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2007 (5) TMI 267 - AT - Income TaxDetermination of Residential status of the Company u/s 6(3) and DTAA between India and Singapore - expression 'control and management' as used in s. 6(3)(ii) - HELD THAT:- Sec. 6(3) states that a company is situated in India for the previous year if (i) it is an Indian company; or (ii) during that year the control and management of its affairs is situated wholly in India. From the above facts of law it can be said that the assessee company does not qualify as resident in India under s. 6(3)(i), as it is foreign company incorporated under the Companies Act in Singapore on 17th Feb., 1996. Under s. 6(3)(ii), a company can be said to be a resident in India if during that year, the control and management of its affairs is situated wholly in India. Therefore, in the case of a foreign company, even if a slightest control and management is exercised from outside India it would not fall within the ambit of s. 6(3)(ii) of the Act and the company would be treated as a non-resident. This concept was opposite to the concept of determining a residential status of HUF, firm or AOP in terms of s. 6(2) of the IT Act wherein the entities shall be resident in India even if partial control and management of their affairs is situated in India. While in the case of HUF, firm or AOP, it is incumbent on the assessee to establish that control is wholly outside India, for them to be treated as a non-resident, in the case of a company, the Department has to establish that the control and management of its affairs is situated wholly in India, for the company to be treated as resident in India. The above view finds support from the decision in the case of Narottam & Pereira Ltd. vs. CIT [1953 (3) TMI 31 - BOMBAY HIGH COURT]. It is found from record that all the board meetings of the assessee company have been held at Singapore and never in India. Since the board of directors, subject to the overall supervision of shareholders, actually controls and manages the affairs of a company effectively as against the day-to-day operation of the company, the situs of the board of directors of the company should determine the place of control and management of the company. This does not mean where one or more of the directors normally reside but where the board actually meets for the purpose of determination of the key issues relating to the company. Similarly, the operation of bank account of the company by Mrs. Geeta Soni alone will not determine the position and status of control and management of the company. Such power has been conferred on her in the meeting of the board of directors of the company held at Singapore. Further, the contention that assessee company is having close connection with Motherson Group operating in India does make the assessee company as 'resident' in India. Similarly, the assessee company is having an Indian company as its subsidiary will also not alter the position. A foreign company can very well have a wholly-owned subsidiary company in India and vice versa an Indian company can also have a wholly-owned subsidiary company abroad. If the company is controlled and managed from the country of its incorporation, then their residential status would continue to be in that country irrespective of the fact whether they own other companies. We are of the view that genuineness of the minutes of meeting of the board held on 18th April, 2001 at 10.30 A.M. at Singapore cannot be doubted. In this connection, it may be mentioned that even if one of the board meetings be considered to have been held in India (where it is not at all evidenced), that does not negate the position that usually the meeting of the board of directors of the company are held in Singapore. It is seen that in the case of Azadi Bachao Andolan [2003 (10) TMI 5 - SUPREME COURT], the Hon'ble Supreme Court held that tax residency certificate issued by the Government of other Contracting State would be a conclusive proof of residential status of the company. The assessee company while relying upon this decision of Hon'ble Supreme Court has submitted that tax residency certificate has been issued by the Singapore taxation authorities in favour of the assessee. Thus, it itself establishes the residential status of the assessee i.e. Singapore. Thus, we hold that there are various documents on record to establish that not only the day-to-day affairs but even the control and management of the company during the year has been conducted at Singapore only. Hence, the provisions of s. 6(3)(ii) of the Act relating to the 'control and management' of the company being situated wholly in India, are not satisfied in this case. Therefore, we hold that the assessee company was a 'non-resident' in India during the year under consideration. In the result, the appeal of the assessee is allowed. Addition of unexplained cash credit u/s 68 - Held that:- Since we have held that the assessee company was not a 'resident' in India during the year, the addition sustained by learned CIT(A) will not be maintainable. Hence, we direct to delete the same. Disallowed w/f of debts as bad - Held that - Since we have held that the residential status is to be adopted as non-resident, only so much income accruing in India is taxable. Since the income from investment is not held taxable in India, there is no question of allowing loss on writing off of such investment. Accordingly, this ground cannot be allowed.
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