Non Resident Special Business

Special Business

Special provisions in respect certain business

Shipping Business [Sec.44B]
Special Procedure for Shipping Business [Sec.172]
Business of exploration, etc. of mineral oils [Sec. 44BB]
Business of operation of aircraft [Sec. 44BBA]
Business of civil construction, etc. in certain turnkey power projects [Sec. 44BBB]
Income by way of royalties, etc. [Sec. 44DA]
Deduction of head office expenditure in the case of non-residents [Sec. 44C]

Shipping business in the case of non-residents [Sec. 44B]

Applicable to	All non-resident assessee
Condition	Assessee must be engaged in the business of operation of ships.
Estimated income	Income taxable under the head "Profits & gains of business or profession" from such business shall be estimated at 7.5% of the amount being aggregate of the following: The amount paid or payable (whether in or out of India ) to the assessee (or to any person on his behalf) on account of the carriage of passengers, livestock, mail or goods shipped at any port in India ; and The amount received or deemed to be received in India by or on behalf of the assessee on account of the carriage of passengers, livestock, mail or goods shipped at any port outside India .
Notes : The amount paid or payable or received or deemed to be received, as the case may be, shall also include demurrage charges or handling charges or any other amount of similar nature.

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Special procedure for Shipping business of non-residents [Sec.172]

The provisions of this section shall, notwithstanding anything contained in the other provisions of this Act , apply for the purpose of the levy and recovery of tax in the case of any ship, belonging to or chartered by a non-resident, which carries passengers, livestock, mail or goods shipped at a port in India .
Where such a ship carries passengers, livestock, mail or goods shipped at a port in India, 7.5% of the amount paid or payable on account of such carriage to the owner or the charterer or to any person on his behalf, whether that amount is paid or payable in or out of India, shall be deemed to be income accruing in India to the owner or charterer on account of such carriage.
The above amount shall include the amount paid or payable by way of demurrage charge or handling charge or any other amount of similar nature.
Before the departure from any port in India of any such ship, the master of the ship shall prepare and furnish to the Assessing Officer a return of the full amount paid or payable to the owner or charterer or any person on his behalf, on account of the carriage of all passengers, livestock, mail or goods shipped at that port since the last arrival of the ship thereat.
However, where the AO is satisfied that it is not possible for the master of the ship to furnish such return before the departure of the ship from the port and provided the master of the ship has made satisfactory arrangements for the filing of the return and payment of the tax by any other person on his behalf, the Assessing Officer may, if the return is filed within 30 days of the departure of the ship, deem the filing of the return by the person so authorised by the master as sufficient compliance.
On receipt of the return, the Assessing Officer shall assess such income and determine the sum payable as tax thereon at the rate or rates in force applicable to the total income of a company which has not made the arrangements referred to in sec. 194 and such sum shall be payable by the master of the ship.
For this purpose, the Assessing Officer may call for such accounts or documents as he may require.
No order assessing the income and determining the sum of tax payable thereon shall be made after the expiry of 9 months from the end of the financial year in which the return is furnished.
A port clearance shall not be granted to the ship until the Collector of Customs or other officer duly authorised to grant the same, is satisfied that the tax assessable under this section has been duly paid or that satisfactory arrangements have been made for the payment thereof.
Nothing in this section shall be deemed to prevent the owner or charterer of a ship from claiming before the expiry of the assessment year relevant to the previous year in which the date of departure of the ship from the Indian port falls, that an assessment be made of his total income of the previous year and the tax payable on the basis thereof be determined in accordance with the other provisions of this Act, and if he so claims, any payment made under this section in respect of the passengers, livestock, mail or goods shipped at Indian ports during that previous year shall be treated as a payment in advance of the tax leviable for that assessment year, and the difference between the sum so paid and the amount of tax found payable by him on such assessment shall be paid by him or refunded to him, as the case may be. [Sec. 172(7)]

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Profits & gains in connection with the business of exploration, etc. of mineral oils [Sec. 44BB]

Applicable to	Non-resident assessee.
Conditions	Assessee must be engaged in the business of - Providing services or facilities in connection with; or Supplying plant and machinery on hire, used or to be used in, - the prospecting for, or extraction or production of, mineral oils. 1. Plant includes ships, aircraft, vehicles, drilling units, scientific apparatus and equipment, used for the purpose of the said business 2. Mineral oil includes petroleum and natural gas.
Estimated income	A sum equal to 10% of the aggregate of the following amount shall be deemed to be the profits and gains of such business chargeable to tax - The amount paid or payable (whether in or out of India) to the assessee (or to any person on his behalf) on account of the provision of services and facilities in connection with, or supply of plant and machinery on hire used, or to be used, in the prospecting for, or extraction or production of, mineral oils in India; and The amount received or deemed to be received in India by or on behalf of the assessee on account of the provision of services and facilities in connection with, or supply of plant and machinery on hire used, or to be used, in the prospecting for, or extraction or production of, mineral oils outside India .
Assessee may claim lower profit	An assessee may claim lower profits and gains if he keeps and maintains books of account as per sec. 44AA and gets his accounts audited and furnishes the report u/s 44AB and thereupon the Assessing Officer shall proceed to make an assessment of the total income of the assessee u/s 143(3) & determine the sum payable by, or refundable to, the assessee

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Profits and gains of the business of operation of aircraft [Sec.44BBA]

Applicable to

All non-resident assessee.

Condition

Assessee must be engaged in the business of operation of aircraft.

Estimated income

Income of such business shall be estimated at 5% of the aggregate of the following -

The amount paid or payable (whether in or out of India ) to the assessee (or to any person on his behalf) on account of the carriage of passengers, livestock, mail or goods from any place in India ; and
The amount received or deemed to be received in India by or on behalf of the assessee on account of the carriage of passengers, livestock, mail or goods from any place outside India.

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Profits and gains of foreign companies engaged in the business of civil construction, etc. in certain turnkey power projects [Sec. 44BBB]

Applicable to	A foreign company
Condition	Assessee must be engaged in the business of - civil construction; or erection of plant or machinery or testing or commissioning thereof, - in connection with a turnkey power project approved by the Central Government in this behalf. Approval issued by the Department of Power in the Ministry of Energy shall be deemed to be the approval of the Central Government for this section.
Estimated income	Income of such business shall be estimated at 10% of the amount paid or payable (whether in or out of India ) to the said assessee (or to any person on his behalf) on account of such civil construction, erection, testing or commissioning.
Assessee may claim lower profit	An assessee may claim lower profits and gains if he keeps and maintain books of account as per sec. 44AA and gets his accounts audited and furnishes the report u/s 44AB and thereupon the Assessing Officer shall proceed to make an assessment of the total income of the assessee u/s 143(3) and determine the sum payable by, or refundable to, the assessee.

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Special provision for computing income by way of royalties, etc. in case of non-resident [Sec. 44DA]

Applicable to	A non-resident (not being a company) or a foreign company
Conditions	Assessee has earned income by way of royalty or fees for technical services received from the Government or an Indian concern in pursuance of an agreement made with the Government or the Indian concern; Assessee carries on business in India through a permanent establishment situated therein, or performs professional services from a fixed place of profession situated therein; and Right, property or contract in respect of which royalties or fees for technical services are paid is effectively connected with such permanent establishment or fixed place of profession, as the case may be.
Agreement date	After 31/3/2003
Tax Treatment	Income shall be computed under the head "Profits and gains of business or profession" in accordance with the provisions of this Act:
Deduction not permissible	No deduction shall be allowed in respect of - any expenditure or allowance which is not wholly and exclusively incurred for the business of such permanent establishment or fixed place of profession in India ; or amounts paid (otherwise than towards reimbursement of actual expenses) by the permanent establishment to its head office or to any of its other offices.
Note : Assessee shall keep and maintain books of account and other documents as per sec. 44AA and get his accounts audited u/s 44AB and furnish along with the return of income, the report of such audit in Form 3CE duly signed and verified by chartered accountant.

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Deduction of head office expenditure in the case of non-residents [Sec. 44C]

In case of a non-resident assessee, head office expenditure shall not be allowed (in computing the income chargeable under the head "Profits and gains of business or profession") in excess of the higher of the following amount:

an amount equal to 5% of the adjusted total income; or
the amount of so much of the expenditure in the nature of head office expenditure incurred by the assessee as is attributable to the business or profession of the assessee in India.

Note

Adjusted total income means the total income without giving effect to:
1. Head-office expenditure u/s 44C; or
2. Unabsorbed depreciation u/s 32(2); or
3. The first proviso to sec. 36(1)( ix ) i.e. capital expenditure on family planning; or
4. Any loss carried forward u/s 72 or 73 or 74 or 74A; or
5. The deductions under Chapter VIA.
Where the adjusted total income of the assessee is a loss, then (i) shall be computed at the rate of 5% of the average adjusted total income of the assessee.
Average adjusted total income means average of adjusted total income of 3 assessment years immediately preceding the relevant assessment year. However, where the total income of the assessee is assessable only for last 2 or 1 year(s), then average of last 2 or 1 year(s) shall be considered.
Head office expenditure means executive and general administration expenditure incurred by the assessee outside India , including expenditure incurred in respect of:
1. rent, rates, taxes, repairs or insurance of any premises outside India used for the purposes of the business or profession;
2. salary, wages, annuity, pension, fees, bonus, commission, gratuity, perquisites or profits in lieu of or in addition to salary, whether paid or allowed to any employee or other person employed in, or managing the affairs of, any office outside India;
3. travelling by any employee or other person employed in, or managing the affairs of, any office outside India ; and
4. such other matters connected with executive and general administration as may be prescribed.

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