Income Tax : A question that was shooting up recently, was: Why are so many Indians going to Dubai? After a detailed research and analysis I un...
Income Tax : Dive deep into India's criteria for determining company residency through Place of Effective Management (POEM) and its significanc...
Income Tax : Get answers to 41 frequently asked questions about the POEM (Place of Effective Management) concept for companies located outside ...
Income Tax : Place of Effective Management (PoEM) is an internationally recognized test for determining the residential status of a company inc...
Income Tax : Section 6 of Income Tax Act of India principally deals with conditions in which a business or an individual's residence is determi...
Income Tax : POEM Guidelines have been recently finalised only on 24th January, 2017, whereas the POEM provisions are already applicable w.e.f....
Income Tax : in a case where a foreign company is said to be resident in India on account of its Place of Effective Management (hereinafter ref...
Income Tax : Para 7 of POEM guidelines provides that the place of effective management in case of a company engaged in active business outside ...
Income Tax : CBDT invites comments and suggestions on the Draft Notification in respect of foreign company said to be resident in India under S...
Income Tax : Press Release on POEM guidelines dated 24th January, 2017 has, inter alia, stated that the POEM guidelines shall not apply to a c...
Income Tax : Section 6(3) of the Income-tax Act, 1961 (the Act), prior to its amendment by the Finance Act, 2015, provided that a company is sa...
The provisions of section 6 of the Act provide for conditions in which residence in India is determined in case of different category of persons. Section 6(3) deals with conditions to be satisfied for a company to be treated as resident in India in any previous year. Prior to amendment of section 6(3) by the Finance Act 2015, a company was said to be resident in India
In order to curb the erstwhile lacuna in the language of the Act and to prevent formations of various foreign shell companies, which are eventually controlled and managed from India, the Government of India amended the provision of clause (ii) of sub-section 3 of section 6 of the Act vide Finance Act, 2015 to avoid future revenue losses and prevent tax abuse.
It is imperative to understand the sense behind introducing the concept of Place of Effective Management (hereinafter refereed as POEM first, before embarking determination aspect of Place of Effective Management. POEM is not a new concept at all; it is an internationally recognised test for determination of residence of a company incorporated in a foreign jurisdiction.
F. No. 142/11/2015-TPL Section 6(3) of the Income-tax Act, 1961, prior to its amendment by the Finance Act, 2015, provided that a company is said to be resident in India in any previous year, if it is an Indian company or if during that year, the control and management of its affairs is situated wholly in India. This allowed tax avoidance opportunities for companies to artificially escape the residential status under these provisions by shifting insignificant or isolated events related with control and management outside India.
A new termed introduced by Finance Act, 2015 for determination of residential Status of foreign company is Place of Effective Management, commonly known as PoEM. Though PoEM seems to be new in context of Indian Income Tax Act, the term has already found its aplace under Article 4 of Bilateral Tax treaties entered by India with various other countries in form of tie-breaker criteria for dual resident companies.
The Finance Act 2015 has introduced a major change to the definition of residential status of companies vide amendment to Section 6(3) of the Income Tax Act, 1961 (‘Act’) which is likely to have significant impact with respect to foreign companies.
Place of Effective Management (POEM) As per Section 6 of the Income Tax Act ( As Amended) : The Rules to be followed: As Per Section 6 of the Income Tax Act’1961 (As Amended), It specifies that the Company will be said to be resident in India, if it satisfies the following condition: It is […]
The India Budget, 2015 has proposed the amendment of Section 6 of the Income Tax Act which alters the conditions under which a company is resident in India by including the concept of ‘place of effective management’ or POEM. Instead of the clause during that year, the control and management of its affairs is situated wholly in India, the new clause will read its place of effective management, at any time in that year, is in India.
The modification in the condition of residence in respect of company by including the concept of effective management would align the provisions of the Act with the Double Taxation Avoidance Agreements (DTAAs) entered into by India with other countries and would also be in line with international standards. It would also be a measure to deal with cases of creation of shell companies outside India but being controlled and managed from India.
