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

Kaveri Textiles Ltd is incorporated in Singapore. During the tax year, its key management and commercial decisions necessary for conducting the business as a whole were, in substance, made in Chennai. Its residential status in India for that year is:

The company is resident in India because its place of effective management, being where key management and commercial decisions for the business as a whole are in substance made, is in India. Foreign incorporation is irrelevant when the effective management is in India.

  1. ANon-resident, because it is a foreign company
  2. BResident, because its place of effective management is in IndiaCorrect
  3. CResident only if it is an Indian company
  4. DNot ordinarily resident, because it is incorporated abroad

Explanation

Under section 6(10), a company is resident if it is an Indian company or its place of effective management is in India. Place of effective management is where key management and commercial decisions for the business as a whole are in substance made. Here that is Chennai, so the company is resident. Foreign incorporation does not prevent this.

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