BOMBAY CHARTERED ACCOUNTANTS’ SOCIETY

CA T. P. Ostwal

GOLDEN JUBILEE RESIDENTIAL

REFRESHER COURSE19th – 22nd January, 2017

Case Studies

CASE STUDY 1

2

CASE STUDY 1

FACTS OF THE CASE

X Ltd is an Indian company engaged in the business of providing information and technology

services. It is in the process of expanding its workforce of software engineers and decides to use

the online platform for networking of an Irish company for online advertisement of job openings in

the company.

X Ltd approached the Irish Co via email for use of their platform for aforesaid purpose. The Irish Co

confirmed the same by sending an invoice electronically quoting a consideration as US$1,000

payable electronically (assume exchange rate to be US $ 1 = INR 65). As per the terms of the

invoice, all taxes, duties, surcharges, cesses and levies etc. applicable in India were to be borne by

X Ltd.

The ultimate parent of the Irish Co is in the USA and they have obtained special rulings from the

Irish government that any payment received by their subsidiary company in Ireland will not be

subject to tax in Ireland. The government of Ireland has generously confirmed the same, since the

Irish Co has assured minimum job creation of 200 in Ireland and the extensive use of technology.

The Irish Co is controlled and managed by a Bermudian company. The US parent does not pay any

taxes on the Irish Co’s profits in USA.

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CASE STUDY 1

FACTS OF THE CASE

The US Co is of the opinion that even CFC rules of USA are not applicable to them.

They have also suggested to the X Ltd to not deduct any tax at source in the absence of any

presence in India, and if X Ltd wishes to deduct, it would be on their account.

X Ltd, being satisfied with the response to the advertisements on the platform, decided to use the

Irish Co’s platform again for the same purpose. However, this time they planned to have twice the

number of postings. The Irish Co quoted a fee of US$ 1,900 payable electronically under the same

terms of payment (assume exchange rate to be US $ 1 = INR 65).

Immediately after the second use of the platform, the Irish Co extended a special offer to X Ltd

whereby, if X Ltd purchased two more advertisement slots on the Irish Co’s platforms for US$ 1,900

on the earlier payment terms, plus X Ltd would be given complimentary 12-month access

(subscription) to a global online database. The subscription fees for this database, which would be

of great use to X Ltd, are ordinarily US$ 800 for 12 months. X Ltd, finding the offer of great value,

conveyed its acceptance to the Irish Co and purchased two advertisement slots.

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CASE STUDY 1

FACTS OF THE CASE

After this, X Ltd required more staff and wished to use the online platform again. However, this

time, X Ltd engaged an Indian company for the purpose of the service. The Indian company is a

non-exclusive agent for the Irish Co in India (and many other foreign companies providing the same

or similar services and platforms). It charged X Ltd Rs. 45,000 for two slots and collected data and

details regarding the job posting advertisements and posted the same itself on the Irish Co’s

networking platform in the name of X Ltd.

The Irish Co has provided X Ltd with a signed invoice, an Irish Tax Residency Certificate, Form 10F

duly verified, and a declaration that they do not have a Permanent Establishment in India.

X Ltd desires to know from the collective wisdom of the participants on the taxability of such

payments and the use of India-Ireland Tax Treaty as suggested by Irish Co and all other relevant

implications on such payment (other than service tax).

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CASE STUDY 1

NOTES ON THE CASE

The nature of service provided, being covered by the definition of “specified services” under

section 164(i) of Chapter VIII of the Finance Act, 2016 is liable to Equalisation Levy

Section 166(1) provides that EL will only be charges on payments exceeding Rs. 100,000.

Since current payment is less than this amount, no EL will be levied.

Further, as per section 10(50) of the Income-tax Act, 1961, ‘any income arising from specified

service’ [as per section 164(i)] is exempt from Income Tax.

The payment from X Ltd to the Irish Co will not be taxable in India by virtue of section 10(5) and

due to the threshold limit of section 166(1) of Finance Act, 2016 no EL would be chargeable.

However, the subsequent payment of US$ 1,900 results in the Rs. 100,000 threshold being

exceeded. As a result, X Ltd would have to deduct EL equal to 6% of the aggregate amount of

payments made to the Irish Co (Rs. 1,88,500). However, as per the payment terms, X Ltd has to

bear all levies, and therefore, the total amount paid to Irish Co would be assumed to have been

made after deducting EL, and X Ltd would have to pay EL of Rs. 12,032.

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CASE STUDY 1

NOTES ON THE CASE

At the time of making payment (Rs. 1,23,500) for the 3rd invoice, EL amounting to Rs. 7,883

would have to be borne by X Ltd.

However, an issue arises while making payment for the 3rd invoice since the services being

provided by Irish Co include free access to the database. Had the database been provided

separately, the payment for subscription would not have been taxable in India in the hands of

Irish Co since it would have been treated as business income and royalty under the treaty and

in absence of a PE of Irish Co in India, business profits are not taxable in India. Also, such

service is not a ‘specified service’ on which EL can be levied.

If X Ltd had requested Irish Co to provide 2 different bills, one for database access, and another

for use of platform at an appropriately discounted rate, EL on $800 may have been saved.

At the time of making the third payment, since the payment is to a resident entity, EL would not

apply. However, TDS would have to be appropriately deducted u/s 194C @ 2%.

An issue arises where bundled services are provided without value being attributed to each part

in the invoice. How should value be apportioned in order to determine the EL in such case if part

of the service is subject to EL while another part of the service is not subject to EL.

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CASE STUDY 2

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CASE STUDY 2

FACTS OF THE CASE

X Ltd. is an Indian company having

manufacturing business in India. X Ltd has the

following shareholders: ABC LLP – 30%; Mr. X

– 60% & other, unrelated Indian Company 10%.

X Ltd and ABC LLP jointly set up a company in

Mauritius, M Ltd, to be the holding company of

its business in Africa. X Ltd owns 74% & ABC

LLP owns 26% of share capital of M Ltd.

M Ltd has set up a wholly owned subsidiary, G

Ltd, in an African country “G” to undertake

manufacturing business.

M Ltd has a valid Tax Residency Certificate of

Mauritius and is eligible for India-Mauritius

treaty benefits.

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CASE STUDY 2

FACTS OF THE CASE

Country G does not levy any corporate taxes and there is no withholding tax requirements on

dividends paid to foreign shareholders.

G Ltd paid a dividend equivalent to Indian Rs. 1 crore to its shareholder M Ltd.

M Ltd has to pay 15% taxes in Mauritius on its foreign sourced income – however, the Mauritius tax

code gives M Ltd a deemed tax credit of 80% of tax payable by assuming that it has paid such tax

on foreign sourced income.

M Ltd paid a dividend equivalent to Indian Rs. 1 crore (to X Ltd and ABC LLP) during the year. There

is no withholding requirement on dividend paid to foreign shareholders by a Mauritian company.

In the same year, X Ltd distributed the entire dividend received from M Ltd as dividend.

The following are issues for consideration:

(1) What is the tax liability in India on dividends from M Ltd in the hands of X Ltd & ABC LLP?

(2) What is the tax liability in India on dividend declared by X Ltd to its shareholders?

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CASE STUDY 2

NOTES ON THE CASE

Dividends received by X Ltd from M Ltd would be chargeable at 15% (plus surcharge and cess)

due to provisions of section 115BBD – X Ltd has more than 26% shareholding of M Ltd

Further, by virtue of Article 23(2) of the Indo-Mauritius DTAA, X Ltd will get full credit of taxes

paid by M Ltd on its profits from which dividend was paid.

Therefore, effectively, X Ltd will pay ‘zero’ tax on its dividend income.

ABC LLP would have to pay tax at 30% (plus surcharge and cess) on dividends received from

M Ltd. It would not be eligible for benefits of section 115BBD since it is a firm and 115BBD

applies only to companies.

The dividend declared by X Ltd to its shareholders – ABC LLP, Mr X and the Indian co, would be

subject to Dividend Distribution Tax (DDT) u/s 115-O.

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CASE STUDY 2

NOTES ON THE CASE

X Ltd will get credit of taxes payable u/s 115BBD on dividends received from M Ltd as per

Section 115-O(1A). Its effective DDT liability will be zero.

ABC LLP & Mr X will have to pay tax at a rate of 10% on dividend exceeding Rs. 10 lakhs

received from X Ltd by virtue of section 115BBDA.

Indian Co will not have to pay any tax on dividend income received from X Ltd. However, it will

be liable for DDT when it distributes such amount as dividend to its shareholders since it would

not be eligible for relief u/s 115-O(1A) as X Ltd is not a subsidiary of Indian Co.

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CASE STUDY 3

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CASE STUDY 3

FACTS OF THE CASE

Master Sachin was born in the USA in 2003 is a natural citizen of USA and the holder of an

Overseas Citizen of India card (“OCI Card”). He came to India for the first time on 1st April, 2010

with his parents, who are US citizens and are also holders of OCI Card. His stay in India in the

subsequent financial years was as under:

views obtained from different consultants they talk to – they get confused and their US consultant is

also equally confused because of the same conflicting views.

Financial Year Stay in India (days)

2010-11 75

2011-12 184

2012-13 183

2013-14 182

2014-15 90

2015-16 90

Both his parents are US Citizens and have their

permanent home and habitual abode in the USA and

in India. All their relatives are in the US except some of

Master Sachin’s mother’s relatives. When in India,

Master Sachin has stayed with his maternal

grandparents.

Parents of Master Sachin are concerned on the

residential status of their son due to conflicting

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CASE STUDY 3

FACTS OF THE CASE

Master Sachin has received a sizeable gift from the grandparents of Rs. 1 crores, which was

credited to a newly opened NRO account in India with the State Bank of Patiala in the FY 2010-11.

Said balance was converted into a fixed deposit carrying interest at the rate of 10% for tenure of 6

years on a cumulative basis.

Parents were advised that the income of Master Sachin will be taxable in their hands in India and

they may not get tax credit in USA. The parents were also worried that the gift received would also

be taxable in the hands of Master Sachin since it is received from mother’s mother.

Master Sachin has also stayed with his parents in the USA and therefore, also has permanent

home and habitual above in the USA. As stated earlier, all his direct relatives are in the USA,

except for some maternal side relatives in India. He was advised to take advantage of India-USA

tax treaty under Article 4 and claim the residency of USA. His CPA in USA is totally confused.

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CASE STUDY 3

FACTS OF THE CASE

Parents therefore, have approached the President of the BCAS to put up this case study for the

collective advice of the participants and at the request of President, I have included this case. He

could have easily given advice himself, but felt that I should include this case in the discussion

paper of the RRC. So therefore, kindly decide the taxability of the income in the hands of

concerned person based on the residential status of such person.

NOTES ON THE CASE

YearStay in

India

Whether satisfies conditions of section Residential

Status6(1)(a) 6(1)(c)

6(6)(a)

[9yrs]

6(6)(a)

[7yrs]

2010-11 75 No No NA NA Non Resident

2011-12 184 Yes No Yes Yes Resident, Not

Ordinarily Resident

(RNOR)

2012-13 183 Yes No Yes Yes

2013-14 182 Yes Yes No Yes

2014-15 90 No No NA NANon Resident

2015-16 90 No No NA NA16

CASE STUDY 3

NOTES ON THE CASE

Master Sachin is a non-resident for FY 2010-11 and a RNOR for FY 2011-12 to FY 2015-16.

The gift received by Master Sachin from his maternal grandparents is exempt from tax by virtue of

the Fourth proviso to section 56(2)(vii).

The interest income earned from the Fixed Deposit with the State Bank of Patiala (through NRO

account) will be taxable in India since the same is received in India. The same would be taxable

under the head “Income from other sources” as per the applicable slab rates.

Further, the income of Master Sachin would be included in the hands of the parent that has the

higher income chargeable to tax in India by virtue of section 64(1A). Such interest income exempt

up to Rs. 1,500 in the hands of the parent in whose income such interest is clubbed – section

10(32).

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CASE STUDY 4

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CASE STUDY 4

FACTS OF THE CASE

FCo is a foreign company, incorporated in Finland, which is the holding company of a global

multinational group. FCo has PAN in India but has no income from or PE in India.

ICo is a wholly owned subsidiary of FCo, set up for the purpose of undertaking business in India.

ICo has suffered significant losses, completely eroding its net worth. Due to working capital

requirements of ICo and surplus funds available with FCo, FCo advanced an interest-free loan of

Rs. 100 million to ICo during FY 2015-16.

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CASE STUDY 4

FACTS OF THE CASE

During the normal course of assessment proceedings of FCo for FY 2015-16, the assessing officer

(“AO”) obtained documents and information regarding the loan to ICo.

Based on the documents, the AO took a view that the loan extended by FCo to ICo was an

International Transaction within the meaning of section 92B in FY 2015-16, and transfer pricing

provisions would be applicable and accordingly the Arm’s Length Price (“ALP”) of interest on the

loan extended by FCo to ICo would have to be determined as per Section 92C.

The AO, after due reference to the Transfer Pricing Officer (“TPO”) determined the ALP at 6% (Rs.

6 million) and made an addition in the hands of FCo u/s 92.

FCo contended that since there was no erosion of tax base in India by FCo giving interest free loan

to ICo, transfer pricing provisions could not be invoked and went into appeal.

The FCo contended that no computation of ALP is required, in absence of any interest charged by it

to ICo.

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CASE STUDY 4

ISSUES FOR CONSIDERATION

1) Is interest free loan from FCo to ICo an international transaction within the meaning of section

92B?

2) Do Indian transfer pricing provisions apply to FCo for computing ALP they have not charged a

single penny by way of interest?

3) Once a transaction is covered by section 92B, is it mandatory to compute ALP to compute the

income from such transaction?

4) Whether in absence of any income being reported by the assessee, can the substitution of the

ALP result in an income which is brought to tax u/s 92?

5) In whose hand should the adjustment be made, ICo or FCo?

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CASE STUDY 4

NOTES ON THE CASE

In July 2016, the Kolkata ITAT gave a decision on a case with similar facts (Instrumentarium

Corporation Ltd v. ADIT, IT). The ITAT held that interest free loan would be an international

transaction within the meaning of section 92B.

Transfer pricing provisions would apply to such a transaction and therefore ALP would have to be

computed – irrespective of whether interest was actually charged or not.

Further, once a transaction is covered by 92B, ALP as per 92C has to be determined in order to

determine whether tax has been avoided by understating income or overstating expenses.

The ITAT also held that even if the assessee has not reported any income, the AO can substitute

ALP and determine income and bring the same to tax u/s 92.

Section 92 cannot be invoked when the overall tax receivable by Indian authorities from the

involved parties decreases. The adjustment cannot be made in the hands of ICo, since this would

result in ICo’s deductions increasing and reduce ICo’s taxable income (either profits will reduce or

loss would increase) – a scenario which is not permitted under TP provisions.

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CASE STUDY 4

NOTES ON THE CASE

The adjustment in this case is being made in the hands of FCo – FCo would be taxed on the ALP

interest, even when it has not actually charged interest. Further, ICo would also not be allowed to

subsequently claim any interest expenditure in its books and thus, as a group, FCo and ICo would

suffer tax on interest which is neither paid nor earned.

In this case, the ITAT held that an adjustment resulting in erosion of Indian tax base would not be a

factor under consideration while invoking TP provisions – the purpose of TP provisions are to

determine ALP and determine whether the transaction has taken place at an appropriate price and

make adjustment accordingly.

Not invoking TP provisions would result in a real tax revenue loss to the country and hence the

base erosion argument fails.

ICo would not be allowed to claim interest (as determined by ALP) and since it is suffering losses.

Making an addition of income in hands of FCo would result in India receiving an additional tax

revenue of 10% of the ALP determined without allowing ICo to reduce its tax liability. (Rate of tax on

interest is 20% as per Income-tax Act, 1961 and 10% as per Article 11 of Indo-Finnish DTAA).

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CASE STUDY 4

NOTES ON THE CASE

Can an argument be made that interest can be taxed only at the time of interest is actually received

by FCo from ICo?

Para 1 of Article 11 of the Indo-Finnish DTAA reads as under:

“1. Interest arising in a Contracting State and paid to a resident of the other Contracting State may

be taxed in that other State.”

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CASE STUDY 5

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CASE STUDY 5

FACTS OF THE CASE

A Ltd is an Indian company with diversified business interests.

It as a wholly owned subsidiary in the USA, B Inc, which has 3 businesses namely:

(a) Manufacturing divisions contained in MCo, a Mexican company and WOS of B Inc.

(b) Services division & Investment division – part of B Inc.

The Manufacturing division (MCo) is the largest in terms of turnover, profitability, manpower and

capital and is controlled by the Board of B Inc. MCo’s Board has two directors, one a Mexican

resident who looks after operations, and the other a nominated US resident Director from B Inc.

The Service division represents a small, but growing part of the company.

The Investment division has the least manpower but is in charge of investing in real estate in the

USA for the purpose of earning lease-rentals. It is a largely static division with one-off additions to

its portfolio of properties every few years.

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CASE STUDY 5

FACTS OF THE CASE

CFO of A Ltd, an Indian resident, is on the Board of B Inc. B Inc has 3 other directors, who are all

US residents. Each Director is in-charge of a separate division.

All the main decisions pertaining budget, capital expenditures, pricing, key appointments, marketing

and other activities relating to the MCo are taken by CFO of A Ltd in the Board Meetings of B Inc.

Decisions concerning the Service & Investment divisions are left to the local management.

The key personnel of the Manufacturing division (MCo) are deputed/seconded from A Ltd and lower

level staff is outsourced locally.

During the year, 6 Board meetings of B Inc were held – 4 in the USA, 1 in India and 1 in Mexico.

CFO of A Ltd attended 2 of the USA meetings physically and the other USA meeting and the

Mexican meeting through video-conference, while all directors were physically present in the India

meeting.

Examine whether B Inc and MCo can be said to have their Place of Effective Management in India.

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CASE STUDY 5

NOTES ON THE CASE

In this case multiple views are possible based on the approach taken towards reading the amended

provisions of section 6(3) and the draft guidelines.

A conservative view is that the key commercial decisions of the business segment that provides

significant value and revenue to B Inc (i.e. the Manufacturing division), are taken by the CFO of A

Ltd in India – therefore PoEM can be argued to be in India, making B Inc a resident of India.

Similarly, MCo’s commercial decisions are also directed by CFO of A Ltd, resulting in its PoEM

being in India.

Another possible view is that the decisions of the service and investment divisions are taken wholly

in the US and therefore not all commercial and key management decisions are taken as a whole

from India – thus PoEM cannot be in India. Further, of the 6 Board Meetings held during the year, 5

took place outside India and of these 5 meetings, the CFO of A Ltd was present in 2 meetings

physically. Therefore, even if the argument of the conservative viewpoint is accepted, the decisions

were still partly taken outside India, not only in form but also in substance. As a result of this, PoEM

cannot be in India.

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CASE STUDY 6

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CASE STUDY 6

FACTS OF THE CASE

FHCo, a company located in

France, is the holding company of a

MNE group of companies through

its 100% subsidiary in France.

FSCo, a French wholly owned

subsidiary (WOS) of FHCo which

has operations in France.

FSCo has two WOS – NCo in

Netherlands and MCo in Mauritius.

FSCo, NCo and MCo have a

subsidiary in India, ICo, in which

FSCo holds 9% directly, and 50%

through NCo and 41% through

MCo.

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CASE STUDY 6

FACTS OF THE CASE

In a scheme of business reorganization, the NCo transfers its entire holdings in ICo to MCo.

Subsequently, FHCo decides to hive off its entire holdings in FSCo, and transfers the shares of

FSCo to another French company.

ISSUES FOR CONSIDERATION

1) Is the transfer of shares of ICo by NCo to MCo taxable in India?

2) Is the transfer of shares of FSCo by FHCo taxable in India?

3) What would be the implications had the following transfer taken place instead of sale of shares

of FSCo:

a) FSCo sold its 9% holding in ICo to a French company.

b) MCo sold its 91% holdings in ICo (i.e. after receiving 40% shares from NCo) to another

company?

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CASE STUDY 6

NOTES ON THE CASE

By virtue of Article 13(5) of the Indo-Dutch DTAA, the gains on transfer of shares by NCo (a

Netherlands resident) to MCo will be taxable only in the Netherlands since the gains are taxable

only in the State where the alienator is a resident.

Even if the shares were transferred to an Indian resident, they would not have been taxable in

India, since the same would have been done under a scheme of business reorganization.

The transfer of shares of FSCo by FHCo results in an indirect transfer of Indian assets (shares of

ICo), assuming that the shares of ICo contribute to more than 50% of the value of FSCo’s shares –

therefore the capital gains arising from the transfer are taxable in India under the domestic law.

However, Article 14(5) of the Indo-French DTAA provides a “participation benefit” whereby the gains

from sale of shares of a French company are taxable only in France, if the transferor of the shares

has a participation of at least 10% in the French company. A case with similar facts [Sanofi Pasteur

Holding SA v. Department of Revenue, Ministry of Finance] was heard by the Andhra Pradesh High

Court (February 2013).

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CASE STUDY 6

NOTES ON THE CASE

If FSCo had sold its shares (9%) in ICo, such gains would not be taxable in India by virtue of para

15(6) of the treaty. In this situation, Article 14(5) would not be applicable, since FSCo holds less

than 10% of ICo, and the gains would only be taxable in France, i.e. the country where the alienator

is a resident.

If MCo were to sell its shares (91%) of ICo, the resulting capital gains will not be taxable in India by

virtue of Article 13(4) of the Indo-Mauritian DTAA.

Effect of re-negotiated DTAA

If MCo had acquired the 50% stake in ICo from NCo after 1st April 2017, the capital gains arising

from the transfer of such shares would be taxable in India by virtue of Article 13(3A) of the DTAA.

If such shares are sold up to 31st March 2019, they would be taxed at 15% (short term capital

gains).

If such shares are sold after 1st April 2019, they would be taxed at 30% (short term capital gains) or

20% (if long term capital gains).

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CASE STUDY 7

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CASE STUDY 7

FACTS OF THE CASE

Mr. X, is a citizen of India and became a US resident since 1983. He has been a green card holder

of USA since 1987. He is currently a 100% owner of ABC Consulting, LLC, a US consulting firm,

with its head office in the US (New York, Chicago), its branch offices in Dubai and UK, and a wholly

owned subsidiary in India.

1983-1990:

In 1983, Mr. X started working as an employee in USA till 1988 and became independent

consultant in USA from 1988 to 1990. He started filing US tax returns since 1984. There were no

Indian assets under his ownership during the period 1983 to 1990. He had not filed any income-tax

returns in India during the said period.

1991-1995:

In 1991, Mr. X returned to India for venturing into a healthcare business in India. However, he did

not do well in his health care business in India till 1995 and continued to do consultancy work

overseas during such period and earned income therefrom.

His primary source of income was professional fees for consultancy services provided around the

world for clients.

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CASE STUDY 7

FACTS OF THE CASE

1991-1995 continued:

Income from the healthcare business represented a very minor part of his earnings. He travelled

outside India for almost 120-183 days a year in the mentioned years. During this period, he did not

own a house in India, and lived with his father.

When in the US, Mr. X stayed in his family’s New Jersey residential house in US.

1995-2005:

In 1995, he purchased a residential house in India in the joint name with his father. This house was

funded 50% by his father and 50% from his overseas income. This house continued to stay in the

joint name till December 2010.

From 1995 onwards, he stayed in this house when in India. He continued to do consultancy work

overseas during such period, for which he frequently travelled overseas. When in the US, Mr. X

stayed in his family’s New Jersey residential house in US.

During the year 2002, he acquired an apartment in New York City.

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CASE STUDY 7

FACTS OF THE CASE

1995-2005 continued:

In 2003, Mr. X acquired additional residential space in Mumbai in the name of wife through his

overseas income.

His primary source of income was professional fees for consultancy services provided around the

world for clients. Income from the healthcare business represented a very minor part of his

earnings.

2005 onwards:

From 2005 onwards, Mr. X has stayed only in the US and has no Indian income.

ISSUE FOR CONSIDERATION

Under the India-US DTAA, will Mr X be a US tax resident or an Indian tax resident for the years

1991 to 2005?

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CASE STUDY 7

NOTES ON THE CASE

From the facts of the case, it is difficult to determine whether Mr X is a resident of India as per the

provisions of section 6 of the Income-tax Act, 1961. His stay in India each year varied since he

travelled for 120-183 days in a year.

Being a US Citizen (Green Card Holder), Mr X becomes a tax resident of USA. Assuming that Mr. X

is also a resident of India as per section 6 of the ITA, he becomes a dual resident and his

residential status would have to be determined as per the tie breaker tests in Article 4 of the Indo-

US DTAA.

For determining residential status, one has to proceed to a subsequent test if the previous test fails

to help the determination of residential status. Article 4 lays downs the following tests:

1. Availability of permanent home

2. Closeness of personal and economic relations (centre of vital interests);

3. Habitual abode

4. Nationality

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CASE STUDY 7

NOTES ON THE CASE

In the period 1991-1995, Mr X had a permanent home only in the US. Further, his centre of vital

interests and habitual abode were also in the US during this period. He is also a US national.

Therefore, he will be a tax resident of the US under the DTAA for the period 1991-1995.

In the period 1995-2005, Mr X had a permanent home both in the US and in India. However, his

centre of vital interests and habitual abode were in the US during this period. He is also a US

national. Therefore, he will be a tax resident of the US under the DTAA for the period 1995-2005.

Period

Test Country

of

ResidencePermanent

Home

Centre of

Vital Interests

Habitual

Abode

Nationality

1991 to 1995 USA USA USA USA USA

1995 to 2005 Both USA USA USA USA

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T. P. Ostwal & Associates LLP

Chartered Accountants

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