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CS Professional · Goods and Services Tax (GST) and Corporate Tax Planning · Tax Planning and Managerial Decisions

The board of Sagar Lines Ltd approves, as a matter of routine, the commercial and strategic decisions made by its executive directors, who work from Chennai, while the board meets in Dubai. For the 'place of effective management' test for tonnage tax qualification, where is the place of effective management?

The place of effective management is Chennai. When the board routinely approves decisions made by executive directors or officers, the Act treats the place where those executives perform their functions as the place of effective management, not the place where the board meets.

  1. ADubai, because the board meets there
  2. BChennai, where the executive directors or officers perform their functionsCorrect
  3. CThe country where the ships are registered
  4. DWherever the majority of shareholders reside

Explanation

Where the board routinely approves the commercial and strategic decisions made by executive directors or officers, the place of effective management is where those executives or officers perform their functions. Here that is Chennai. The board's meeting location is relevant only when the board itself makes the decisions.

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