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Special Provisions for Foreign Company said to be resident in India – Section 115JH.

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June 5, 2021 |

5 mins read

Bird’s Eye view of the ‘Special Provisions for Foreign Company said to be resident in India- Section 115JH’

Concept of taxation Non-Resident Taxation
Provision of Income Tax Act, 1961 Section 115JH
Provision deals with Taxation of Foreign Company which is resident in India

Special Provisions for Foreign Company said to be resident in India – Section 115JH of Income Tax Act

  • An Indian company, which is liable to file tax return in India, has to follow a particular procedure for filing return of income. It is also allowed to certain beneficial provisions like, carry forward and set off of losses of earlier years against taxable income , carry forward of unabsorbed depreciation, etc.
  • A foreign company, which becomes a tax resident in India for the first time ever, in any particular previous year, may also have similar losses etc., for earlier years, even though it did not file its return of income/was not liable for tax in India. In such a case, the issue which arises is that  how shall the provisions of the IT Act apply to such company. For this purpose, Section 115JH read with Notification No. SO 3039 (E) No . 29/2018 (F.No.370142/19/2017-TPL) , dated 22.6.2018, provides that the following provisions shall apply to the foreign company with such exceptions, modifications and adaptations as may be specified in the notification –
    • The computation of total income,
    • Treatment of unabsorbed depreciation,
    • Set off or carry forward and set off of losses,
    • Collection and recovery and special provisions relating to avoidance of tax

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  • However, if the foreign company did not file a tax return in India/ claimed itself as a non-resident,  then, the provisions of this section shall also apply in respect of any other previous year, succeeding such previous year for which the assessment is made, provided : –
    • Foreign company is resident in India in such succeeding previous year
    • Previous year ends on or before the date on which such assessment proceeding is completed.
  • A foreign company may claim a benefit, exemption or relief in a previous year, which is subject to certain conditions specified in the notification. If such a relief has been claimed and granted to the Foreign Company, and, subsequently, the foreign company fails to comply with any of such conditions, then,
    • Such benefit, exemption or relief shall be deemed to have been wrongly allowed,
    • The Assessing Officer may re-compute the total income of the assessee on the basis that the benefits so claimed were not available; and.
    • For the purpose of rectification u/s 154, the period of 4 years would be considered from the end of the previous year in which the failure to comply with the conditions takes place.

Every notification issued under this Section shall be laid before both the House of Parliament

For any queries, please write them in the Comment Section or Talk to our tax expert

Arinjay Jain

Bio of author

Arinjay is a Chartered Accountant with more than 20 years of post-qualification experience. He worked as Director, in the M&A Tax Division at KPMG in India. Presently, he is advising several MNCs in UAE on Economic Substance Regulations and impact of the UAE Corporate Tax Law on their business and clients across globe on International Tax issues . He is a well recognised Trainer of International Tax and UAE Corporate Tax. The areas of service include the following : - Advise and Compliance relating to International Tax Issues; Advise relating to UAE Corporate Tax Issues; Advise and Compliance relating to UAE Economic Substance Regulations; Advise and Compliance relating to Indian Income Tax Issues; Other connected matters from a Regulatory perspective.

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