DTAA and Section 9 of Income Tax Act

[NIKHIL DUREJA]

Dear Professionals,

Greeting

one of my italy client wants to setup his branch in INDIA and the role of branch is just to find customer for italy company , further all the orders recived from INDIA are directly entered with the Italy company , so branch role is to just find interested customers and for this italy company are not giving any commision to its branch .

 

so my question arises - what is the taxability or tax liability of branch , wether branch has to pay any tax or not.???

wether branch will be considered as PE of Italy company and as per section 9 deeming fiction comes into force and it will be deemed that italy company has a business connection in INDIA , therfor so much profit as attributable to branch shall be taxable in INDIA.???

[RAM KUMAR LAKKOJU]

According to Sec 9(1)(i) of Income Tax Act, 1961 Income from business connection in india is deemed to accrue or arise in india irrespective of residential status.

Business connection include activity whether directly or indirectly securing orders in india for the the non resident or non residents under the same management.

So if u set up a branch in india, u will certainly liable for tax.

2) Where all operations are not carried out in india, only such part of income as is reasonably attributable to operations carried out in india will be taxable.

AI Summary

Business connection under tax law yields taxation of profits attributable to a local branch's India activities. A nonresident enterprise's branch that secures orders in India constitutes a business connection, bringing into play the deeming provision so that only the portion of income reasonably attributable to operations carried out in India is taxable.