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

Lotus Infra Ltd is incorporated in Mauritius under foreign law, and no Indian law governs its incorporation. During the tax year, its board meets in Mauritius, but the managing director, sitting in Chennai, in substance makes all key management and commercial decisions needed to run the business as a whole. Under the Income-tax Act, 2025, the company is:

The company is resident in India. A company is resident if it is an Indian company or its place of effective management is in India, meaning where key management and commercial decisions are in substance made. Here they are made in Chennai, so foreign incorporation and Mauritius board meetings do not decide status.

  1. ANon-resident, because it is incorporated outside India
  2. BResident, because its place of effective management is in IndiaCorrect
  3. CNot ordinarily resident, because board meetings are held abroad
  4. DNon-resident, because the board meets outside India

Explanation

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. Those decisions are made in Chennai, so the company is resident. Board meeting location is not decisive; substance is.

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