Any income accruing or arising outside India due to a business connection in India is deemed to accrue or arise in India and shall be taxable in case of all assessees irrespective of their residential status.
The term “Business Connection” shall include any business activity carried out through a person who, acting on behalf of the non-resident :
— has and habitually exercises in India, an authority to conclude contracts on behalf of the non-resident or
— habitually concludes contracts or
— habitually plays the principal role leading to conclusion of contracts by that non resident and the contracts are—
in the name of the non-resident; or
for the transfer of the ownership of, or for the granting of the right to use, property owned by that non-resident or that non-resident has the right to use; or
for the provision of services by the non-resident.
Cases Where Income Is Not Deemed To Accrue Or Arise From Business Connection in case of Non-Resident
(a) Business activity carried out through specified persons :
The term business connection shall not include any business activity carried out through a broker, general commission agent or any other agent having an independent status, if such broker, general commission agent or any other agent having an independent status is acting in the ordinary course of his business. However, where such broker, general commission agent or any other agent works mainly or wholly on behalf of a non- residents (to be referred to as the principal non-resident) or on behalf of such non-resident and other non- residents which are controlled by the principal non-resident or have a controlling interest in the principal non-resident or are subject to the same common control as the principal non-resident, he shall not be deemed to be a broker, general commission agent or an agent of an independent status.
(b) Purchase of goods in India for export [Exp. (b) to section 9(1)(i)].
In the case of non-residents, no income shall be deemed to accrue or arise in India to him through or from operations which are confined to the purchase of goods in India for the purpose of export.
No income is deemed to accrue in India to a non-resident through or from operations confined to the purchase of goods in India for export even if the purchases are made through a regular agency established in India for that purpose.
(c) Business of a news agency/publishing newspapers, etc.
In the case of a non-resident, being a person engaged in the business of running a news agency or of publishing newspaper, magazines or journals, no income shall be deemed to accrue or arise in India to him for activities, which are confined to the collection of news and views in India for transmission outside India.
(d) Income from shooting of any picture in India [Explanation (d) to section 9(1)(i)].
In the case of a non-resident, being :
an individual who is not a citizen of India; or
a firm which does not have any partner who is a citizen of India or who is residentin India; or
a company which does not have any shareholder who is a citizen of India or who is resident in India.
no income shall be deemed to accrue or arise in India to such individual, firm or company through or from operations which are confined to the shooting of any cinematograph film in India.
(e) 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 display of uncut and unassorted diamond in any Special Zone notified by the Central Government in the Official Gazette in this behalf.