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

Mehta & Co., a partnership firm, has two partners. One partner lives in Pune and manages the firm's day-to-day affairs there. The other partner lives in Dubai and takes decisions on some contracts from there. Under the Income-tax Act, 2025, what is the residential status of the firm for the tax year?

The firm is resident in India. Under section 6(9), a firm is resident unless control and management of its affairs is situated wholly outside India. Since the Pune partner manages day-to-day affairs, control is partly in India, so the Dubai partner's decisions do not make the firm non-resident.

  1. ANon-resident, because part of the decisions are taken outside India
  2. BResident, because control and management is not situated wholly outside IndiaCorrect
  3. CNot ordinarily resident, because control is split between two countries
  4. DResident only for income earned in India

Explanation

A firm is resident in India unless control and management of its affairs is situated wholly outside India. Here part of the control and management is exercised from Pune, so it is not wholly outside India. The firm is therefore resident. A part-outside split does not make it non-resident.

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