Income deemed to accrue or arise in India - “Foreign company engaged in the business of diamond mining” - Section 9(1)(i) - International Taxation - Income Tax

Income deemed to accrue or arise in India Foreign company engaged in the business of diamond mining Income deemed to accrue or arise in India - Through or from any business connection in India. Any income accruing or arising to an assessee in any place outside India whether directly or indirectly through or from any business connection in India , or through or from any property, any asset or source of income in India or through the transfer of a capital asset situated in India Would be deemed to accrue or arise in India. [ Section 9(1)(i) ] As per Explanation 1(e) of section 9(1)(i) Activities confined to display of rough diamonds in Special Notified Zones In the case of a foreign company engaged in the business of mining of diamonds, No income shall be deemed to accrue or arise in India to it through or from the activities which are confined to the display of uncut and unassorted diamond in any special zone notified by the Central Government in the Official Gazette in this behalf. Safe Harbour Rules for income referred to in Section 9(1)(i) chargeable to tax under the head Profits and gains of business or profession, such option has been inserted vide Notification no. 124/2024 dated 29.11.2024, these rules is effective retrospectively from the 1st day of April, 2024 and applies to the assessment year 2024-25 relevant to the previous year 2023-24. Accordingly, it is hereby certified that no person is being adversely affected by giving retrospective effect to these rules specified under such notification. Who exercised such option The income-tax authorities will accept the option for safe harbour exercised by a foreign company involved in diamond mining business in any relevant previous year under rule 10TIB, provided that the income declared is at least 4% of the gross receipts from the sale of raw diamonds in any notified special zone. However, this safe harbour may be deemed invalid if it does not meet the conditions specified under rule 10TIB(3). [ Rule 10TIA (1) (2) ] Meaning of specified term - For the purposes of this rule and rule 10TIA to rule 10TIC. Gross receipts means the aggregate of - (i) the amount paid or payable to the eligible assessee or to any person on his behalf on account of sale of raw diamonds by such eligible assessee; and (ii) the amount received or deemed to be received by the eligible assessee or by any person on his behalf on account of sale of raw diamonds by such eligible assessee; [ Rule 10TI(b) ] Raw diamonds means diamonds that are, (i) uncut or unpolished; (ii) unassorted; (iii) unworked or simply sawn, cleaved or bruted; (iv) not conflict diamonds as defined by the Kimberley Process; (v) accompanied by Kimberley Process Certificate issued by the Kimberley Process authority in the exporting country; and (vi) falling under Tariff Heading 7102 of the First Schedule to the Customs Tariff Act, 1975. [ Rule 10TI(e) ] Condition to be fulfill for the opting the such option Where the eligible assessee has exercised the option for safe harbour under rule 10TIB in respect of the eligible business in any relevant previous year and such option is not declared invalid under the said rule, not allowed any deduction - any deduction allowable under the provisions of sections 30 to 38 shall be deemed to have been already given full effect to and no further deduction under those sections shall be allowed; the written down value of any asset of such business shall be deemed to have been calculated as if the eligible assessee had claimed and had been actually allowed the deduction in respect of the depreciation for such previous year; no set off of unabsorbed depreciation under section 32(2) or carried forward loss under section 72(1) shall be allowed to such assessee; and no set off of loss from other business under section 70(1) or other head under section 71 (1) or (2) shall be allowed to such assessee for income chargeable to tax under the head Profits and gains of business or profession in respect of such business. [ Rule 10TIA(3) ] The provisions of sections 92D and 92E shall apply in respect of an international transaction (i.e. same meaning as assigned u/s 92B), if the eligible assessee enters into such transaction while carrying on the eligible business. [ Rule 10TIA(4) ] Procedure of exercising option for safe harbour [ Rule 10TIB ] For the purposes of exercising option for safe harbour, the assessee shall furnish Form No. 3CEFC , complete in all respects, to the Assessing Officer before furnishing the return of income under section 139 for the relevant previous year. The income from eligible business shall be determined in accordance with the provisions of the Act without having regard to the provisions of rule 10TIA(2), where the assessee does not exercise option for safe harbour under sub-rule (1) of the said rule. The Assessing Officer may declare the option for safe harbour as invalid by an order in writing, where the assessee has - (a) availed the safe harbour by furnishing incorrect facts; or (b) concealed facts related to his business. The Assessing Officer shall afford a reasonable opportunity of being heard to the assessee before declaring the option for safe harbour invalid under sub-rule (3). The Assessing Officer shall serve a copy of the order referred to in sub-rule (3) to the assessee and the other provisions of the Act shall apply accordingly. Mutual Agreement Procedure not to apply [ Rule 10TIC ] The assessee shall not be entitled to invoke mutual agreement procedure under an agreement for avoidance of double taxation as referred to in section 90 or section 90A in relation to an eligible business, if the assessee has exercised the option for safe harbour under rule 10TIB in respect of such business and such option is not declared invalid under the said rule. .