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CA Intermediate · Taxation · Residential Status and Scope of Total Income

Tara Industries, a company incorporated in India, is wholly owned by Indian promoters, but its board decisions during tax year 2026-27 were taken at meetings held in Singapore. Which statement is correct regarding its residential status for tax year 2026-27?

Tara Industries is resident in India. Under the residence rules, an Indian company is always resident regardless of where its board meets. The place of effective management test is relevant only for companies incorporated outside India.

  1. AIt is resident in India, since a company incorporated in India is always residentCorrect
  2. BIt is non-resident, as place of effective management is outside India
  3. CIt is resident but not ordinarily resident
  4. DIt is non-resident, as the board met abroad in all the meetings

Explanation

An Indian company is resident in India in every tax year, irrespective of where its management is. The place of effective management test applies to foreign companies only. Option 2 wrongly applies that test to an Indian company.

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