CA Final · Direct Tax Laws & International Taxation · Non Resident Taxation

Rohan, a resident of India, transfers assets to Zenith Holdings, a company incorporated outside India, through a transfer that, along with associated operations, results in income becoming payable to Zenith. The income is later used to provide Rohan with benefits, and the income would have been chargeable to tax had it been his own. Rohan shows that the transfer and all associated operations were bona fide commercial transactions not designed to avoid tax. Under section 174 of the Income-tax Act, 2025, what is the position?

Section 174 does not apply to Rohan. Although Zenith is treated as non-resident and Rohan receives benefits from its income, he has shown to the Assessing Officer's satisfaction that the transfer and associated operations were bona fide commercial transactions not designed to avoid tax, which section 174(5)(b) accepts.

1. ASection 174 does not apply, because he has shown to the Assessing Officer's satisfaction that the transactions were bona fide commercial and not designed to avoid taxCorrect
2. BThe income is deemed to be Rohan's, because he receives benefits out of it
3. CThe income is deemed to be Rohan's only if Zenith is resident in India
4. DSection 174 applies since a body corporate outside India is treated as non-resident, regardless of purpose