Examine in the context of provisions contained under the Income Tax Act, 1961 in each of the following independent cases and state in brief whether there exists business connection in each of the cases in India so as to

CS Professional · Advanced Tax Laws · PYQS · December 2020
Examine in the context of provisions contained under the Income Tax Act, 1961 in each of the following independent cases and state in brief whether there exists business connection in each of the cases in India so as to bring the income earned in the previous year, if any to be taxed in India: (i) Al Rahim Ltd a company resident in Dubai had setup a liaison office at Mumbai to receive trade enquiries from the customers in India. The work of the liaison office is not only restricted for forwarding the trade enquiries to the company in Dubai but was also to negotiates and enters into the contracts on behalf of Al Rahim Ltd with the customers in India.

Answer & Explanation:

All income accruing or arising directly or indirectly through or from any business connection in India is chargeable to tax in India as per section 9(1)(i) of the Income Tax Act, 1961. In the given case Al Rahim Ltd (Non-resident Company) is having a liaison office in India which is also having authority to negotiate and conclude the contracts on behalf of the non-resident company. As per Explanation 2 of section 9 of the Income tax Act, 1961, there exists a business connection and therefore the income of the liaison office located at Mumbai shall be taxable in India in the hands of Al Rahim Ltd.

Topics: Income Tax Act

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