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 PROF. VINIT KUMAR TAXATION 9873126173

4. SCOPE OF INCOME

PARTICULARS OR NOR NR
1. Income received or deemed to be received in India earned anywhere.

2. Income arise or deemed to arise in India received anywhere (including

India)
3. Income arise as well as received outside India
a) Business controlled from India even partly

b) Except 3a

Agriculture income in India

Past untaxed income bought to India

Remittance

QUESTION. Discuss the taxability of the following items of receipt in the case of RNOR:
1) Rs. 1,00,000 was earned from a business in the USA but the profit has been remitted to India. The assessee
used to attend to the business only when he was in the USA.
2) Remuneration of Rs. 20,000 due to him for services rendered in Russia was credited to his bank account in
Russia & immediately thereafter remitted to India.
Solution:

INCOME DEEMED TO ACCRUE/ARISE IN INDIA - Section 9

s.no. Type of income Rule applicable

1 Salary Income • Salary income is deemed to accrue/arise in India if the services are rendered in
India. Therefore, place of accrual of salary is the place where work has been
done by an employee.

If any person has received any pension, such pension shall be accruing/arising in
India if the employer is in India.

• Exception: Salary payable by Indian Government (Central Govt/State Govt) to

an Indian citizen for services rendered outside India is deemed to accrue/arise
in India. However, all allowances & perquisites received by such person outside
India are fully exempt u/s 10(7).

Eg, Mr X is a citizen of India and is an IFS officer. He is posted in Indian

embassy of Singapore. In this case, his salary income would be deemed to
accrue/arise in India even though services are rendered in Singapore.

RESIDENTIAL STATUS
 PROF. VINIT KUMAR TAXATION 9873126173

2 Income from any Income from any property or asset (movable, immovable, tangible, intangible) is
Property/ Asset deemed to accrue/arise in India if such property/asset is situated in India.

Example - Mr R, who lives in London, has a house property situated in India which
has been given by him on rent. Rent derived by Mr R shall be taxable in India
whether such rent is received in India or outside India.

3 Income from # Business connection means any activity undertaken in India in relation to a
Business business apart from the normal foreign operations of the business (ie :business
Connection in operations are being undertaken in :India as 'well as outside INDIA. )
India (Imp)
# In any business, many activities arc undertaken to 'earn profit. If 'any of
those activities ere undertaken in India, then it 'will be treated 'as business
connection in India.

#Tax needs to be paid in India on the profit earned due to any activity carried
out in India. Business connection can exist in the form of:
❑ branch or agent; or
❑ subsidiary in India; or
❑ factory in India, etc

# Business connection would exist if any non-resident has business outside India
but he has agent in India who:

a) habitually secures orders in India for the non-resident; or

b) habitually maintains stock of goods in India from which he regularly delivers

goods to buyers on behalf of the non-resident; or

c) habitually concludes contracts on behalf of the non-resident.

# However, in case of non-residents, the following operations shell not be

treated as business connection in India and therefore income from such
operations shall not be taxable:

a) The activity carried cut involves purchase of goods in India for The purpose
of export from India and no other activity whatsoever is carried out in India.
b) A non-resident engaged in the business of running a news agency or publishing
newspapers, etc if he undertakes collection of news end views for transmission
outside India (the newspaper should not be sold in India/ the news should not be
broadcasted in India).

c) Shooting of cinematographic films in India by a non-resident provided the

film is not shown in India and conditions listed below are satisfied: (If the film
is shown in India, it would amount to a business connection)
❑ Shooting is done by non-resident individual: The individual should not be a
citizen of India.
❑ Shooting is done by non-resident firm: All the partners should be non-
resident in India and none of them should be a citizen of India.
❑ Shooting is done by non-resident company: All the shareholders should be
non-resident in India and none of them should be a citizen of India.
RESIDENTIAL STATUS
 PROF. VINIT KUMAR TAXATION 9873126173

4 Income from Capital gains from the transfer of any capital asset situated in India would be
Transfer of any taxable in India irrespective of the residential status of the assessee.
Capital Asset
Any share or interest in a company registered outside India shall be deemed
to be situated in India, if the share or interest derives, directly or indirectly,
its value from the assets located in India (Amendment carried out with
retrospective effect from April 1, 1961 to overrule the judgement of Supreme
Court in Vodafone's case).

5 Interest • Loan Used by Indian Government (Central Govt/State Govt): Interest paid
(Consideration for by Indian Government on a loan used by it would always be deemed to
Using Borrowed accrue/arise in India. (The Indian Government can use the loan in India or
Money) outside India)

• Loan Used by an Indian Resident (ROR/NOR): Interest paid by an Indian

resident on a loan used by him would always be deemed to accrue/arise in
India. However, where such loan is used by such resident for
business/profession carried on outside India or for earning any income whose
source is outside India, then such interest would not be deemed to
accrue/arise in India.

• Loan Used by a Non-Resident: Interest paid by a non-resident would be

deemed to accrue/arise in India only when such loan is used by such non-
resident for business/profession carried on in India.
6 Royalty • Patent, Design, etc Used by Indian Government (Central Govt/State Govt):
(Consideration for Royalty paid by the Indian Government would always be deemed to accrue/
Using Patent, arise in India. (The Indian Government can use the patent, design, etc in India
Copyright, Know- or outside India)
how, Trademark,
Design, etc) • Patent, Design, etc Used by an Indian Resident (ROR/NOR): Royalty paid by
an Indian resident would always be deemed to accrue/arise in India. However,
{Consideration for where such patent, design, etc is used by such resident for
Use or Right to business/profession carried on outside India or for earning any income whose
Use Computer source is outside India, then such royalty would not be deemed to accrue/arise
Software is Also in India.
Included Within
the Scope of . Patent, Design, etc Used by a Non-Resident: Royalty paid by a non-resident
'Royalty') would be deemed to accrue/arise in India only when such patent, design, etc is
used by such non-resident for business/ profession carried on in India or for
earning any income whose source is in India.

7 Fees for Technical . Technical Services Used by Indian Government (Central Govt/State Govt):
Services Fees for technical services paid by the Indian Government would always be
deemed to accrue/arise in India. (The Indian Government can use the services
in India or outside India)

• Technical Services Used by an Indian Resident (ROR/NOR): Fees for

technical services paid by an Indian resident would always be deemed to
accrue/arise in India. However, where such services are used by such resident
for business/profession carried on outside India or for earning any income

RESIDENTIAL STATUS
 PROF. VINIT KUMAR TAXATION 9873126173

whose source is outside India, then such fees for technical services would not
be deemed to accrue/arise in India.

• Technical Services Used by a Non-Resident: Fees for technical services paid

by a non-resident would be deemed to accrue/arise in India only when such
services are used by such non-resident for business/profession carried on in
India or for earning any income whose source is in India.

1.:- calculate income for Mr.A from the following particulars:-

a) Income from agri. Income from Bhutan :- 40,000
b) Dividend received from foreign company in india :- 50,000
c) Pension for services rendered in india received in paris :- 15,000
d) Past untaxed income :- 50,000
e) Profit form business in paris deposit there :- 1,00,000
f) Profit from business in Canada controlled from india received there :-1,75,000
g) Interest on saving deposit in PNB in india :- 20,000
h) Capital gain on sale of house in delhi amount received in paris. :- 2,00,000.

2.:- calculate gross income for Mr. Y:-

a) Dividend from Indian company received in japan :- 60,000
b) Profit on sale of machine in India received in japan :- 1,20,000
c) Profit from business in Mumbai controlled from japan :- 2,25,000
d) Profit from business in japan managed there :- 1,45,000
e) Income from house property in India :- 1,50,000
f) Income from house property in japan received there :-1,50,000
g) Income from agri. in japan received there :-75,000
h) Fees from technical services rendred in india receive in japan :- 65,000
i) Interest on govt. securities in india received in japan :- 80,000.
j) Interest on govt. securities in japan received in india :- 40,000

3. From the following particulars of Income furnished by Mr. Anirudh pertaining to the year ended 31-
03-2023, compute the total income, if he is :
(i)Resident and ordinary resident ;
(ii) Resident but not ordinarily resident ;
(iii) Non-resident
(a) Profit on sale of shares in Indian Company received in Germany 15,000
(b) Dividend from a Japanese Company received in Japan 10,000
(c) Rent from property in London deposited in a bank in London, later on remitted to India through approved
banking channels 75,000
(d) Dividend from RP Ltd., an Indian Company 6,000
(e) Agricultural income from lands in Gujarat 25,000

RESIDENTIAL STATUS
 PROF. VINIT KUMAR TAXATION 9873126173

4. - Scope of total Income: Following incomes are derived by Mr. Krishna Kumar during the year ended 11-1-
2023
Particulars Amount (₹)
Pension received from the US Government 3,20,000
Agricultural income from lands in Malaysia 2,70,000
Rent received from let out property in Colombo, Sri Lanka 4,20,000
Discuss the taxability of the above items where the assessee is (i) Resident, (ii) Non resident.

5.- Scope of total Income: Explain with reasons whether the following transactions attract income-tax in
India in the hands of recipients?
a) Salary (Computed) paid to Mr. David, a citizen of India ₹ 15,00,000 by the Central Government for the
services rendered in Canada.
b) Legal charges of ₹ 7,50,000 paid to Mr. Johnson, a lawyer of London, who visited India to representa case
at the Supreme Court.
c) Royalty paid to Rajeev, a non-resident by Mr. Kukesh, a resident for a business carried on in Sri Lanka.
d) Interest received of ₹ 1,00,000, on money borrowed from France, by Ms. Dyana, a non-resident for the
business at Bangalore.
6. - Computation of total income: Determine the taxability of income of US based company Heli Ltd., in
India on entering following transactions during the financial year 2022-23:
(i) ₹ 5 lacy received from an Indian domestic company for providing technical knowhow in India.
(ii) ₹ 6 Lacs from an Indian firm for conducting the feasibility study for the new project in Finland.
(iii) ₹ 4 lacs from a non-resident for use of patent for a business in India.
(iv) ₹ 8 Lacs from a non-resident Indian for use of knowhow for a business in Singapore.
(v) ₹ 10 Lacs for supply of manuals and designs for the business to be established in Singapore.
Explain the rate of tax applicable on taxable income for US based company, Heli Ltd., in India.

7.Computation of total income: From the following particulars of Income furnished by Mr. Anirudh pertaining
to the year ended 31-03-2023, compute the total income for the assessment year 2023-24, if he is:
(i) Resident and ordinary resident;
(ii) Resident but not ordinarily resident;
(iii) Non-resident :
Particulars Amount (₹)
(a) Profit on sale of shares in Indian Company received in Germany 15,000
(b) Dividend from a Japanese Company received in Japan 10,000
(c) Rent from property in London deposited in a bank in London, later on remitted to India through
approved banking channels 75,000
(d) Dividend from RP Ltd., an Indian Company 6,000
(e) Agricultural income from lands in Gujarat 25,000

8.- Computation of total income: Mrs. Geetha and Mrs. Leena are sisters and they earned the following
income during the Financial Year 2022-23. Mrs. Geetha is settled in Malaysia since 1988 and visits India
for a month every year. Mrs. Leena is settled in Indere since her marriage in 1996. Compute the total
income of Mrs. Geetha and Mrs. Leena. (Amount in ₹)

RESIDENTIAL STATUS
 PROF. VINIT KUMAR TAXATION 9873126173

Particulars Mrs. Geetha Mrs. Leena

1. Income from Profession in Malaysia, (set up in India) received there 15,000 _

2. Profit from business in Delhi, but managed directly from Malaysia 40,000 _

3. Rent (computed) from property in Malaysia deposited in a Bank at 1,20,000 _

Malaysia, later on remitted to India through approved banking channels.
5,000 9,000
4. Dividend from PQR Ltd. an Indian Company
15,000 8,000
5. Dividend from a Malaysian company received in Malaysia
_ 51,000
6. Cash gift received from a friend on Mrs. Leena's 50th birthday
7,50 4,000
7. Agricultural income from land in Maharashtra
0 _
8. Past foreign untaxed income brought to India
5,000 _
9. Fees for technical services rendered in India received in Malaysia
25,000 15,00
10. Income from a business in Pune (Mrs. Geetha receives 50% of
the income in India) 12,000 0

11. Interest on debentures in an Indian company (Mrs. Geetha 18,500

received the same in Malaysia) 14,000
15,000
12. Short-term capital gain on sale of shares of an Indian company 25,50
14,000 0
13. Interest on savings account with SBI
_ 8,000
14. Life insurance premium paid to LIC
30,00
0

9.- Determination of residential status and scope of total income: DAISY Ltd., a foreign company,
incorporated in USA and engaged in the manufacturing and distribution of diamonds, set up a branch office
in India in June 2021. The branch office was required to purchase uncut and un-assorted diamonds from
dealers of Mumbai and export them to USA. During the Previous Year 2021-22, profit from such export
amounted to ₹ 75 lakhs. Out of 20 shareholders of DAISY Ltd., 12 shareholders are non-resident in India.
All the major decisions were taken through Board Meetings held at USA.
(v) Determine the residential status of DAISY Ltd. for the Assessment Year 2022-23
(vi) Discuss the tax treatment of profit from export business.

RESIDENTIAL STATUS