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Income Deemed to Accrue or Arise in India [Section 9](For CMA
Inter Group 1)[Issued on July 15, 2013]
1. Income from a business connection in India.A business
connection involves a relation between a business carried on and
some activity in Indiawhich contributes to the earning of
profits.Some examples of non-resident having business connection in
India are(a) Branch or agent or(b) Subsidiary in India or(c)
Factory in IndiaA new Explanation has been added to section 9(1)
which clarifies thatBusiness connection shall include following
activities carried out by non-resident, through a personacting on
his behalf:-
(i) Concluding contracts on behalf of non-resident.(ii)
Maintaining stock of goods and delivering them on behalf of
non-resident.
(iii) Securing orders in IndiaApportionment of profit:-If all
business operations are not carried out in India, the income of the
business deemed to accrue orarise in India shall be only such part
of income as is reasonably attributable to the operations
carriedout in India. [Explanation 1 to section 9(1)]The
apportionment of profits should be on a rational basis and should
not be arbitrary.For example if in India only negotiation was done
in relation to trading while the contract wasperformed entirely
outside India, it was held that only 10% of profits shall be deemed
to accrue or arisein India.However in case of Non-resident the
following operations confined to India shall not be treated as
business connection in India:(i) Purchase of goods in India for
the purpose of exports.(ii) collection of news and views for
transmission outside India by Non-resident who is engaged in
thebusiness of running news agency or of publishing newspapers,
magazines or journals.(iii) Shooting of cinematography films in
India if(a) An individual- he is not a citizen of India(b) Firm -
no partner is citizen or resident of India(c) Company - no
shareholder is citizen or resident of India.
2 . Income from any property, assets or source of income
situated in India.3 . Income from the transfer of any capital
assets situated in India.4 . Any income from salary if it is
payable for services rendered in India.5. Salary payable by the
Govt. to an Indian citizen for services rendered outside India.
However, all allowances and perquisites received by Citizen of
India rendering services outsideIndia, who is a govt. employee are
fully exempt
6 . Dividend paid by an Indian company outside India.7. Interest
payable by:
(i) Govt.(ii) Resident in IndiaExcept where interest is payable
in respect of money borrowed and used for the purpose of
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business or profession or earning any income from any source
outside India or(iii) A non-resident if interest is payable for
money borrowed and used for a business or
profession in India8 . Royalty payable by:
(i) Govt.(ii) A person who is a resident in India except where
it is payable in respect of any right/
information/ property used for the purposes of a business or
profession carried on outside Indiaor earning any income from any
source outside India or(iii) A person who is a non-resident
provided royalty is payable in respect of any right/
information/ property used for the purpose of the business or
profession carried on in India.However it shall not apply tolump
sum royalty paid by a resident for transfer of computer software
supplied by a non-resident
manufacturer along with a computer under a scheme approved by
govt.Royalty means : -
(i) Transfer of rights in respect of a patent, invention, model,
design, process ortrade mark or
copyright, literary, artistic or scientific work including films
or video tapes.(ii) use of
any patent, invention, model , design or process etc.(iii)
giving anti information
concerning the working of a patent, invention, model, design or
process etc.(iv) rendering any services
in connection with the above activities.(H) A person who is a
resident in India,9. Fees for Technical Services :
(i) Govt.
(ii) A person who is resident in IndiaExcept where services are
utilized for a business or profession carried on outside India
orearning any income from any source outside India or(iii) A
non-resident provided fee is payable in respect of services for a
business carried in India.
Fees for technical services means any consideration for the
rendering of any managerial, technical orconsultancy services.
