Forums
Back
#4A Inter: Question of the day (Group 1)
Direct Taxation
Examine with reasons whether the following transactions attract income-tax in India in the hands of recipients: (i) Salary paid by Central Government to Mr. John, a citizen of India Rs. 7,00,000 for the services rendered outside India. (ii) Interest on moneys borrowed from outside India Rs. 5,00,000 by a non-resident for the purpose of business within India say, at Mumbai. (iii) Post office savings bank interest of Rs. 19,000 received by a resident assessee, Mr. Ram, aged 46 years. (iv) Royalty paid by a resident to a non-resident in respect of a business carried on outside India. (v) Legal charges of Rs. 5,00,000 paid in Delhi to a lawyer of United Kingdom who visited India to represent a case at the Delhi High Court.
Answers (4)
(Updated)
Correct Answer - (i) Taxable i.e., Rs. 6,50,000 As per section 9(1)(iii), salaries payable by the Government to a citizen of India for service rendered outside India shall be deemed to accrue or arise in India. Therefore, salary paid by Central Government to Mr. John for services rendered outside India would be deemed to accrue or arise in India since he is a citizen of India (ii) Taxable i.e., Rs. 5,00,000 As per section 9(1)(v)(c), interest payable by a non-resident on moneys borrowed and used for the purposes of business carried on by such person in India shall be deemed to accrue or arise in India in the hands of the recipient. (iii) Partly taxable i.e., Rs. 5,500 The interest on Post Office Savings Bank a/c, would be exempt u/s 10(15)(i), only to the extent of Rs. 3,500 in case of an individual a/c. Further, interest up to Rs. 10,000, would be allowed as deduction u/s 80TTA from Gross Total Income. Balance Rs. 5,500 i.e., Rs. 19,000 Less Rs. 3,500 Less Rs. 10,000 would be taxable in the hands of Mr. Ram, a resident. (iv) Not Taxable Royalty paid by a resident to a non-resident in respect of a business carried outside India would not be taxable in the hands of the non-resident provided the same is not received in India. This has been provided as an exception to deemed accrual mentioned in section 9(1)(vi)(b). (v) Taxable i.e., Rs. 5,00,000 In case of a non-resident, any income which accrues or arises in India or which is deemed to accrue or arise in India or which is received in India or is deemed to be received in India is taxable in India. Therefore, legal charges paid in India to a non-resident lawyer of UK, who visited India to represent a case at the Delhi High Court would be taxable in India
Your Reply