CA Final · Direct Tax Laws & International Taxation · Non Resident Taxation
Mr. Arjun Mehta, resident in India, transfers assets to Seabright Ltd, a company incorporated outside India. By virtue of the transfer and associated operations, income becomes payable to Seabright. Arjun can control the application of that income, though it is not paid to him. Seabright's income would have been chargeable if it were Arjun's. Under section 174 of the Income-tax Act, 2025, what is the position, assuming he cannot establish the exceptions in sub-section (5)?
The income is deemed to be Arjun's income for all purposes of the Act. Seabright is treated as non-resident, and his ability to control application of its income gives him power to enjoy it under section 174, unless he proves absence of tax avoidance purpose or bona fide commercial transactions.
- AThe income is not taxable in India because Seabright is a foreign company
- BThe income is deemed to be Arjun's income for all purposes of the Act, since he has power to enjoy itCorrect
- COnly the portion actually received by Arjun is taxed, as and when received
- DThe income is taxable in Seabright's hands only, with Arjun liable for penalty
Explanation
Under section 174(6)(b) a body corporate incorporated outside India is treated as non-resident. Section 174(6)(c)(v) says a person has power to enjoy income if he is able to control its application, so section 174(2) deems the income to be his. Receipt is not required, so taxing only on receipt is wrong. Section 174(4) only prevents double taxation when it is later received.
Did you get it right without looking?
One question tells you little. A timed set on Non Resident Taxation shows your real accuracy, how long you take and where you lose marks.
More Non Resident Taxation questions
- The Assessing Officer issued a certificate under Rule 214 of the Income-tax Rules, 2026 to Kaveri Traders Ltd for payments to a non-resident…
- Arjun, resident in India, transferred assets to a company incorporated outside India, and income from those assets became payable to that co…
- Under Rule 214 of the Income-tax Rules, 2026, while issuing a certificate for the appropriate proportion of a sum payable to a non-resident,…
- Under section 174 of the Income-tax Act, 2025, a person was taxed on income of a non-resident deemed to be his. He later receives that same …
- Under section 174 of the Income-tax Act, 2025, Dev, a resident, receives a loan from a non-resident entity connected with a transfer of asse…
- Mr. Raghav Kapoor, resident in India, transferred assets to a company incorporated outside India, in association with other operations. The …