Place of Man­age­ment to Ap­ply Only to Cos with Over 50-cr Turnover

The Economic Times - - Companies: Pursuit Of Profit - Our Bureau

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. —

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