"Liaison office maintained in India to explore the opportunity of business in India does not constitute business connection". In the context of provisions contained in the Income Tax Act, 1961, examine the correctness of

The statement is correct. If a liaison office is maintained solely for the purpose of carrying out activities which are preparatory or auxiliary in character and such activities are approved by the Reserve Bank of India, then no business connection is established. In this case, the liaison office is maintained for the purpose of exploring the business opportunity which is in the nature of preparatory or auxiliary activity and such activities are approved by the Reserve Bank of India. Since it does not undertake any commercial, trading on industrial activity, directly or indirectly, the liaison office does not constitute a business connection in this case.