MCA Knowledge Centre
India’s POEM – Further clarifications
The Finance Act, 2016 brought in an important amendment. As per this, some foreign companies could be deemed to have their Place of Effective Management (“POEM”) in India and as a consequence, would be deemed to be an Indian tax resident having to pay tax on global income. A POEM for a foreign company would mean a dual tax residency, one in its home country and the other in India. By definition in the Indian tax law, POEM “means a place where key management and commercial decisions that are necessary for the conduct of business of an entity as a whole are, in substance made”. The POEM rules apply from the Financial Year (“FY”) 2016-17.
Hon’ble Supreme Court holds amendment to Section 40(a)(ia) of the Act to be retrospective in nature
In a recent decision, the Hon’ble Supreme Court has upheld a ruling of the Hon’ble Calcutta High Court to the effect that amendment by Finance Act, 2010 to Section 40(a)(ia) of the Income Tax Act, 1961 (“Act”) is retrospective in nature. The judgement has the effect of relaxing the rigours of Section 40(a)(ia) of the Act to some extent. The decision has been rendered in the case of CIT Kolkata X v/s. M/s. Calcutta Export Company.
ITAT holds that Permanent Establishment is not created merely on secondment of employees to Indian subsidiary
The Assessee is Samsung Electronics Co. Ltd. (“Samsung”) which is a company established in Korea. Principle activity of the company is manufacturing and sales of wide range of electronic items globally. Samsung has a wholly owned subsidiary in India named Samsung India Electronics Private Limited (‘SIEL’). A survey was conducted by the income-tax department at the premises of SIEL. Consequently, a notice u/s 148 of the Act was issued to Samsung for initiating re-assessment proceedings for AY 2004-05 to 2009-10. On the request of Samsung the income-tax department provided the following reasons for issuance of notice u/s 148 of the Act: