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CMA Intermediate · Direct and Indirect Taxation · Residential Status and Scope of Total Income

A company, Bharat Components Pvt Ltd, is incorporated in India under the Companies Act, 2013, but all its key commercial decisions are taken by its foreign parent at a place outside India. Under the Income-tax Act, 2025, the company's residential status is:

The company is resident in India. The two conditions for a company's residence are alternatives: being an Indian company, or having its place of effective management in India. Since it is incorporated in India, it is an Indian company and resident, even though decisions are taken abroad.

  1. ANon-resident, because place of effective management is outside India
  2. BNot ordinarily resident, because decisions are taken abroad
  3. CResident, because it is an Indian companyCorrect
  4. DResident only if its turnover in India exceeds a prescribed limit

Explanation

A company is resident if it is an Indian company or its place of effective management is in India; either condition suffices. Bharat Components is an Indian company, so it is resident regardless of where decisions are taken. The foreign place of management does not override incorporation in India.

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