Page 52 - DCOM301_INCOME_TAX_LAWS_I

Unit 2: Residential Status and Taxation

Notes
Example: Hire charges or rent paid outside India for the use of the machinery or buildings
situated in India, deposits with an Indian company for which interest is received outside India
etc.
3. Income through the transfer of a capital asset situated in India: Capital gains arising
from the transfer of a capital asset situated in India would be deemed to accrue or arise in
India in all cases irrespective of the fact whether (i) the capital asset is movable or
immovable, tangible or intangible; (ii) the place of registration of the document of transfer
etc., is in India or outside; and (iii) the place of payment of the consideration for the
transfer is within India or outside.
Explanation 1 to section 9(1)(i) lists out income which shall not be deemed to accrue or
arise in India. They are given below:
a. In the case of a business, in respect of which all the operations are not carried out in India:
Explanation 1(a) to section 9(1)(i): In the case of a business of which all the operations
are not carried out in India, the income of the business deemed to accrue or arise in
India shall be only such part of income as is reasonably attributable to the operations
carried out in India. Therefore, it follows that such part of income which cannot be
reasonably attributed to the operations in India, is not deemed to accrue or arise in
India.
b. Purchase of goods in India for export: Explanation 1(b) to section 9(1)(i): In the
case of a non-resident, no income shall be deemed to accrue or arise in India to him
through or from operations which are confined to the purchase of goods in India for
the purpose of export.
c. Collection of news and views in India for transmission out of India: Explanation 1(c) to section
9(1)(i): In the case of a non-resident, being a person engaged in the business of
running a news agency or of publishing newspapers, magazines or journals, no
income shall be deemed to accrue or arise in India to him through or from activities
which are confined to the collection of news and views in India for transmission out
of India.
d. Shooting of cinematograph films in India: Explanation 1(d) to section 9(1)(i): In the
case of a non-resident, no income shall be deemed to accrue or arise in India through
or from operations which are confined to the shooting of any cinematograph film in
India, if such non-resident is :

an individual, who is not a citizen of India or
a firm which does not have any partner who is a citizen of India or who is
resident in India; or

a company which does not have any shareholder who is a citizen of India or
who is resident in India.
4. Income from salaries: Under section 9(1)(ii) income which falls under the head ‘salaries’,
would be deemed to accrue or arise in India, if it is in respect of services rendered in India.
Thus Section 9 (1)(ii) of the Act requires that salaries is to be considered as deemed to
be accrued or arise in India only if it is “earned in India”.
Further, the salaries payable for services rendered in India shall be regarded as
income earned in India, though it may be paid in India or outside i.e. the payment or
receipt of salary is immaterial. What is important is the place of rendering of services.
Section 9(2) makes an exception to the aforesaid rule in the case of certain retired
civil servants and judges permanently residing outside India.

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