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CS Professional · Goods and Services Tax (GST) and Corporate Tax Planning · Corporate Tax Planning

Ferndale Ltd., a foreign company whose place of effective management is wholly outside India, had these items in the tax year: (i) ₹30 lakh business profits accruing from a business connection in India; (ii) ₹20 lakh interest from a foreign borrower, received in London; (iii) ₹10 lakh of foreign business profits first received in its London bank account and later remitted to its Indian branch account. What income is taxable in India?

Only ₹30 lakh is taxable. A non-resident company is taxed on income accruing in India or received in India. The Indian-business profit qualifies, while the London interest is foreign income received abroad, and profits already received abroad do not become taxable merely by later being remitted to India.

  1. A₹30 lakhCorrect
  2. B₹40 lakh
  3. C₹50 lakh
  4. D₹60 lakh

Explanation

As a non-resident, only income received or deemed received in India, or accruing or arising (or deemed so) in India, is taxable. Item (i) qualifies at ₹30 lakh. Item (ii) is foreign-source and received abroad. Item (iii) was already received outside India, so later remittance into India is not a fresh receipt; adding it (option B) is the key mistake.

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