place of effective management
TRANSCRIPT
PLACE OF EFFECTIVE MANAGEMENT(A NEW CONCEPT)
Earlier provision of section 6(3) of Income Tax Act,
1961
According to section 6(3)
A company is said to be resident in India in any previous year, if:-
1. It is an Indian company; or2. During that year, the control & management
of its affairs is situated wholly in India.
Which led to
Simply
CONCLUSIONTHE COMPANY IS DECLARED
NON RESIDENT
According to section 6(3)
A company is said to be resident in India in any previous year, if:-
1. It is an Indian company; or2. During that year, the control & management
of its affairs is situated wholly in India.2. Its Place of Effective Management, at any time in that year, is in India.
Place of effective management
It means a place where key management and commercial decisions that are necessary for the conduct of the business of an entity as a whole are, in substance made..
It is determined from year to year basis. That means each year place of effective management will be ascertained..
IT WILL BE A MEASURE TO DEAL WITH CASES OF CREATION OF SHELL
COMPANIES OUTSIDE INDIA BUT BEING CONTROLLED &
MANAGED FROM INDIA
COMPANY IS SAID TO BE ENGAGED IN ACTIVE
BUSINESS OUTSIDE INDIA
LESS THAN 50%
PASSIVE INCOME TOTAL ASSETS SITUATED IN INDIA
EMPLOYEES ARE SITUATED OR RESIDENT IN INDIA
PAYROLL EXPENSES ON SUCH EMPLOYEES OF ITS TOTAL PAYROLL EXPENDITURE
TRANSACTIONS WITH ASSOCIATED ENTERPRISES
ROYALTY, DIVIDEND, CAPITAL GAINS, INTEREST & RENT
IN OTHER CASES
“POEM” IDENTIFIED IN 2 STAGES
1. Identification or ascertaining the person who are responsible for decision making for the conduct of company’s business
2. Determination of place where these decisions are in fact being made.
BY HOLDING COMPANY SITUATED IN INDIA
PERSON RESIDENT IN INDIA
IF POWERS OF DECION MAKING IS EXCERCISED
OR
“POEM” IS IN INDIA
LOCATION
COMPANY ITSELF HANDLES THE DECISIONS
PLACE WHERE COMPANY HELDS REGULAR BOARD
MEETINGS
NOW A DAYS ITS NOT NECESSARY TO BE PHYSICALLY PRESENT IN THE BOARD MEETING TO TAKE DECISIONS
IN SUCH CASES
THE PLACE WHERE MAJORITY OF THE DIRECTORS TAKE DECISIONS OR WHERE MAJORITY OF THE DIRECTORS RESIDE WILL BE THE “POEM” OF THE COMPANY..
IF ITS NOT CLEARLY DEFINED, THEN PLACE WHERE MAIN & SUBSTANTIAL ACTIVITY IS CARRIED OUT OR WHERE ACCOUNTING RECORDS ARE KEPT WILL BE CONSIDERED.
THE END
