Skip to content

CA Final · Direct Tax Laws & International Taxation · Latest Developments in International Taxation

Case: Meridian Foods Inc, a foreign company with no presence in India, has a significant economic presence under the Indian provisions through systematic and continuous soliciting of business and interaction with 30 lakh Indian users. Assume the relevant thresholds are met. Meridian's gross receipts from Indian transactions in goods and services are Rs 10 crore, and the attributable proportion of profits is deemed to be 20% of receipts for this case. Ignoring surcharge and cess and treating it as a company taxed at 40% on such income, what is the tax if the income is attributed to the significant economic presence?

The tax is Rs 80 lakh. Only the income attributable to the significant economic presence is taxed, which is 20% of Rs 10 crore, or Rs 2 crore. At 40% the tax comes to Rs 80 lakh, not a tax on gross receipts.

  1. ARs 80 lakhCorrect
  2. BRs 2 crore
  3. CRs 4 crore
  4. DRs 10 crore

Explanation

Income attributable to the significant economic presence is limited to the part of the transactions or activities attributable to the Indian operations. Here, income = 20% of Rs 10 crore = Rs 2 crore. Tax at 40% = Rs 80 lakh. Rs 2 crore is the income, not the tax; Rs 4 crore and Rs 10 crore wrongly apply the rate to gross receipts or ignore profit attribution.

Did you get it right without looking?

One question tells you little. A timed set on Latest Developments in International Taxation shows your real accuracy, how long you take and where you lose marks.

Practise Latest Developments in International TaxationFree diagnostic mock

More Latest Developments in International Taxation questions