Page 37 - DCOM508_CORPORATE_TAX_PLANNING

Corporate Tax Planning

Notes 4. ‘S’, a foreign national but a person of Indian origin visited India during the previous year
2011-12 for 181 days. During 4 preceding previous years he was in India for 400 days,
‘S’ shall be:
(a) resident in India
(b) Non-resident in India
(c) not ordinarily resident in India

2.2 Residential Status of a Company

An Indian company is always resident in India. A foreign company is resident in India only
if during the previous year, control and management of its affairs is situated wholly in India.
Conversely, a foreign company is treated as non-resident if during the previous year, control and
management of its affairs is either is wholly or partly situated out of India.

Example: ‘XYZ’ Ltd., is an Indian Company, the entire control and management of its
affairs is situated outside India. ‘XYZ’ Ltd., shall be considered as a resident in India.

Notes If control and management of a fi rm or association of fi rm is situated wholly or
partially in India, it will be considered as Resident. Otherwise it will be considered as
Non-Resident.

A company can never be ordinarily or not ordinarily resident in India. In case of a foreign
company even the slightest control and management is exercised from outside India, it would be
treated as a non-resident.
The term “control and management” refers to the “head and the brain” which directs the

affairs of policy, finance, disposal of profits and vital things concerning the management of the

company. Usually the control and management of a company’s affairs is situated at the place
where meetings of its board of directors are held. In case of a subsidiary company managed by its

local board of directors, it is difficult to establish that control and management of its affairs vests
at the place where the parent company resides.

Did u know? A foreign company means a company incorporated outside India but having
a place of business in India

Self Assessment

State whether the following statements are true or false:
5. An Indian Company is always resident in India.
6. A foreign company is always non-resident in India.
7. A foreign company means a company incorporated outside India but having a place of
business in India.
8. Control and management refers to the head and the brain which directs the affairs of policy,

finance, disposal of profits and vital things concerning the management of the company.
9. In case of a subsidiary company managed by its local board of directors, it is easy to
establish that control and management of its affairs vests at the place where the parent
company resides.

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