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

Sharma & Sons, a partnership firm, has its partners meeting in Mumbai for most key decisions, but on one occasion during the tax year a major decision was taken at a meeting held in Dubai. What is the firm's residential status for that tax year?

The firm is resident in India. A firm is resident unless control and management of its affairs is situated wholly outside India. As most decisions are taken in Mumbai, control is not wholly abroad, so one meeting in Dubai does not make it non-resident.

  1. ANon-resident, because one decision was taken abroad
  2. BResident, because control and management is not situated wholly outside IndiaCorrect
  3. CNot ordinarily resident, because control is partly abroad
  4. DResident only for income earned in India

Explanation

Under section 6(9), a firm is resident unless control and management of its affairs is situated wholly outside India. Since most decisions are taken in Mumbai, control is partly in India, so the firm is resident. Part control abroad does not make it non-resident.

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