Problems on residential status and tax incidence 91

Residential status of the firm and association of persons [Sec. 6(2)]

26. A partnership firm and an association of persons are said to be resident in India if control and management of their affairs are wholly or partly situated within India during the relevant previous year. They are, however, treated as non-resident in India if control and management of their affairs are situated wholly outside India. ■ The above rule may be summarised as follows —

Place of control Control and management of the affairs of a firm/association of persons is — ❑ Wholly in India ❑ Wholly outside India ❑ Partly in India and partly outside India Residential status

Resident Non-resident Resident

Note - A firm/an association of persons cannot be “ordinarily” or “not ordinarily resident”. The residential status of the partners/members of the firm/association is not relevant in determining the status of the firm/ association.

26.1 What is “control and management” - While in the case of a firm, control and management is vested in partners, in case of an association of persons it is vested in the principal officer. Control and management means de facto control and management and not merely the right to control or manage. Control and management is usually situated at a place where the head, the seat and the directing power are situated. Where the partners of a firm are resident in India the normal presumption is that the firm is resident in India. This presumption can, however, be effectively rebutted by showing that the control and management of the affairs of the firm is situated wholly outside India. The onus of rebutting the presumption is on the assessee.

Direct Taxes Law & Practice

AUTHOR

: Vinod K. Singhania , Kapil Singhania PUBLISHER : TAXMANN DATE OF PUBLICATION : May 2022 EDITION : 67th Edition ISBN NO : 9789356221888 NO. OF PAGES : 1754 BINDING TYPE : PAPERBACK Rs. : 2100 | USD : 70

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