Taxation of Non-residents with

Special Reference to Chapter

XII and XII A
Which are the income of non-residents taxable?
What is the meaning of non-resident under the Income-tax Act?
According to section 2(30) , Non-resident means a person who is not a resident
in India. However in the following cases, it also includes a person who is not
ordinarily resident in India:-
(a) Section 92 – relating to computation of income from international
transactions having regard to arm’s length price.
(b) Section 93- avoidance of income tax by transactions resulting in transfer of
income to non-residents.
(c) Section 168- Executors.
What are the types of Non-resident under the Income tax Act?

• (a) Non-resident Indian

• (b) Any other non-resident person ie. Foreign national

• Which are the incomes taxable in case of Non-residents?

• Sections 115A, 115AB, 115 AC, 115 AD, 115 BBA covered under Chapter XII.
• Section 115 C to 115 I , Chapter XII A
Who may be regarded as agent in relation to non-resident?
Section 163 specifies who can be regarded as agent of non-resident
(a) Who is employed by or on behalf of the non-resident; or
(b) Who has any business connection with the non-resident; or
(c) From or through whom the non-resident is in receipt of any income,
whether directly or indirectly; or
(d) Who is the trustee of the non-resident;
and includes also any other person who, whether a resident or non-resident,
has acquired by means of a transfer, a capital asset in India.
What is the tax liability of the income of a
non-resident artist or performer in India
(i) If an artist perform in India gratuitously without any consideration.

(ii) Where the artist perform in India to promote sale of his records and
no consideration is paid for this performance by record company or
anyone else.

(iii) Any consideration received by an artist or performer for live

performance or simultaneous live telecast or broadcast.
(iv) The consideration paid to the artist to acquire the copy rights of performance
in India for subsequent sale abroad(of records, CDs, etc) or the consideration
paid to the artist for acquiring the licence for broadcast or telecast overseas.

(v) The consideration paid to the artist to acquire the copy rights of performance
in India for subsequent sale (of records, CDs, etc) in India or the consideration
paid to the artist for acquiring the licence for broadcast or telecast in India.

(vi) The portion of endorsement fees(for launch or promotion of products, etc.)

which relates to the artist’s performance in India.
Will the non-resident assesse, who has allowed
the Indian assesse to use his servers located
outside be liable to tax in India?
• As per Explanation 5 to section 9 inserted by the Finance Act, 2012
w.e.f 1.6.1976, royalty includes and has always included consideration
in respect of any right, property or information, whether or not-
(a) The possession or control of such right, property or information is
with the payer;
(b) Such right, property or information is used directly by the payer;
(c) The location of such right, property or information is in India.
Will payment made by Indian T.V. Channels
for making use of satellite of foreigners be
taxable in India?
• As per Explanation 6 to section 9(1) inserted by the Finance Act, 2012,
w.e.f. 1-4-176, the term process includes and shall be deemed to have
always included transmission by satellite(including uplnking,
amplification, etc.) Hence, payment made by T.V. Channels to non-
resident for transmission of programme by satellite is treated as
royalty and hence liable to tax in India.
Will the non-resident who is engaged in
providing bandwith/telecom services for
transmission of data, etc. in India be liable to
tax in India
• Where the assesse engaged in providing international connectivity
services(Bandwith services or Telecom services) for transmission of
data and voice receives any payment for the use of international
private leased circuit , such receipt were liable to be treated as royalty
under section 9(1)(vi) read with Explanation 2(iva).
• Fact that the bandwidth was shared with others had to be seen in the
light of the technology governing the operation of the process and
itself did not take the payment out of scope of royalty [Explanation 5
and 6]
Will the subscription charged by a non-
resident company for providing access to its
products over the internet from its data server
be taxable in India?
• CIT v. Wipro Ltd. (2011) 203 Taxman 621(Karn)
• Gartner Ireland Ltd. v. ADIT(2013) Mumbai Tribunal
• Assessee company made payment to GCC Singapore and ‘N’,
Singapore in relation to sponsorship of various sports event organized
by ICC. The proprietary trademark or logo of ICC is put alongside the
assesse’s logo.
Will the payment made for the sponsorship of various sports events to
a non-resident company outside India be treated as royalty?
Hero Moto Corp. Ltd. v. Ad. CIT(2013) Delhi
Tribunal