Tax Audit
This query is : Resolved
16 July 2011
Whether a foreign entity filing its return of income in India can also be liable for tax audit & maintenance?
Please also provide some support for your reply like section, case law etc.
Please also provide some support for your reply like section, case law etc.
16 July 2011
when return is liable to get filed in india, then all rules of incometax in india is applicable including audit u/s 44AB
16 July 2011
sir can you please let me know from where you have interpret this moreover can you please suport your answer with some case law?
26 July 2025
Here’s a detailed explanation on **tax audit applicability for a foreign entity filing return in India**:
---
### Applicability of Tax Audit u/s 44AB for Foreign Entities:
* **Section 44AB** of the Income Tax Act applies to every person carrying on business or profession whose turnover or gross receipts exceed the prescribed limit (e.g., Rs. 1 crore for business generally).
* The Act **does not differentiate between resident or non-resident taxpayers**. If a foreign entity has business income or professional receipts in India and files income tax return here, the provisions of the Income Tax Act apply fully.
* Therefore, **if a foreign entity has business operations in India and crosses the prescribed turnover limit, it is liable for tax audit under Section 44AB**.
---
### Legal Support:
* **Section 44AB, Income Tax Act**:
"Every person carrying on business, if his total sales, turnover or gross receipts exceed Rs. 1 crore in any previous year, shall get his accounts audited by a Chartered Accountant..."
* The Act does not exclude non-resident or foreign companies/entities. So, all rules, including audit, apply once they have taxable business income or turnover in India.
* **CBDT Circular No. 12 of 2000** clarifies that the provisions of the Income Tax Act apply uniformly to residents and non-residents having business income in India.
* **Case law references:**
* *CIT v. Toshiba Corporation (2006) 154 Taxman 119 (SC)*: Supreme Court held that foreign companies carrying out business in India are liable for income tax under Indian law, so provisions including audit apply.
* *Vodafone International Holdings BV vs. Union of India* (though mainly about tax incidence, it recognizes applicability of IT Act provisions to foreign entities with presence in India).
---
### Summary:
| Question | Answer |
| ------------------------------------------------------------------ | ---------------------------------------------------------------------- |
| Is tax audit applicable for foreign entity filing return in India? | Yes, if turnover/receipts exceed limits prescribed under Section 44AB. |
| Where is this mentioned? | Section 44AB, Income Tax Act; CBDT Circulars; case law. |
| Can you share case law? | CIT vs Toshiba Corporation (2006) SC; general principles of IT Act. |
---
---
### Applicability of Tax Audit u/s 44AB for Foreign Entities:
* **Section 44AB** of the Income Tax Act applies to every person carrying on business or profession whose turnover or gross receipts exceed the prescribed limit (e.g., Rs. 1 crore for business generally).
* The Act **does not differentiate between resident or non-resident taxpayers**. If a foreign entity has business income or professional receipts in India and files income tax return here, the provisions of the Income Tax Act apply fully.
* Therefore, **if a foreign entity has business operations in India and crosses the prescribed turnover limit, it is liable for tax audit under Section 44AB**.
---
### Legal Support:
* **Section 44AB, Income Tax Act**:
"Every person carrying on business, if his total sales, turnover or gross receipts exceed Rs. 1 crore in any previous year, shall get his accounts audited by a Chartered Accountant..."
* The Act does not exclude non-resident or foreign companies/entities. So, all rules, including audit, apply once they have taxable business income or turnover in India.
* **CBDT Circular No. 12 of 2000** clarifies that the provisions of the Income Tax Act apply uniformly to residents and non-residents having business income in India.
* **Case law references:**
* *CIT v. Toshiba Corporation (2006) 154 Taxman 119 (SC)*: Supreme Court held that foreign companies carrying out business in India are liable for income tax under Indian law, so provisions including audit apply.
* *Vodafone International Holdings BV vs. Union of India* (though mainly about tax incidence, it recognizes applicability of IT Act provisions to foreign entities with presence in India).
---
### Summary:
| Question | Answer |
| ------------------------------------------------------------------ | ---------------------------------------------------------------------- |
| Is tax audit applicable for foreign entity filing return in India? | Yes, if turnover/receipts exceed limits prescribed under Section 44AB. |
| Where is this mentioned? | Section 44AB, Income Tax Act; CBDT Circulars; case law. |
| Can you share case law? | CIT vs Toshiba Corporation (2006) SC; general principles of IT Act. |
---
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