the appeal. As the Supreme Court set it out:

“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.”

The majority in Nandlal Gandalal restated it: the expression “signifies controlling and directive power, “the head and brain” as it is sometimes called”. Erin Estate said that the control and management contemplated by the section “evidently refers to the controlling and directing power”.

Each word in the definition carries part of the test. “Controlling and directive” separates control from operations. “Situated” requires the power to function at a place “with some degree of permanence”, which excludes a stray act. “Wholly” allows the seat to be divided.

De facto, not de jure

The power must be exercised, not merely held. The Bombay High Court decided this in Bhimji Naik v. CIT, first on an earlier hearing in which it remanded the case to the Tribunal, and then on 12 March 1946. Leonard Stone CJ recorded the earlier holding that the control and management “must be de facto control and management and not de jure control and management”. On the facts found after remand he said that the founder’s power of control, though relevant, was no evidence by itself of any act of control, and that “it is the acts and not the powers with which we are concerned”.

The Supreme Court adopted the rule in both later cases. In Nandlal Gandalal the majority said it was settled that the expression “means de facto control and management and not merely the right or power to control and manage”. Erin Estate: the control “is not the merely theoretical control and power, not a de jure control and power but the de facto control and power actually exercised in the course of the conduct and management of the affairs of the firm.”

For a firm the point is important because every partner has the legal right to take part in the conduct of the business. Erin Estate said that the presence of this theoretical right, which “inevitably vests in all the partners”, would not by itself show that control was situated in India.

How much control is enough

Once real control is shown to be exercised in India, its extent does not matter. Erin Estate:

It must be shown by evidence that control and management in the affairs of the firm is exercised, may be to a small extent, in India before it can be held that control and management is not situated wholly without the taxable territories.

The same judgment added the limit: “The control and management must no doubt be shown to have been actually exercised; and the exercise of the control and management should not be illusory or merely notional.”

The Madras High Court, deciding the same case before it reached the Supreme Court (CIT v. The Erin Estate, Galaha, 27 March 1951), put the positive side widely:

A place wherefrom oversight or supervision or even tacit control of the affairs of the business by the owner of the business conducted abroad is regularly exercised would be a place where the control and management is situate.

The word “regularly” in that passage matters. Patanjali Sastri J had said in Subbiah Chettiar that neither extreme contention was warranted by the clause: the karta did not have to control all the family’s affairs from India to make it resident, but an isolated or casual act of management by a karta living abroad was not enough, because the clause speaks of the situation of control, not of its occasional exercise. Subbayya Chettiar said the same thing in its own words: mere activity cannot be the test of residence.

What is not control

The decisions give a working list.

• Day-to-day operations by servants, agents or employees. Narottam and Pereira said that the control contemplated “is not the carrying on of day to day business by servants, employees or agents”.
• Receiving accounts and reports. The Madras High Court in Talipatigala Estate v. CIT (9 December 1949) noted its own earlier decision that the mere receipt of copies of accounts from agents abroad does not amount to the exercise of control.
• A fleeting visit. Talipatigala Estate: “A mere fleeting or sporadic visit” by a principal, without any exercise of supervision or control during it, does not connote control.
• Keeping in touch. Talipatigala Estate, following Bhimji Naik, said that a partner in India who keeps himself in touch with the partners abroad and informed of the general condition of the business does not thereby exercise control. In Bhimji Naik Kania J said that advices of this kind “would be natural in the case of a partner who has a share in profits and losses” but do not lead to any conclusion about control.
• Temporary journeys. Bhimji Naik: the situation of control is to be ascertained “apart from the temporary journeyings of the active partners or the residence of the dormant ones”.

What is control

The same decisions show what crosses the line.

• Approving the budget. In Erin Estate the superintendent in Ceylon sent the partners in India a budget for important matters at the start of each year, and acted on it after approval. The Supreme Court said: “The act of approval in the context is undoubtedly an act of exercising the right of control and management of the affairs of the firm.” That the budget was usually approved made no difference.
• Directions on operations, staff and money. The letters in Erin Estate gave instructions on manuring, building, the reserve to be retained before distribution, purchases of tea and a salary increase of Rs. 2 a month for a clerk. The Court said this correspondence showed that the entire control had not been left with the superintendent.
• Directions to an agent abroad. In Talipatigala Estate the partner in India had selected and sent out the agents, received regular reports and accounts, and sent instructions on engaging workmen, reducing the cost of production, raising wages and selling produce. The High Court held that “some amount of control and management of the firm’s affairs was actually exercised in British India” and said that if any part of the control and management is in India, “then the firm is a resident”.

The difference between the two lists is the difference between being told and deciding. A partner or karta who receives information is not controlling; one who sanctions, directs or vetoes is.

Which “affairs” count

The control must be of the assessee’s “affairs”. The word has been given a definite meaning.

Subbayya Chettiar said 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. Applying its principles, the Court held that a family house in India where the karta’s mother lived was not the seat of control of the family’s affairs, and the karta’s attendance at litigation over family land and at the family’s own income-tax hearings did not by itself shift the seat of control. Erin Estate applied the same reading to a firm: the affairs subject to control “refer to the affairs which are relevant for the purpose of taxation and so they must have some relation to the income of the firm”. The Madras High Court in its Erin Estate judgment drew the corollary for partners: the private or domestic affairs of individual partners, unrelated to the firm’s business, are not the firm’s affairs, and a partner’s power of attorney for his own affairs was irrelevant.

Nandlal Gandalal narrowed the word further for a Hindu undivided family. The family carried on a cloth business in Wadhwan, then outside British India. One coparcener went to Bombay and started a partnership with three strangers, financed, on the Department’s case, by Rs. 1,50,000 sent from the family’s funds; a second coparcener joined him, and the firm later started a separate firm at Banaras with an outside partner. The Income-tax Officer held the family resident for assessment year 1945-46 and taxed the remittance as income brought into British India. The question was whether the Bombay partnership was an “affair” of the family.

The majority (S.K. Das J, for himself and Kapur J) held that it was not:

It seems to us that the word ” affairs ” in s. 4A(b) must mean affairs of a Hindu undivided family which are capable of being controlled and managed by the said Hindu undivided family as such.

Where a coparcener enters into partnership with strangers, the partnership is between him individually and the other partners, and the family exercises no controlling power over the firm. A coparcener joining a firm with strangers “will not determine the residence of the family unless the control and management of the firm is at least, in part, in the Hindu undivided family”. The majority accepted that the position would be different if the family itself carried on the business as its own. It answered the apparent paradox, that the income was the family’s but the business was not its affair, by separating accrual from residence: “There is really no paradox because the place of accrual of income of such family and the place of its residence need not necessarily be the same under the Act.”

Hidayatullah J dissented. In his view the coparcener-partners in Bombay were managing a family undertaking with family money, and “The coparceners who Januslike face two ways, cannot shelter behind the law of Partnership”. He said that in the case of firms, associations and families control can be exercised by one or more of the group, and “So long as this control and management (even partly) is found, and it must be so when some coparceners reside in British India and manage the affair, the family must be treated as resident.” He would have held the family resident, and would have decided the case on burden alone if necessary.

The majority’s reading is the law. The dissent is worth reading for what it shows about how the Department frames these cases: by treating everything a coparcener does with family money as the family’s affair. The answer, after Nandlal Gandalal, is to identify each affair, ask whether the family as such can control it, and then ask where that control was exercised.

Hindu undivided families: the karta abroad and the coparceners at home

Subbayya Chettiar is the model family dispute. The karta lived in Colombo with his wife and children, was domiciled in Ceylon and carried on business there. The family had a house, some land and investments in British India, and shares in two firms. In the year of account the karta visited British India seven times, for 101 days in all. During those visits he attended a litigation over family land in the trial court and in appeal, appeared before the income-tax authorities in the family’s own assessment and obtained an extension of time for payment, and started two partnership businesses. He did not produce the file of correspondence with the Colombo business. The family was assessed as resident for assessment year 1942-43.

The Supreme Court did not accept the Madras High Court’s reasoning. It said that the house, the 101 days, the litigation and the tax proceedings did not by themselves shift the seat of control or start a second centre of control, and that the High Court had taken “rather a narrow view” in treating attendance to family affairs during a visit as enough. But it upheld the result on the burden of proof. The Appellate Assistant Commissioner had found that the karta controlled businesses in Burma and Saigon for a major part of the year with no evidence that control was exercised only from Colombo, and that no correspondence showed instructions issued from Colombo about the Indian affairs, which were looked after by an unauthorised clerk. The Supreme Court said the karta “was called upon to adduce evidence” that control was wholly outside, but the correspondence and other material evidence “were not produced”. The acts done in India, though “not conclusive by themselves”, were “by no means irrelevant”, and in the absence of that material the presumption stood. The Court confined the decision to that year and left it open to the family to prove non-residence in future years “by proper evidence”.

Three lessons for a family’s file follow from that judgment.

First, the karta’s own presence in India is not decisive either way. A karta abroad does not make the family non-resident, and a karta’s visits do not make it resident. The question is where the family’s income-related affairs were directed from.

Second, the family is more than the karta. Hidayatullah J’s description in Nandlal Gandalal, that control of a family’s affairs “can be exercised by one or more of the group”, was in a dissent, but nothing in the majority judgment contradicts it, and the Madras High Court made the same point in a different way in Rm. Al. St. Annamalai Chettiar v. IV Addl. ITO (16 September 1957):

No doubt normally it is the Karta who has control of the business of a Hindu undivided family, but it does not follow as a matter of law that control was not exercised at any particular point of time by someone other than the karta.

A family with a karta abroad and an adult coparcener in India who signs cheques, instructs the family’s munim and decides on the family’s investments has a real problem with the exception. The record has to show what the coparcener in India actually decided, and on whose instructions.

Third, a coparcener’s own partnership is not the family’s affair just because family money went into it. That is Nandlal Gandalal. The family’s affair is what the family as such can control. A firm in which a coparcener is a partner with strangers is controlled by its partners, not by the family. The position changes where the family carries on the business itself, or where the family, through its karta, controls the firm’s management at least in part.

The family that is not ordinarily resident: the manager test

A resident family may still be not ordinarily resident, which changes the scope of its taxable income. Section 6(13)(a) of the 2025 Act combines the individual and the family in one clause:

(a) an individual who has been, or a Hindu undivided family, whose manager has been— (i) a non-resident in India in nine out of the ten tax years preceding that year; or (ii) in India cumulatively for seven hundred and twenty-nine days or less in seven tax years preceding that year; or

For tax years beginning before 1 April 2026, section 6(6)(b) of the 1961 Act says that a Hindu undivided family is not ordinarily resident if it is:

(b) a Hindu undivided family whose manager has been a non-resident in India in nine out of the ten previous years preceding that year, or has during the seven previous years preceding that year been in India for a period of, or periods amounting in all to, seven hundred and twenty-nine days or less ;

The two limbs are alternatives. A family whose manager satisfies either is not ordinarily resident. Clauses (b) and (c) of section 6(13) of the 2025 Act, and clauses (c) and (d) of section 6(6) of the 1961 Act, which deal with the citizen or person of Indian origin with total income, other than income from foreign sources, above fifteen lakh rupees and the citizen deemed resident, speak only of individuals. They are not borrowed for the family.

Under the 2025 Act the look-back runs into years before 1 April 2026. Section 3(1) of that Act defines a “tax year” as the twelve months of the financial year commencing on 1 April, so the “ten tax years” and “seven tax years preceding” in section 6(13)(a) include financial years governed by the 1961 Act.

The manager test has a long history. Section 4B(b) of the 1922 Act said that a Hindu undivided family was deemed to be ordinarily resident if its manager was ordinarily resident. The Madras High Court applied it in K.M.N.N. Swaminathan v. CIT (21 April 1947), for assessment year 1940-41: the karta’s status determined the family’s, and because the karta had been resident in nine of the ten preceding years and in British India for more than two years in the preceding seven, the family was ordinarily resident and its foreign income was taxable. Patanjali Sastri J, concurring, said that “more than two years” required at least two years and a day, and rejected a reading that would let a person shed his ordinarily resident status by being absent for three and a half months every year. Two years earlier the same Court, in a judgment delivered by Patanjali Sastri J, had held in S. Marimuthu Pillai v. CIT (23 February 1945) that the periods of residence and stay of successive managers during the family’s continued existence count under section 4B, so that a deceased father-manager’s years in India made the family ordinarily resident in a year managed by a son who had returned from Ceylon (open question 13).

The point to keep separate is the one the Madras High Court made in Annamalai Chettiar. The family had claimed, and been assessed as, “resident but not ordinarily resident” for assessment year 1951-52, on the strength of the karta’s absence in Malacca. Three years later it sought rectification on the footing that it should have been held non-resident. The High Court refused:

These two sub-sections, section 4A(b) and section 4B(b) point to different criteria for the determination of the status defined by each of them

Residence turns on where control was exercised; not ordinarily resident status turns on the manager’s history. The karta’s absence for the whole year does not prove that control was exercised from outside India, and a family that pleads only the manager test has not pleaded non-residence. The court also said there was no mistake apparent from the record to rectify. A family that wants to be treated as non-resident has to make that claim on the facts about control in the assessment itself.

The practical difference between the two statuses is in section 5, discussed below. A non-resident family is taxed only on income received or deemed received in India, or accruing or arising or deemed to accrue or arise in India. A resident but not ordinarily resident family is taxed on the same, and on income accruing outside India only if it is derived from a business controlled in or a profession set up in India. A resident and ordinarily resident family is taxed on its income wherever it accrues.

Firms and limited liability partnerships

The test for a firm

A firm is a separate assessable unit under the Act though not a separate person under the Indian Partnership Act. The Madras High Court said so in Talipatigala Estate in rejecting an argument that the firm could not be reassessed because a partner had been assessed on his share; it is the firm’s own residence that is in issue, decided by where its affairs are controlled. Talipatigala Estate also said that the residence of the individual partners in India “does not determine the residence of the firm for purposes of income-tax if the control and management of the firm’s business is wholly situate outside”.

That said, a firm whose partners all live in India starts with the presumption against it. Erin Estate is the leading case. The firm’s seven partners all lived in Tiruchirapalli District. It owned a tea estate in Ceylon, run by a salaried superintendent under a clause in the partnership deed that left the management of the estate to him. The partners’ case was that the deed and the practice left everything to the superintendent. The partner who gave evidence admitted that the superintendent sent a budget each year for important matters, that it was usual for the partners to approve it, and that the partners had the right to check the superintendent if anything seemed irregular. The correspondence showed instructions on manuring, buildings, a reserve of Rs. 7,500 to Rs. 10,000 to be retained every six months before distribution, purchases of tea and a salary increase of Rs. 2 a month. The Supreme Court held the firm resident for assessment years 1939-40 to 1942-43.

Two further points in Erin Estate matter for a firm’s file.

The deed is not the answer. The partnership deed in Erin Estate left the management to the superintendent, and the Court accepted that “the substantial part of the management of the estate was left to the superintendent”, yet held that the correspondence showed control in India. What the partners did prevails over what the deed said.

A technical argument about authority will not help. The assessee argued that under section 12 of the Partnership Act only a majority of partners could give effective directions, and that no majority had acted in concert. The Court rejected it: every partner has a right to take part in the conduct of the business, a majority is needed only where there is a difference on ordinary matters, and nothing showed any disagreement with the directions the principal partner gave.

The contrast is Bhimji Naik. The founder of a South African business had returned to live in India and had not been to South Africa since 1912; the business was carried on by partners in Southern Rhodesia under a partnership formed later. Three affidavits, from the founder, from two of the South African partners and from a trading counterparty, said that he gave no instructions and was not consulted. They were not challenged and no cross-examination was sought. The Bombay High Court held that the unchallenged affidavits discharged “the initial burden of proof”, that the Tribunal’s finding of “some control” was based on no evidence, and that letters of caution and general advice from the founder were the natural communications of a partner sharing in profits and losses. The firm was non-resident.

Limited liability partnerships

Whatever its character under the Limited Liability Partnership Act, 2008, an LLP formed under that Act is a “firm” for income-tax. Section 2(45) of the 2025 Act includes in “firm” a limited liability partnership as defined in section 2(1)(n) of the LLP Act, and section 2(23)(i) of the 1961 Act does the same: it includes “a limited liability partnership as defined in the Limited Liability Partnership Act, 2008”. The consequence for residence is direct: an LLP’s residence is tested under section 6(9) (section 6(2) of the 1961 Act) by control and management, and not under section 6(10) (section 6(3)) by place of effective management. The place of effective management guidelines in Circular No. 6/2017, discussed in Part 2, are guidelines for companies and do not apply to an LLP.

The decisions on firms apply to an LLP. The evidence of where control is exercised is the evidence of where the partners’ decisions were taken and recorded, and an LLP usually has more of that evidence in formal form than a traditional firm. The structural rule does not change: a partner in India taking real decisions on the LLP’s affairs makes it resident.

The classification point arises with a body set up abroad. A body formed outside India as a limited liability partnership is not an LLP under the 2008 Act. If it is a body corporate incorporated under the laws of a country outside India, it falls within the definition of “company” in section 2(28)(b) of the 2025 Act and section 2(17)(ii) of the 1961 Act, and its residence is tested by place of effective management under Part 2. If it is not a body corporate under its own law, the question is whether it is a firm under the Indian Partnership Act definition or an association of persons. Each answer leads to a different test, so the classification has to be settled before the residence argument begins. The Revenue may say that classification under the Act is a matter of Indian law: the definitions in section 2 decide the class, and a foreign label does not, so a body whose members share profits and act for one another can be treated as a firm or an association whatever its home law calls it. The assessee’s answer is that the words “body corporate incorporated by or under the laws of a country outside India” in section 2(28)(b) of the 2025 Act, as in section 2(17)(ii) of the 1961 Act, themselves send the inquiry to the foreign law. Our view is that the foreign law under which the body was formed decides whether it is a body corporate, and the Indian definitions then decide the class; a submission that skips the first step leaves the Department free to choose whichever class suits its case.

Associations of persons, bodies of individuals, trusts and every other person

An association of persons is named in section 6(9) and section 6(2). A body of individuals is not, and falls under section 6(11) and section 6(4). So do a local authority and an artificial juridical person. The test is the same, and the cases on families and firms apply. For an association, the questions are the ones in Nandlal Gandalal and Erin Estate: what are the association’s own affairs, and do any members in India exercise real control over them (open question 12).

A trust is not named anywhere in section 6. Nor is a trust always assessed as a person in its own right. Where a trustee appointed under a trust declared by a duly executed instrument in writing receives or is entitled to receive income on behalf or for the benefit of any person, the trustee is a representative assessee (section 303(1)(d) of the 2025 Act; section 160(1)(iv) of the 1961 Act; for an oral trust, section 303(1)(e) and section 160(1)(v)), and the assessment on him is deemed to be made “in his representative capacity only”, with the tax levied upon and recovered from him “in like manner and to the same extent as it would be leviable upon and recoverable from the person represented by him” (section 304(1) of the 2025 Act; section 161(1) of the 1961 Act).

That rule applies “subject to the other provisions contained in this Chapter”, and two of those provisions bear on residence. The first is the charge where the beneficiaries or their shares are not fixed. Where the income is not specifically receivable on behalf or for the benefit of any one person, or the individual shares of the beneficiaries are indeterminate or unknown, section 307(1) of the 2025 Act and section 164(1) of the 1961 Act charge it at the maximum marginal rate, or, in the cases in section 307(2) and in the first proviso to section 164(1) (among them, where none of the beneficiaries has other income chargeable above the amount not chargeable to tax for an association of persons, or is a beneficiary under any other trust), as if it were the total income of an association of persons. The income is deemed to fall within those words unless the instrument of trust expressly states the beneficiary and the shares and they are identifiable or ascertainable on its date (section 307(5); Explanation 1 to section 164).

The second is business income, and here the two Acts are worded differently. Section 307(3) of the 2025 Act has no non obstante clause: “subject to the provisions of sub-section (4)”, it directs that “tax shall be charged at the maximum marginal rate on such income or part thereof”, and section 307(4) charges the business income of the only will trust for a dependent relative at the rate applicable to an association of persons, whether or not the shares are fixed. Section 161(1A) of the 1961 Act applies “notwithstanding anything contained in sub-section (1)” and charges “the whole of the income in respect of which such person is so liable at the maximum marginal rate”. Its proviso takes out a trust declared by will exclusively for the benefit of a relative dependent on the testator for support and maintenance, where it is “the only trust so declared by him”. Such a trust’s business income is then left to section 161(1) or, where section 164(1) applies, to the first proviso to section 164(1). The further proviso to section 164(1) allows the first proviso to apply to a trust whose income includes business profits only if it is such a will trust, so that any other such trust is charged at the maximum marginal rate even where a clause of the first proviso would otherwise be met.

Income of an oral trust is charged at the maximum marginal rate (section 308; section 164A of the 1961 Act). A trust not declared by a duly executed instrument in writing is treated as one that was if a statement in writing, signed by the trustee or trustees, setting out its purposes, the trustees, the beneficiaries and the trust property, is forwarded to the Assessing Officer within three months of its declaration (or, for a trust declared before 1 June 1981, within three months from that day) (section 303(2); Explanation 1 to section 160(1) of the 1961 Act). The Assessing Officer may also assess the beneficiary directly (section 304(3); section 166 of the 1961 Act).

Where the trust is assessed through its trustee, whose status governs the scope of the charge is itself in issue. Where the persons concerned are assessed as an association of persons, section 6(9) or section 6(2) applies, though income for which a trustee is assessable as representative assessee cannot be assessed on him under any other provision (section 304(2) of the 2025 Act; section 161(2) of the 1961 Act). Otherwise the trust is tested under the residual rule in section 6(11) or section 6(4). The words are the same in each case, so the analysis of control is the same: where are the trust’s income-related decisions (investment, distribution, the exercise of the trustees’ discretions) actually taken, and does any part of that decision-making take place in India. The decisions on families and firms are the authority on what control means; the questions specific to trusts and associations are open question 12.

How the Department builds the case, and what the record must show

The Department’s case

The Department does not have to prove residence. It has to show that the assessee falls within the class (family, firm, association, other person) and then put the assessee to proof of the exception. The assessing officer’s case is built from:

• the residence of the karta, coparceners, partners, trustees or members, and their days in India;
• the assessee’s own return, especially if it claimed resident but not ordinarily resident status, which pleads only the manager test and leaves non-residence unclaimed (Annamalai Chettiar);
• bank mandates, cheque books and signing authorities operated from India;
• correspondence, emails and messages between members in India and managers abroad, called for in the assessment;
• budgets, approvals and sanctions for expenditure;
• statements recorded from members and managers;
• any power of attorney or authority given by the assessee to a person in India.

The assessing officer then relies on the presumption, and on any refusal to produce. Subbayya Chettiar upheld the finding against the family because the correspondence it was called upon to produce was not produced. The Madras High Court in its Erin Estate judgment called the non-production of material and available evidence “an infirmative circumstance that has to be taken into account against the assessee”. Non-production is weighed with its explanation. In Bhimji Naik the correspondence file had been produced before the Department’s examiner, and Kania J held that its non-production on remand by the founder’s legal representatives, after his death during the proceedings, “can be easily understood and no adverse inference could be drawn from that fact”.

What the assessee’s record must show

The exception is proved by evidence of where control was in fact exercised, for that year. The record should contain:

1. A map of the affairs. A list of the assessee’s income-related affairs (each business, investment, property and bank account), and for each, who decides and from where. Nandlal Gandalal shows why: an affair the assessee as such cannot control does not count.
2. The decision-makers and their locations through the year. For a family, every adult coparcener who takes part in the family’s business; for a firm, every partner; for a trust, every trustee, and any protector or person with power to direct.
3. The documents of decision. Minutes of partners’ or trustees’ meetings, with places and modes of attendance; budget approvals; investment decisions; the instructions given to managers abroad. The instructions should be shown to come from outside India.
4. The full correspondence, produced. Subbayya Chettiar was lost on the file that was not produced. If the correspondence shows only reports, accounts and general advice to India, it helps the assessee (Talipatigala Estate on accounts; Bhimji Naik on advice). If it shows sanctions and directions from India, it decides the case the other way (Erin Estate).
5. Affidavits from the persons concerned, offered for cross-examination. In Bhimji Naik unchallenged affidavits discharged the initial burden and a finding contrary to them was set aside as based on no evidence.
6. An explanation for each act done in India. In Subbayya Chettiar the family house in India and the karta’s taking part in litigation over family property and in the family’s own tax proceedings did not by themselves shift the seat of control, though the Court held such acts “by no means irrelevant”. A visit to India should be accounted for by what was done during it.

The appeal

Whether the assessee is resident is “a mixed question of fact and law”, and the legal effect of the facts found is a question of law (Erin Estate, para 6). That is the difference from an individual’s day count in Part 1, which is a question of fact; for the assessees in this Part, whether the acts found amount to control and management is a question of law on those facts. A finding of residence based on inference without evidence can be challenged as perverse, as it was in Bhimji Naik. A finding that rests on the assessee’s failure to produce evidence is much harder to disturb, as Subbayya Chettiar shows.

Residence is decided for each year. Subbayya Chettiar confined its decision to the year in issue and left it open to the family to prove the position “in future years by proper evidence”. A finding for one year is evidence in the next, but it does not bind, and the assessee’s record for the next year can be different.

What residence switches on: section 5

Residence matters because of the scope of total income. Section 5(1) of the 2025 Act includes, in the total income of a resident, all income from whatever source derived which is received or deemed received in India, accrues or arises or is deemed to accrue or arise in India, or accrues or arises outside India; for a person not ordinarily resident under section 6(13), section 5(1)(c) includes income accruing outside India only when it is derived from a business controlled in or a profession set up in India. Section 5(2) confines a non-resident’s total income to income received or deemed received in India, or accruing or arising or deemed to accrue or arise in India. Section 5 of the 1961 Act says the same in sub-sections (1) and (2), with the not ordinarily resident exclusion, by reference to section 6(6), in the proviso to section 5(1).

For the assessees in this Part, the consequences are these:

Status	Who can have it	Income taxable
Resident and ordinarily resident	Family, firm, LLP, association, body of individuals, trust (subject, where its trustee is assessed as representative assessee, to open question 12), every other person	Income from whatever source, wherever it accrues
Resident but not ordinarily resident	Family only (section 6(13)(a) of the 2025 Act; section 6(6)(b) of the 1961 Act)	As for a non-resident, plus income accruing outside India derived from a business controlled in or a profession set up in India
Non-resident	Any of them	Income received or deemed received in India, or accruing or arising or deemed to accrue or arise in India

Section 6(12) of the 2025 Act and section 6(5) of the 1961 Act add that a person resident for any source of income is resident for each of its other sources. A family or firm cannot be resident for its Indian business and non-resident for its foreign one.

A firm, association, body of individuals or trust that is resident in India is therefore taxed on its foreign income, with no intermediate status, subject, for a trust whose trustee is assessed as representative assessee, to the question taken in open question 12. That is why the control question can be the whole case for these assessees.

The consequences beyond the Income-tax Act are not rebuilt here. A family or other person may be within the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, whose section 2(2) makes an assessee of a person resident in India within the meaning of section 6 of the 1961 Act in the previous year, and of a non-resident or not ordinarily resident person who was resident in India in the previous year to which the income relates or in which the undisclosed asset outside India was acquired, that year being determined without giving effect to section 72(c) of that Act (proviso to section 2(2)) (see who is an assessee under the Black Money Act, and the article on the Black Money Act’s assessee, year of charge, penalty and prosecution). A resident family or firm selling immovable property in India deducts and is deducted under different provisions from a non-resident; the withholding on a non-resident seller is in section 195, discussed in TDS on property bought from an NRI, and the position of family and firm landowners in development agreements is in JDA landowners beyond individuals.

Residence under the Foreign Exchange Management Act, 1999 is a different question with different tests. Section 2(v) of that Act, set out and contrasted with section 6 in Part 1, looks to residing in India for more than 182 days in the preceding financial year with an intention test, and for bodies to registration or incorporation in India. A finding under one statute does not decide the other.

The treaty layer for persons other than individuals

Is the entity a resident of the other State at all?

A family, firm, LLP, association or trust that is resident in India under section 6, and also treated as resident by another country, can look to the treaty. So can one that is non-resident in India and claims treaty relief here. Either way the first question under Article 4(1) of many of India’s treaties is whether the entity is “liable to tax” in the State concerned by reason of domicile, residence, place of management or a similar criterion; the India-Singapore treaty asks instead whether it is a resident “in accordance with the taxation laws of that State”.

The Supreme Court said in Union of India v. Azadi Bachao Andolan (7 October 2003): “Liability to taxation is a legal situation; payment of tax is a fiscal fact.” That answers the objection that an entity which paid no tax cannot be a resident. It does not answer the different question that arises for a partnership or trust that is fiscally transparent in its home State, where the income is taxed in the partners’ or beneficiaries’ hands and not in the entity’s. Some treaties deal with the point expressly. Article 4(1)(b) of the India-UK Convention says that in the case of income derived or paid by a partnership, estate or trust, the term resident “applies only to the extent that the income derived by such partnership, estate, or trust is subject to tax in that State as the income of a resident, either in its hands or in the hands of its partners or beneficiaries.” Where a treaty has no such clause, the entity’s entitlement has to be argued from Article 4(1) itself and the evidence of how the other State taxes it.

The Tribunal at Ahmedabad made the evidential point in Skaps Industries India Pvt. Ltd. v. ITO (21 June 2018). Article 4(1) is a “preliminary requirement”, and unless the foreign payee established that it was liable to tax in its State by reason of a residence-type criterion, it could not claim treaty protection (para 13). A form filed for the other country’s reporting purposes was not evidence of fiscal domicile (paras 14 and 15). The matter was remitted for fresh evidence (para 19).

Some treaties limit who can be resident. Article 4(1)(b) of the India-UAE Agreement, as substituted by Notification No. S.O. 2001(E) dated 28 November 2007, defines a resident of the UAE as “an individual who is present in the UAE for a period or periods totalling in the aggregate at least 183 days in the calendar year concerned, and a company which is incorporated in the UAE and which is managed and controlled wholly in UAE”, with paragraph 2 adding the State, its sub-divisions and certain government institutions. A partnership or trust in the UAE is not within that definition as worded. A family or firm with a member or branch in the UAE cannot treat the UAE treaty as available to the entity without first meeting Article 4(1)(b).

The tie-breaker for a dual-resident entity

Where a person other than an individual is resident in both States under Article 4(1), the older treaties settle residence by place of effective management. Article 4(3) of the India-Singapore Agreement reads: “Where by reason of the provisions of paragraph 1, a person other than an individual is a resident of both Contracting States, then it shall be deemed to be a resident of the State in which its place of effective management is situated.” Article 4(4) of the India-UAE Agreement is in the same form. Article 4(3) of the India-UK Convention was in the same form, but it has been replaced by Article 4(1) of the multilateral instrument, as the next paragraphs explain. The tie-breaker covers every “person other than an individual”, so it reaches a family, firm, LLP, association or trust as well as a company.

The multilateral instrument changes this for some treaties. Article 4(1) of the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting provides that where a person other than an individual is resident of more than one jurisdiction, the competent authorities “shall endeavour to determine by mutual agreement” its residence, “having regard to its place of effective management, the place where it is incorporated or otherwise constituted and any other relevant factors”, and that in the absence of agreement the person is not entitled to any relief or exemption except as the competent authorities agree. Under Article 4(4) the treaty’s own tie-breaker is replaced only where all the parties have notified it; otherwise the instrument supersedes the treaty only to the extent of incompatibility.

India deposited its instrument of ratification on 25 June 2019 without a reservation on Article 4, and notified the existing tie-breakers in its listed treaties, among them Singapore (Article 4(3)), Mauritius (Article 4(3)), the Netherlands (Article 4(3)), the United Kingdom (Article 4(3)) and the UAE (Article 4(4)). The partners’ positions differ. Singapore, the UAE and Mauritius reserved the right for the entirety of Article 4 not to apply to their covered agreements (and Mauritius has not listed its treaty with India as a covered agreement at all), so the place of effective management tie-breaker in those three treaties continues. The Netherlands and the United Kingdom each notified Article 4(3) of its treaty with India, so in those two treaties the competent authority rule replaces the place of effective management test; the Department’s synthesised texts of both treaties print Article 4(3) as replaced by paragraph 1 of Article 4 of the instrument, subject to the instrument’s provisions on entry into effect. For any other treaty, the partner’s own deposited position has to be read before the tie-breaker is pleaded. Part 2 discusses how place of effective management is proved for a company; the same evidence is relevant for a family or firm, because the tie-breaker asks where its key management and commercial decisions are, in substance, made.

The certificate of residence

A non-resident family, firm or trust claiming relief under a treaty in India needs a certificate of residence from the other country’s government. Under the 2025 Act the requirements are in section 159(8): clause (a) for the certificate, clause (b) for the prescribed documents and information. Rule 75 of the Income-tax Rules, 2026 prescribes Form No. 41 for the information, requires the documents to be kept, and replaces Forms 10FA and 10FB with Forms 42 and 43.

For tax years up to 2025-26, section 90(4) of the 1961 Act says that an assessee, “not being a resident”, to whom a treaty applies “shall not be entitled to claim any relief under such agreement unless a certificate of his being a resident” in the other country is obtained from that government, and section 90(5) requires such other documents and information as may be prescribed. Rule 21AB of the Income-tax Rules, 1962 prescribes the information in Form No. 10F: status (individual, company, firm and so on), nationality or country of incorporation or registration, tax identification number, the period for which the certificate applies, and the address, except to the extent the certificate already contains it. Rule 21AB(2A) requires the assessee to keep the documents that substantiate the information. A resident in India who needs a certificate for use abroad applies in Form No. 10FA and receives it in Form No. 10FB (rule 21AB(3) and (4)).

Where the other State’s tax year is not April to March, Form No. 41 (item 11) and Form No. 10F (item (v)) ask for the period the certificate covers, and certificates covering the whole Indian tax year are the safe course; that point, the decisions on treaty residence of an individual for part of a year, and the credit for foreign tax paid by a resident family, firm or trust for a foreign year under rule 76 of the Income-tax Rules, 2026 (rule 128 of the 1962 Rules) are taken in Part 1.

What the certificate proves is contested. The Tribunal at Ahmedabad held in Skaps Industries that section 90(4), which has no non obstante clause, cannot be read as a limitation on the treaty override in section 90(2), and said that “an eligible assessee cannot be declined the treaty protection under section 90(2) on the ground that the said assessee has not been able to furnish a Tax Residency Certificate in the prescribed form” (para 10), while insisting that residence under the treaty must still be proved by other evidence. The Supreme Court in Authority for Advance Rulings (Income Tax) v. Tiger Global International II Holdings (15 January 2026) said that section 90(4) “only speaks of the TRC as an “eligibility condition”“, and that “the mere holding of a TRC cannot, by itself, prevent an enquiry” after the introduction of section 90(2A) and Chapter X-A where the interposed entity was a device to avoid tax. Parts 1 and 2 take these decisions further. For a family, firm or trust, the practical point is that a certificate establishes eligibility to claim; it does not prevent the assessing officer from examining whether the entity is in fact controlled from India, and if it is, the entity is resident in India under section 6 whatever the certificate says, leaving only the tie-breaker or, where the multilateral instrument has replaced it, the competent authority procedure.

The anti-avoidance rules interact with all of this. Section 159(6) of the 2025 Act and section 90(2A) of the 1961 Act apply Chapter XI of the 2025 Act (Chapter X-A of the 1961 Act) even where it is not beneficial to the assessee. A structure that places a family’s or firm’s control abroad only on paper is open to challenge both on the facts under section 6 and under the general anti-avoidance rule; the latter is in the GAAR series.

Open questions, argued both ways

The open questions are numbered continuously through the series. Questions 1 to 6 are in Part 1 and questions 7 to 10 in Part 2.

Open question 11: does one act of control in India, by one member, make the whole family or firm resident?

That it does (the Revenue). The exception requires control to be situated “wholly” outside India. Erin Estate said that control exercised “even in part” in India is enough and that its extent is irrelevant, and that it “may be to a small extent”. Talipatigala Estate said that if any part of the control is in India the firm is resident. Section 6(12) of the 2025 Act and section 6(5) of the 1961 Act make residence for one source residence for all. A karta or partner who sanctions one investment or approves one budget from India has exercised control of an affair of the assessee, and the assessee has not proved the exception.

That it does not (the assessee). “Situated” implies the functioning of the power at a place “with some degree of permanence”, in the passage the Supreme Court adopted in Subbayya Chettiar. Patanjali Sastri J said in the Madras High Court that an isolated or casual act of management by a karta living abroad is not enough. Subbayya Chettiar itself said that mere activity cannot be the test, and that litigation, tax proceedings and starting two firms during visits did not by themselves shift the seat of control, though it held such acts “by no means irrelevant”. Bhimji Naik told the court to give a liberal meaning to “wholly situated” and to disregard temporary journeys. Erin Estate itself required the control to be actually exercised and not illusory or merely notional. And under Nandlal Gandalal the act must concern an affair the assessee as such controls.

Our view. The two lines are reconcilable. The question is not the quantity of control but its character. A pattern of real decisions taken from India on an income-related affair of the assessee as such (the annual budget in Erin Estate, the standing instructions in Talipatigala Estate) makes the assessee resident however small the share of the total. A one-off act during a visit, unconnected with any continuing exercise of direction from India, does not, and the assessee should say so with evidence of where the decisions on that affair are normally taken. The file must deal with every act the Department relies on, one by one.

Open question 12: whose control decides the residence of a trust or an association of persons, and whose status measures the charge when the trustee is assessed as representative?

That control by any trustee, settlor, protector or member in India makes the trust or association resident (the Revenue). The test is where control and management of the trust’s affairs is exercised, and it is satisfied if any part is in India. A trustee living in India who takes part in trustees’ decisions exercises control in India. A settlor or protector in India whose letters the trustees follow, or whose consent is needed for distributions or investments, is the “head and brain” in substance, and Erin Estate shows that approval is itself control. The same reasoning reaches an association of persons, such as a consortium or joint venture with members in and outside India: any member in India who takes part in the association’s decisions exercises control of its affairs, and under Erin Estate it is enough that the control in India is exercised “to a small extent”.

That only actual decision-making on the trust’s or association’s own affairs counts, and only where it is in fact done (the assessee). The trust’s affairs are managed by its trustees under the trust deed. A protector’s or settlor’s power to direct is a power, and Bhimji Naik and Nandlal Gandalal make the test acts, not powers. A letter of wishes that the trustees consider but are not bound by is advice, of the kind Bhimji Naik and Talipatigala Estate held was not control. Where the trustees abroad meet, consider and decide abroad, a trustee in India who receives reports and attends by video from India has not moved the seat of control, any more than the receipt of accounts was held to be control in the decisions noted in Talipatigala Estate. For an association of persons, Nandlal Gandalal confines the inquiry to affairs the association as such controls: a member who manages his own share of a joint venture from India controls his own affairs, not the association’s.

That, where the trustee is assessed as representative assessee, the person represented sets the measure of the charge. This argument serves whichever side the beneficiary’s status favours. Section 304(1)(b) of the 2025 Act, and section 161(1) of the 1961 Act, levy the tax on the trustee “in like manner and to the same extent” as on the person represented. On that footing a non-resident beneficiary’s share is within the charge only so far as section 5(2) of either Act reaches it, a not ordinarily resident beneficiary’s subject to section 5(1)(c) of the 2025 Act (the proviso to section 5(1) of the 1961 Act), and an ordinarily resident beneficiary’s in full, whatever the trust’s own residence under section 6(11) or section 6(4). And the representative regime is exclusive for the income it covers: a person assessable under the Chapter as representative assessee in respect of any income “shall not, in respect of that income, be assessed under any other provision of this Act” (section 161(2) of the 1961 Act; section 304(2) of the 2025 Act is to the same effect). The trustees cannot be taken out of the Chapter and assessed on the same income as an association of persons, or in their own right as every other person, so that their own residence under section 6 can be applied. Nor do the rate provisions change the measure. Section 161(1A) charges “the whole of the income in respect of which such person is so liable”, and section 164(1) charges the “relevant income”, defined by reference to income “in respect of which the persons mentioned in clauses (iii) and (iv) of sub-section (1) of section 160 are liable as representative assessees”: both assume that the income for which the trustee is liable as representative has first been found under section 161(1), and both fix the rate, not the measure. Section 307(1) of the 2025 Act is drafted the same way: it makes “The income or any part thereof, in respect of the person mentioned in sections 303(1)(c) and (d)” chargeable “at the maximum marginal rate”. Section 307(3) says so more plainly for business income: it has no non obstante clause and directs that “tax shall be charged at the maximum marginal rate on such income or part thereof”. And where the instrument names the beneficiaries but leaves their shares to the trustees, the persons represented are identified even though their shares are not; if every one of them is a non-resident, income beyond the reach of section 5(2) is outside the charge whichever of them takes it.

That the trust’s own residence still decides (the opposing side). The representative-assessee provisions say on whom, and to what extent, tax is levied on income the trustee receives for another; they do not displace section 6, which applies to “every other person”. Where the trust is assessed as an association of persons, or the trustees are assessed as a body in their own right, the residence that matters is that of the person assessed, and the control test applies to it. The answer to section 304(2) (section 161(2)) is that section 307 (section 164), which is within the Chapter, itself sets the charge without reference to any beneficiary’s residence. Section 304(1)(b) of the 2025 Act applies “subject to the other provisions contained in this Chapter”, and section 161(1) of the 1961 Act in the same words. Where the income is not specifically receivable on behalf of any one person, or the shares are indeterminate or unknown, as they are deemed to be unless the instrument expressly states the beneficiary and the shares and they are identifiable or ascertainable on its date (section 307(5); Explanation 1 to section 164), section 307(1) (section 164(1) of the 1961 Act) charges it as a unit at the maximum marginal rate, or at the association of persons rate in the listed cases. On business income, section 161(1A) operates “notwithstanding anything contained in sub-section (1)”, so the like-manner rule, and with it the beneficiary’s measure, gives way; under the 2025 Act the Revenue’s footing is that section 304(1)(b) is subject to section 307(3). A trust whose instrument does not fix its beneficiaries or their shares is therefore taxed as a unit, and where no beneficiary is identified there is no person represented whose status could set the measure: the trust’s own residence is the only status left to apply. Section 304(4) of the 2025 Act (section 165 of the 1961 Act), which apportions a beneficiary’s receipt where only part of a trust’s income is chargeable, also assumes that chargeability is decided for the trust first.

Our view. The trust deed decides who has the power; the record decides who used it and where. A trust with any trustee in India who actually takes part in decisions from India should expect to be held resident on the reasoning in Erin Estate, and the file should be built on that footing rather than on the deed. A protector’s veto that was never exercised, and a letter of wishes that the record shows the trustees independently weighed, should not by themselves place control in India. The same acts-not-powers line applies to an association: what counts is a member’s real part, from India, in decisions on the association’s own affairs. Whether a trust falls under section 6(9) or section 6(2) as an association, or under the residual rule in section 6(11) or section 6(4), does not change the control test, because the words are the same. Where the trustee is assessed as representative assessee, our view is that section 304(1) of the 2025 Act (section 161(1) of the 1961 Act) makes the person represented the measure of the charge, and section 304(2) (section 161(2)) keeps that income out of any other assessment on the trustee. Where the instrument of trust fixes the beneficiaries and their shares and the income is not business income (or, under the 1961 Act, is business income of a will trust within the proviso to section 161(1A)), the beneficiary’s residence decides what is taxed. Where the instrument identifies no beneficiary, the charge falls under section 307(1) and (2) of the 2025 Act (section 164 of the 1961 Act), there is no identified person whose status can measure it, and the trust’s own residence under the control test is likely to decide; that is what the file has to meet. Between those cases lie a trust that names its beneficiaries but leaves their shares to the trustees, and a trust with fixed beneficiaries and business income (under the 1961 Act, other than the only trust declared by will exclusively for a dependent relative). In both the persons represented are identified, and the question is whether section 307 of the 2025 Act (section 164 or section 161(1A) of the 1961 Act) sets only the rate or also the measure. We think only the rate, for the reason given on the assessee’s side, and for business income the 2025 text supports that reading more plainly: section 307(3), unlike section 161(1A), has no non obstante clause and charges “such income or part thereof”; where the shares are left to the trustees, section 307(1) is drafted, like section 164(1), by reference to the income in respect of the representative. But the non obstante words in section 161(1A), the words “subject to the other provisions contained in this Chapter” in section 304(1)(b) of the 2025 Act, and the reading of section 164 as a charge on the trust as a unit are real arguments, and the point is open under both Acts. The file should meet the control test as well, and the assessee should settle the basis of assessment before anything else.

Open question 13: how is a family’s not ordinarily resident status decided when the manager changes, or when the manager’s own status rests on the special rules for citizens?

That the family is ordinarily resident if any manager during the year fails the test, and that the manager’s status for all purposes counts (the Revenue). Section 6(13)(a) of the 2025 Act and section 6(6)(b) of the 1961 Act ask whether the family’s manager “has been” non-resident in nine out of ten preceding years or in India for 729 days or less in the preceding seven. Where the karta dies or retires during the year, the family’s manager at the end of the year, who represents it for the year, is a relevant person, and his history is taken whole. But the history that counts is not only his. The Madras High Court decided the nearest question under section 4B of the 1922 Act in S. Marimuthu Pillai v. CIT (23 February 1945). The father, who had managed the family until his death on 12 September 1937, had been in British India throughout; the son, who had been in Ceylon before his father died, was the manager in the year of account 1939-40, and the family’s case was that the son had not been in British India for more than two of the seven preceding years. The Court refused to confine the test to the person who happened to be manager in the year of account:

There is nothing in Section 4-B to indicate that the periods of residence and stay in British India of the successive managers of a Hindu undivided family during its continued existence should not count for purposes of this section.

It counted the father’s years and held the family ordinarily resident for assessment year 1940-41. In Swaminathan Patanjali Sastri J, who delivered the judgment in Marimuthu Pillai, refused a construction under which a person “by adopting the simple expedient of being absent” could relieve himself of his status as ordinarily resident; a reading that let a family shed its history by changing its karta invites the same objection. On that reasoning the look-back years are the family’s years, and the history of whoever managed it in each of them counts. A manager who was resident in earlier years by reason of the deemed residence rule for citizens or the 120-day rule was “resident” in those years, and those years count against the family.

That the family’s status follows the manager who actually managed it, on the two tests the clause names and no others (the assessee). The clause uses the individual’s two limbs, nine out of ten and 729 days, and does not borrow the citizen-specific rules that make an individual not ordinarily resident in clauses (b) and (c) of section 6(13), or sub-clauses (c) and (d) of section 6(6). The test for the family is a factual history of the person who was manager, and where the manager changed during the year, the person who managed it for most of the year, or for the part in which its income arose, is the natural reference. The Madras High Court under section 4B of the 1922 Act treated the manager’s status as decisive for the family (Swaminathan). Marimuthu Pillai is answered on its wording and its facts. Section 4B(b) deemed a family ordinarily resident “if its manager is ordinarily resident”, and the Court read that as a question about the family’s management through its continued existence. The present clauses do not deem anything by reference to the manager’s status; they ask whether the family’s “manager has been” a non-resident, or in India for the stated days, in the preceding years, which is a question about one person’s history. And on the facts the aggregation brought in a father who had been in British India throughout and had died in September 1937, before the year of account 1939-40; the case did not decide how to treat a change of manager within the year itself. Gentle CJ in Swaminathan described it as a decision on “aggregating the periods of presence of more than one karta of the family within British India”, which is a description of the result, not a rule for the present text. And even if years of deemed residence count as years in which the manager was resident, they bear only on the first limb. The second limb asks how many days the manager was in India in the seven preceding years, and deemed residence needs no days at all.

Our view. Marimuthu Pillai is a High Court decision directly on successive managers, and a Tribunal is likely to apply it: the family’s look-back years are its own years, and the history of the person who managed it in each of them counts. The difference in wording between section 4B(b) and the present clauses is a real argument, but Marimuthu Pillai stands against it, and a family should not plan or plead on the footing that a new karta’s absence abroad wipes out his predecessor’s years in India. The years in which a manager was resident include years in which he was resident only by the deemed residence rule, because the clause asks whether he “has been a non-resident”, and in those years he was not. That decides the first limb only. The second limb counts days in India, not status, and the deeming adds no days: a manager deemed resident in each of the seven preceding years who was in India for 104 days or fewer in each has at most 728 days, and the family is not ordinarily resident under section 6(13)(a)(ii) of the 2025 Act or section 6(6)(b) of the 1961 Act whatever his status in those years. A year in which he was resident under the 120-day rule brings at least 120 days into that count. Where the manager changed during the year itself, neither the year-end rule nor the greater-part-of-the-year rule is in the text; on Marimuthu Pillai the safer course is to test both managers’ histories and to treat the family as ordinarily resident if the combined record fails both limbs. The file should show who managed the family in fact, for what period and from where, because that same evidence decides the separate question of residence under section 6(9) or section 6(2). The point is open.

On a live file

1. Classify the assessee first. Family, firm, LLP under the 2008 Act, foreign body corporate, association, body of individuals or trust. The class decides whether section 6(9) or 6(2), section 6(11) or 6(4), or section 6(10) or 6(3) applies, and whether not ordinarily resident status is available at all. For a trust, settle also the basis of assessment: as an association of persons, in its own right under the residual rule, or through its trustee as representative assessee, and in the last case whether section 307 or 308 of the 2025 Act (section 164, 161(1A) or 164A of the 1961 Act) applies (open question 12).
2. Settle the year and the Act. For tax year 2026-27 onwards, section 6(9), 6(11), 6(12) and 6(13) of the 2025 Act; for tax years beginning before 1 April 2026 the 1961 Act applies, including in proceedings begun on or after that date (section 536(2)(c) of the 2025 Act).
3. List the affairs. Each business, investment, property and account with income, and, for each, whether the assessee as such controls it (Nandlal Gandalal).
4. List the decision-makers and where they were. Karta and coparceners, partners or designated partners, trustees, protector, settlor; their residence and days in India in the year.
5. Assemble the evidence of decisions. Minutes, approvals, budgets, mandates, instructions, emails and messages, with places and dates. Produce the correspondence in full. Not producing it lost Subbayya Chettiar.
6. Account for every act in India. For each visit or act the Department relies on, say what it was and why it was not an exercise of control (litigation and tax proceedings, which in Subbayya Chettiar did not by themselves shift the seat of control but were “by no means irrelevant”; advice in Bhimji Naik; receipt of accounts in Talipatigala Estate).
7. File affidavits and offer the deponents. Unchallenged affidavits discharged the initial burden in Bhimji Naik. A Tribunal finding contrary to unchallenged evidence can be attacked as based on no evidence.
8. For a family, keep residence and the manager test apart. Plead non-residence on control if the facts support it, and not ordinarily resident status on the manager’s history in the alternative. Do not rely on the karta’s absence alone (Annamalai Chettiar), and where the karta has changed, test the history of every person who managed the family in the look-back years (Marimuthu Pillai). Where the karta is a citizen deemed resident, count his days in India too: the deeming adds no days, and the family can be not ordinarily resident under the 729-day limb whatever his status (open question 13).
9. Work out the section 5 consequence. Resident and ordinarily resident, resident but not ordinarily resident (families only), or non-resident; and the effect of section 6(12) or 6(5) across sources.
10. Check the treaty. Is the entity “liable to tax” in the other State; does the treaty limit residence to individuals and companies (India-UAE Article 4(1)(b)); what is the tie-breaker, and has it been replaced under the multilateral instrument or kept by the partner’s reservation.
11. Get the certificate and the forms right. Certificate of residence under section 159(8)(a) or section 90(4); Form 41 under rule 75 of the 2026 Rules (Form 10F under rule 21AB of the 1962 Rules); documents kept under rule 75(2) or rule 21AB(2A). Where the other State’s year is not April to March, hold certificates that between them cover the Indian tax year, with the period of each stated (Part 1).
12. Do not cite the dissent as the law. Where an order relies on the passage in Nandlal Gandalal that control “(even partly)” exercised by coparceners makes the family resident, point out that it is from Hidayatullah J’s dissent; the majority decided the case on what the family’s affairs were.

Concordance: Income-tax Act, 2025 and Income-tax Act, 1961

Subject	Income-tax Act, 2025	Income-tax Act, 1961
Hindu undivided family, firm, association of persons	Section 6(9)	Section 6(2)
Every other person (body of individuals, local authority, artificial juridical person, trust not assessed as an association or through its trustee as representative assessee)	Section 6(11)	Section 6(4)
Company (for contrast)	Section 6(10)	Section 6(3)
Resident for one source, resident for all	Section 6(12)	Section 6(5)
Not ordinarily resident: Hindu undivided family by its manager	Section 6(13)(a)	Section 6(6)(b)
Scope of total income	Section 5	Section 5
“Firm”, including a limited liability partnership	Section 2(45)	Section 2(23)(i)
“Company”	Section 2(28)	Section 2(17)
“Person”	Section 2(77)	Section 2(31)
“Resident”	Section 2(96)	Section 2(42)
Treaty relief; more beneficial rule	Section 159(1) to (4)	Section 90(1), (2); section 90A
Chapter on anti-avoidance applies even if not beneficial	Section 159(6)	Section 90(2A)
Certificate of residence; other documents	Section 159(8)(a), (b)	Section 90(4), (5)
Information for treaty relief	Rule 75, Form No. 41 (Income-tax Rules, 2026)	Rule 21AB, Form No. 10F (Income-tax Rules, 1962)
Certificate for a resident: application and certificate	Rule 75(3), (4), Forms No. 42 and 43	Rule 21AB(3), (4), Forms No. 10FA and 10FB
Foreign tax credit: year of credit; income offered in more than one year	Rule 76(1), (2) of the Income-tax Rules, 2026	Rule 128(1) and proviso of the Income-tax Rules, 1962
Trustee as representative assessee	Section 303(1)(d), (e)	Section 160(1)(iv), (v)
Liability of representative assessee; no assessment under any other provision	Section 304(1), (2)	Section 161(1), (2)
Income not specifically receivable or shares unknown; business income of a trust	Section 307(1), (3)	Section 164(1); section 161(1A)
Association of persons rate in the listed cases	Section 307(2)	First proviso to section 164(1)
Business income of the only will trust for a dependent relative	Section 307(4) (association of persons rate)	Proviso to section 161(1A) (income left to section 161(1)); further proviso to section 164(1) (first proviso available, where income includes business profits, only to such a trust)
Beneficiary and shares deemed unknown unless stated in the instrument and identifiable or ascertainable on its date	Section 307(5)	Section 164, Explanation 1
Part only of a trust’s income chargeable: beneficiary’s share	Section 304(4)	Section 165
Oral trust	Section 308	Section 164A
Trust not declared by a duly executed instrument treated as so declared on a statement forwarded within three months	Section 303(2)	Section 160(1), Explanation 1
Direct assessment of the beneficiary	Section 304(3)	Section 166
Board’s instructions	Section 239	Section 119
Repeal and savings	Section 536(2)(c), (j)	Not applicable

Decisions referred to in this Part

Decision	Court and date	Cited for
V.V.R.N.M. Subbayya Chettiar v. CIT	Supreme Court, 21 December 1950 (Civil Appeal No. XXXVIII of 1949; assessment year 1942-43)	Presumption of residence; “affairs”; onus on the assessee; correspondence called for and not produced; decision confined to the year
CIT v. Nandlal Gandalal	Supreme Court, 21 April 1960 (Civil Appeal No. 788 of 1957; assessment year 1945-46); S.K. Das J for the majority, Hidayatullah J dissenting	De facto control; “head and brain”; affairs the family as such can control; accrual and residence distinct
The Erin Estate, Galah, Ceylon v. CIT	Supreme Court, 22 April 1958 (assessment years 1939-40 to 1942-43)	Presumption for a firm with resident partners; control “may be to a small extent”; budget approval as control; section 12 Partnership Act argument rejected
CIT v. The Erin Estate, Galaha	Madras High Court, 27 March 1951	Tacit control regularly exercised; non-production an “infirmative circumstance”
CIT v. V.V.R.N.M. Subbiah Chettiar	Madras High Court, 22 August 1947	Patanjali Sastri J’s definition of control and management; isolated or casual act not enough
Bhimji Naik v. CIT	Bombay High Court, 12 March 1946	De facto control; acts, not powers; unchallenged affidavits discharge the initial burden; non-production explained, no adverse inference
Talipatigala Estate v. CIT	Madras High Court, 9 December 1949	Fleeting visits and receipt of accounts not control; instructions to an agent abroad are; any part of control in India
De Beers Consolidated Mines Ltd. v. Howe	As quoted in Subbayya Chettiar	Central management and control as the test of residence
Swedish Central Railway Co. Ltd. v. Thompson	As quoted in Subbayya Chettiar	The four principles on seat of control, activity, divided control and dual residence
Narottam and Pereira Ltd. v. CIT	Bombay High Court, 6 March 1953	The company rule as the converse of the rule for families, firms and associations
S. Marimuthu Pillai v. CIT	Madras High Court, 23 February 1945 (assessment year 1940-41)	Periods of successive managers counted under section 4B of the 1922 Act
K.M.N.N. Swaminathan v. CIT	Madras High Court, 21 April 1947 (assessment year 1940-41)	Family’s ordinary residence follows the manager’s status; status not shed by the “simple expedient of being absent” (Patanjali Sastri J)
Rm. Al. St. Annamalai Chettiar v. IV Addl. ITO	Madras High Court, 16 September 1957 (assessment year 1951-52)	Residence and not ordinarily resident status are separate tests; karta’s absence not proof of control abroad
Radha Rani Holdings (P) Ltd. v. Addl. DIT	Income-tax Appellate Tribunal, Delhi, 31 May 2007	Contrast between the company rule and section 6(2); para 15 quotes the dissent in Nandlal Gandalal
Union of India v. Azadi Bachao Andolan	Supreme Court, 7 October 2003	Liability to tax is a legal situation
Skaps Industries India Pvt. Ltd. v. ITO	Income-tax Appellate Tribunal, Ahmedabad, 21 June 2018	Section 90(4) and section 90(2); Article 4(1) as a preliminary requirement
Authority for Advance Rulings (Income Tax) v. Tiger Global International II Holdings	Supreme Court, 15 January 2026	Certificate of residence as an eligibility condition; enquiry not barred

Part 1 takes up individuals: the 182-day, 60-day and 120-day limbs, employment abroad and ship’s crew, deemed residence under section 6(7) of the 2025 Act and section 6(1A) of the 1961 Act, not ordinarily resident status, day counting, the Article 4(2) tie-breaker and the FEMA contrast, with open questions 1 to 6. Part 2 takes up companies: the Indian company, place of effective management under section 6(10) of the 2025 Act and section 6(3) of the 1961 Act, the Board’s guidelines, the earlier control and management test and the dual-resident company after the multilateral instrument, with open questions 7 to 10.

This note is general commentary on the law as at 11 November 2026 and is not advice on any matter. The position in a particular case depends on its own facts.