As per section 9 of Income tax act, There will be a business connection if any non resident has a business outside India but has agent in India who -
a) secures orders in India
b) maintains stock of goods for delivery of goods
c) concludes contract on behalf of non-resident
There are following exceptions i.e. income will not be taxable in case of following -
a) If such non resident purchase goods from India (even from agent) and there is
no other activity
b) Non resident has business of running a new agency or of publishing newspapers, magazines or journals (but it should not be sold in India)
c) Non resident is doing shooting of cinematography film in India (but it should not be shown in India)
Also, the foreign company can avail benefits under international treaties entered into with the country in which the foreign co. is a resident provided a Tax Residency Certificate has been obtained. This can reduce the taxability of the foreign company in India to lower rates or even to NIL rate of tax.
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