Page 46 - DCOM508_CORPORATE_TAX_PLANNING

Unit 2: Residential Status and Taxation

Notes
!
Caution The following exceptions must be kept in mind while dealing with income from
business connection
“Business connection”, however, shall not be held to be established in cases where the
non-resident carries on business through a broker, general commission agent or any other
agent of an independent status, if such a person is acting in the ordinary course of his
business.
A broker, general commission agent or any other agent shall be deemed to have an
independent status where he does not work mainly or wholly for the non-resident. He will
however, not be considered to have an independent status in the three situations explained
in (iv) above, where he is employed by such a non-resident.
Where a business is carried on in India through a person referred to in (ii), (iii) or (iv)
mentioned above, only so much of income as is attributable to the operations carried out in
India shall be deemed to accrue or arise in India.
2. Income from property, asset or source of income: Any income which arises from any
property which may be either movable, immovable, tangible or an intangible property
would be deemed to accrue or arise in India.

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

LOVELY PROFESSIONAL UNIVERSITY 41