Place of Management to Apply Only to Cos with Over 50-cr Turnover
The Central Board of Direct Taxes has issued a circular clarifying that the provisions relating to place of effective management (POEM) will apply to companies with over .₹ 50-crore turnover.
The clarification circular comes after a CBDT press release specified this but the circular issued omitted a mention. "...it is clarified that provisions of Sec 6(3)(ii) relating to place of effective management (POEM) won't apply to companies having turnover or gross receipts less than .₹ 50 crores in a financial year," it said.
The board had on January 24 issued final guidelines to determine if an entity can be considered an Indian resident and taxed here. These norms come into effect from April 1.
A foreign company will be considered Indian resident if its place of effective management in a given year is in India. The rules seek to curb tax avoidance, targeting shell companies incorporated outside India, but with real control and management in India.
The limit will ensure that only substantive cases are taken up and small companies do not clog the system. —