Page 47 - DCOM508_CORPORATE_TAX_PLANNING

Corporate Tax Planning

Notes 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 are 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.
Section 9(1)(iii) provides that the salaries are chargeable to tax if the same is payable by the
Government to an Indian Citizen for services rendered outside India. The residential status
and the place of receipt of salary are not relevant for the purpose of this sub-section. For
income to be treated as deemed to accrue or arise in India following four conditions needs
to be satisfi ed:

Income should be chargeable under the head “Salaries”
Salary should be payable by Government of India
The recipient should be an Indian Citizen, irrespective of their residential status
The services should be rendered outside India

Notes It is important to note that all allowances or perquisites paid outside India by the
Government to the Indian Citizens for their rendering services outside India are exempt
under section 10(7).

5. Income from dividends: All dividends paid by an Indian company must be deemed to
accrue or arise in India. Under section 10(34), income from dividends referred to in section
115-O are exempt from tax in the hands of the shareholder. It may be noted that dividend
distribution tax under section 115-O does not apply to deemed dividend under section
2(22) (e), which is chargeable in the previous year in which such dividend is distributed or
paid.
6. Interest: Under section 9(1)(v), an interest is deemed to accrue or arise in India if it is
payable by -
(i) the Central Government or any State Government;
(ii) a person resident in India except where it is payable in respect of any money
borrowed and used for the purposes of a business or profession carried on by him
outside India or for the purposes of making or earning any income from any source
outside India;
(iii) a non-resident when it is payable in respect of any debt incurred or moneys
borrowed and used for the purpose of a business or profession carried on in India by
him. Interest on money borrowed by the non-resident for any purpose other than a

42 LOVELY PROFESSIONAL UNIVERSITY