Business taxation !st chapter as per Davanagere University. Determination of Residential Status of HUF, Firm and Company- Computation of GTI of HUF, Firm and Company based on Residential status.

1. Module 1
Residential Status and Incidence of Tax
Business Taxation
Davanagere university

2. Residential Status and Incidence of Tax sec 5:
• The scope of total income of an assesse varies according to his
residential status in India. Consequently, the incidence of tax on
an assesse also varies according to such residential status in India.
Residential status is always determined for the PY because we
have to determine the total income of the PY.
• For the purpose of determining residential status. All taxable
entities are defined u/s 2(31) are classified into the following
categories
• 1.An individual 3. A firm or association of persons.
• 2. A HUF 4. A joint stock company
• 5. A local authority or every other person as per the definition.

3. Different residential status
• An individual and a HUF can either be
• 1. Resident and ordinary resident in India or
• 2. Resident but not ordinary resident in India
• 3. Non resident in India
• All other assesse ( firm, association of persons, a joint stock
company and every other persons as per the definition) can be
either be
• 1. Resident in India or
• 2. Non resident in India.

4. Different residential status of a HUF
• 1. Resident and ordinary resident :
A HUF is said to be resident and ordinary resident in India in any PY
if the control and management of its affairs is situated wholly or
partly in India during the relevant PY. In addition, the Karta of the
family should satisfy both the additional conditions given u/s6(6).
• 2. Resident and not ordinary resident :
• A HUF is said to be resident and not ordinary resident in India in
any PY if the control and management of its affairs is situated
wholly or partly in India during the relevant PY. In addition, the
Karta of the family is satisfying only one or none of the additional
conditions given u/s6(6).

5. • 3. Non Resident:
A HUF will be treated as non resident in India in the PY where the
control and management of its affairs is situated wholly outside
India.
Indian income:
1. Income received or deemed to be received in India during the
previous year. The income may accrue or arise or is deemed to
accrue or arise in India or outside India.
2. Income accrues or arise or is deemed to accrue or arise in India
during the previous year. The income may be received in India or
outside India.

6. • Foreign Income:
• 1. Any income which is not received or deemed to be received in
India.
• 2. Any Income which does not accrue or arise or does not deemed
to accrue or arise in India.

7. The following table depicts the Tax liability of HUF
Whether taxable or not
OR NOR NR
Indian Income Taxable Taxable Taxable
Foreign income Taxable Taxable only when
the income is
derived from a
business controlled
from India or a
profession set up In
India.
Not taxable.

8. Compute GTI of the family, if the family is i) OR II) NOR iii)NR
(Nov/Dec 2017 Davanagere university)
Mr. Jaggu, Karta of an HUF furnishes the following incomes for the PY 2019-20.
1. Income from business in Chennai ₹ 1.50,000.
2. Salary received by a member of HUF for working as MD of a company ₹ 80000.
3. Profit from business in Australia which is controlled from HO at Delhi ₹ 125000
4. Income from house property in London deposited in bank there ₹ 120000
5. Dividend from a domestic company ₹ 3000
6. Profit from sale of building in Srilanka received in Chennai ₹ 88000
7. Income from business in Mumbai controlled from Japan ½ received in Japan ₹ 180000
8. Directors fees received by Jaggu from a company by his own efforts ₹ 30000
9. Income from agriculture in Nepal ₹ 110000

9. Computation of GTI of the HUF for the AY 2020-21
OR(₹) NOR(₹) NR(₹)
Income from business in Chennai (Indian Income) 1.50,000 1.50,000 1.50,000
Salary received by a member of HUF for working as MD of a company (PI) NIL NIL NIL
Profit from business in Australia which is controlled from HO at Delhi 125000 125000 125000
Income from house property in London deposited in bank there 120000 NIL NIL
Dividend from a domestic company ₹ 3000(Exempt up to 10lakh u/s 10(34)) NIL NIL NIL
Profit from sale of building in Srilanka received in Chennai 88000 88000 88000
Income from business in Mumbai controlled from Japan ½ received in Japan 180000 180000 180000
Directors fees received by Jaggu from a company by his own efforts (PI) NIL NIL NIL
Income from agriculture in Nepal (Foreign Income) 110000 NIL NIL
GTI 773000 543000 418000

10. 2. From the following income earned by the HUF, compute GTI of the
HUF, if it is 1)OR 2)NOR 3)NR.
1. Dividend from an Indian Company ₹ 20000
2. Share from a partnership Firm ₹ 12000
3. Agricultural income from Srilanka ₹ 5000
4. Agricultural income from land which is situated in Bengalore ₹ 10000
5. Interest on debentures of a foreign company received in India(gross)
₹ 20000
6. Salary received by a member of the family from a company as MD ₹
50000
7. Profit on sale of building in India (computed) ₹ 25000
8. Income from HP in India (computed) ₹ 5000
9. Income from business in Kolkata managed from USA ₹ 20000
10.Winning from lottery (net) ₹ 70000 .

11. Computation of GTI of the HUF for the AY 2020-21
OR(₹) NOR(₹) NR(₹)
Dividend from an Indian Company (u/s 10(34)) exempt exempt exempt
Share from a partnership Firm (u/s10(2A)) exempt exempt exempt
Agricultural income from Srilanka 5000 NIL NIL
Agricultural income from land which is situated in Bengalore(u/s 10(1)) exempt exempt exempt
Interest on debentures of a foreign company received in India(gross) 20000 20000 20000
Salary received by a member of the family from a company as MD NIL NIL NIL
Profit on sale of building in India (computed) 25000 25000 25000
Income from HP in India (computed) 5000 5000 5000
Income from business in Kolkata managed from USA
Winning from lottery (net) 70000X100/70
20000
100000
20000
100000
20000
100000
GTI 175000 170000 170000

12. 3. From the following income earned by the HUF, compute GTI of the HUF, if it
is 1)OR 2)NOR 3)NR.
1. Income from house property in Bengalore₹ 120000
2. Profit from business in Japan, controlled from Bengalore1/3rd received in
Bengalore. ₹ 108000
3. Remuneration received by Karta for acting as Director of a company in
which the HUF holds 35% of the shares. ₹ 80000
4. Profit from sale of shop in Delhi 80000
5. Profit from business carried on by his major son for which HUF contributed
200000 capital. ₹ 75000
6. Another son Mr. Kiran an MBA graduate is working as Manager in a
company at Mumbai and is getting a salary of ₹180000per annum.
7. Rent received from house property let out at Japan ₹120000
8. Agricultural income from land in Chennai ₹220000
9. Share in income of a firm in which his younger brother is a partner and
family contributed 300000as capital. ₹ 88000
10. Interest on investment in an Indian company in the name of himself and
his wife ₹ 40800.

13. Computation of GTI of the HUF for the AY 2020-21
OR(₹) NOR(₹) NR(₹)
Income from house property in Bengalore 120000 120000 120000
Profit from business in Japan, controlled from Bengalore 108000 108000 108000
Remuneration received by Karta for acting as Director of a company in
which the HUF holds 35% of the shares.(treated as family income)
80000 80000 80000
Profit from sale of shop in Delhi 80000 80000 80000
Profit from business carried on by his major son (personal income) NIL NIL NIl
Salary of Mr. Kiran (personal Income) NIL NIL NIL
Rent received from house property let out at Japan( foreign income) 84000 NIl NIl
Agricultural income from land in Chennai (exempt u/s 10(1)) Nil NIL NIL
Share in income of a firm(exempt u/s10(2A))
Interest on investment in an Indian company
NIL
40800
NIL
40800
NIL
40800
GTI 512800 428800 356800

14. Determination of residential status of a company
• A company is resident in India in any PY if any one of the following
two conditions is satisfied:
• A) It is an Indian company as per sec 6(3)(i) or
• B) A foreign company whose turnover / gross receipt in the PY is
more than 50 crore and its place of effective management , during
the relevant PY, is in India sec6(3)(ii).

15. Determination of residential status of a Firm or other Association of
Persons etc.
• 1) Resident: A Firm or an AOP is resident in India in any PY if the
control and management of its affairs, either wholly or partly, is
situated in India in the relevant PY.
• 2) Non Resident: A firm or an AOP is non resident in India in any PY
if the control and management of its affairs is wholly outside India
in the relevant PY.

16. Following are the incomes of Sumitra Pharma Ltd. For the PY 2019-20. Find out the GTI of the
Company if it is 1. Resident Company 2. A Non resident Company.
1. Interest on deposits with an Australian Company (1/3 received in India and 2/3 in Mauritius)
630000
2. Interest on German Development Bonds (50% received in Germany and remaining 50% is
received in Mauritius) 200000
3. Dividend from a foreign company, received in Mauritius 380000
4. Profit on sale of property situated in UK (10% of the profit is received in India and 90% is
received in Mauritius, amount received in Mauritius is used for purchasing gold in India) (
the value of Gold on 31 march 2019 is 1700000) 1000000
5. Income earned from business in New Zealand (20% received in Kolkata, 70% is received in
New Zealand and 10% is received in Mauritius) 400000
6. Profit from business in Chennai ( entirely controlled and managed from Mauritius, 70% of the
profit is received in India in India and 30% in Mauritius) 700000
7. Income from commercial property situated in Mauritius, deposited in SBI branch there 610000
8. Royalty received in Mauritius for a patent Right given to a non resident ( the non resident has
utilized the patent right for development of a product in India) 280000
9. Interest received in Mauritius on money lent to Y ltd. An Indian company ( money is lent in
the UK, which is used by Y Ltd. For setting up a factory in the UK) 1900000
10. Fees for technical service rendered from a profession setup in India ( the project is
completed by the technical executives of the company in Spain. Amount is received in Spain)
1800000

17. Computation of GTI of the Sumitra Pharma Ltd. for the AY 2020-21
OR(₹) NR(₹)
Interest on deposits with an Australian Company (1/3 received in India and
2/3 in Mauritius)
630000 210000
Interest on German Development Bonds (50% received in Germany and
remaining 50% is received in Mauritius)
200000 Nil
Dividend from a foreign company, received in Mauritius 380000 Nil
Profit on sale of property situated in UK (10% of the profit is received in
India and 90% is received in Mauritius, amount received in Mauritius )
1000000 100000
Income earned from business in New Zealand 400000 80000
Profit from business in Chennai 700000 700000
Income from commercial property situated in Mauritius, deposited in SBI
branch there
610000 Nil
Royalty received in Mauritius for a patent Right given to a non resident ( the
non resident has utilized the patent right for development of a product in
India)
280000 280000
Interest received in Mauritius on money lent to Y ltd.
Fees for technical service rendered from a profession setup in India
1900000
1800000
NIL
NIL
GTI 7900000 1370000

18. 1. H.C. Mehrotra and Goy
2. al, Direct Taxes, Sahithya Bhavan Publication, Agra.
2. Vinod Singhania, Direct Taxes, Taxxman Publication Private
Ltd, New Delhi.
3. Gaur and Narang, Law and Practice of Income Tax, Kalyani
Publications, Ludhiana.
4. Bhagawathi Prasad, Direct Taxes.
5. R.G. Saha and N. Usha Devi, Income Tax (Direct Tax), HPH.
6.Dr. C. Basavanthappa , Business Taxation ,BKP.