RELIEF TO NON RESIDENT FIRMS TAX ABILITY

The Supreme Court in a recent judgement laid down the guidelines for assessing income deemed to accrue in India. It was held that only such part of the income as is attributable to operations carried out in India can be taxed in India in case of Non Residents. If all parts of the transfer of goods are carried on outside the country, transaction cannot be taxed in India. The place where contract is signed is of no material consequence. In case of offshore services, sufficient nexus between the rendition of services and territorial limits of India is necessary to make the income taxable. Therefore amounts received by Japanese Corporation from an Indian company for offshore supply of equip ments and materials shall not be liable to tax in India. Harima Heavy Industries Ltd. vs Director of Income Tax 2007-ITS-124-SC Dt 04.01.2007