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

Zenith Traders, a partnership firm, has two partners. In tax year 2026-27, the business was managed by one partner from Pune, and the other partner who is abroad took only one decision on an acquisition made through a video call from London. Which statement is correct about the firm's residential status?

The firm is resident because it is non-resident only when control and management of its affairs is wholly outside India. Day-to-day management from Pune means it was partly in India. The ordinarily or not ordinarily resident classification applies only to individuals and HUFs, not firms.

  1. AThe firm is non-resident because one partner decided on the acquisition from London
  2. BThe firm is resident because control and management was not wholly situated outside IndiaCorrect
  3. CThe firm is resident only if both partners stay in India for 182 days
  4. DThe firm is resident and ordinarily resident because it has two partners

Explanation

A firm is non-resident only if control and management of its affairs is wholly situated outside India during the year. Here most affairs were managed from Pune, so control and management was partly in India. The firm is therefore resident. Firms are not classified as ordinarily or not ordinarily resident, which is only for individuals and HUFs, so option D is incorrect.

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