Explain the primary factors taken into account in the process of determination of Place of Effective Management (POEM).

Primary Factors for Determination of Place of Effective Management (POEM): The Place of Effective Management (POEM) is a crucial concept for determining the residential status of a company (other than an Indian company) for tax purposes. It refers to a place where key management and commercial decisions that are necessary for the conduct of the entity’s business as a whole are, in substance, made. The determination of POEM is primarily based on whether or not the company is engaged in 'Active Business Outside India' (ABOI). A. If a company is engaged in 'Active Business Outside India' (ABOI): A company shall be said to be engaged in 'Active Business Outside India' if it satisfies all the following conditions: Its passive income is not more than 50% of its total income; AND Its total assets situated in India are less than 50% of its total assets; AND The total number of employees who are residents in India or are citizens of India and are situated in India is less than 50% of its total employees; AND The payroll expenses incurred on such employees is less than 50% of its total payroll expenditure. If a company satisfies all these conditions, its POEM shall be outside India. B. If a company is NOT engaged in ABOI (i.e., for companies not fulfilling the conditions of ABOI): The determination of POEM would be done in two stages: (i) Identify the person/s who actually make the key management and commercial decisions: This involves identifying the individuals or groups of individuals who are responsible for making the strategic and commercial decisions for the conduct of the company's business as a whole. (ii) Determination of the place where the decisions are de facto made: This involves examining various factors to ascertain the actual location where these key decisions are made. These factors include: The location where the company's Board regularly meets and makes decisions. The location where the executive committee (if any) consisting of key senior management members makes decisions. The location of the company's head office. The place where the Directors or persons taking decisions usually reside, especially in cases where modern technology allows decisions to be made remotely. The frequency and nature of decisions made through circular resolutions or round-robin voting. Day-to-day routine operational decisions undertaken by junior and middle management are generally not relevant for POEM determination. Decisions made by shareholders on matters reserved for them under company law are not relevant.