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CBDT

POEM Guidance For Companies Engaged in Active Business Outside India

by Sanjeev Archak Sanjeev Archak No Comments

In our previous post, we discussed the idea of Place of Effective Management and how it came into existence. Today we will be focusing on the POEM guidance for companies that are engaged in active business outside India.

Determination of “active business outside India”

A company shall be considered as engaged in “active business outside India” if the passive income is not more than 50% of its total income; and if the following conditions are met –

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Place of Effective Management Rules

by Sanjeev Archak Sanjeev Archak No Comments

The idea of Place of Effective Management or POEM was first introduced in the Finance Act 2015 for the purpose of determining the residential status of foreign businesses. As per the act, any business having its place of effective management in India will be considered as an Indian resident and accordingly, it’s global income will be taxable in India.17

But the Finance Act was missing the entire criteria and process for determining the place of effective management. For this purpose, the Central Board of Direct Taxes (CBDT) introduced the Guiding Principles for determination of Place of Effective Management (POEM) of a Company.

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Trade Advances Not To Be Deemed As Dividends

by Sanjeev Archak Sanjeev Archak No Comments

SECTION 2(22) OF THE INCOME-TAX ACT, 1961 – DEEMED DIVIDEND – CBDT’S CLARIFICATIONS ON SETTLED VIEW OF SECTION 2(22)(e) OF SAID ACT ON TRADE ADVANCES/COMMERCIAL TRANSACTIONS

CIRCULAR NO.19/2017 [F.NO.279/MISC./140/2015/ITJ], DATED 12-6-2017

Section 2(22) clause (e) of the Income-tax Act, 1961) (the Act) provides that “dividend” includes any payment by a company, not being a company in which the public are substantially interested, of any sum by way of advance or loan to a shareholder, being a person who is the beneficial owner of shares (not being shares entitled to a fixed rate of dividend whether with or without a right to participate in profits holding not less than ten percent of the voting power, or to any concern in which such shareholder is a member or a partner and in which he has a substantial interest (hereafter in this clause referred to as the said concern) or any payment by any such company on behalf, or for the individual benefit, of any such shareholder, to the extent to which the company in either case possesses accumulated profits.

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