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CS Executive · Tax Laws and Practice · Classification and Tax Incidence on Companies

Under the Income-tax Act, 2025 as taught for the June 2027 session, what is meant by 'place of effective management' (POEM) of a company?

Place of effective management is the place where key management and commercial decisions necessary for the conduct of the company's business as a whole are in substance made. It is a substance test, not based on registered office, staff location or bank accounts.

  1. AThe place where the company's registered office is situated
  2. BThe place where the largest number of employees work
  3. CThe place where key management and commercial decisions necessary for the conduct of the business as a whole are in substance madeCorrect
  4. DThe place where the company's bank accounts are maintained

Explanation

POEM is a substance-based test: it is the place where key management and commercial decisions needed for conducting the business as a whole are in substance made. Registered office, employee headcount and bank location are formal or incidental factors, not the test.

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