A partnership is formed in Canada by Indian and Canadian partner.
The business is of investing and renting of real estate in Canada.
Since the Indian Partner is a resident of India,
1. Will the Indian partner's share of profits (already taxed as partnership profits in Canada) from partnership be taxable in India?
2. Will the income of partnership (as assessee) be taxable in India?
As a fundamental principle under the IT Act, all resident taxpayers are subjected to tax in India on their worldwide income. In case a partnership is not organized within the meaning of the Indian Partnership Act, 1932, It will be taxed as AOP. Also, as per Section 6 of the IT Act, for a foreign partnership to qualify as a non-resident for Indian tax purposes, it is required that the control and management of its affairs is situated wholly outside India.
[As per DTAA,
INCOME FROM IMMOVABLE PROPERTY (Article 6)
Income from immovable property (including income from agriculture or forestry) may be taxed in the Contracting State in which such property is situated.
Business profits (Article 7)
The profits of an enterprise of a Contracting State shall be taxable only in that State unless the enterprise carries on business in the other Contracting State through a permanent establishment situated therein.
RESIDENCE(Article 4)
1. For the purposes of this Agreement, the term 'resident of a Contracting State' means any person who, under the laws of that State, is liable to tax therein by reason of his domicile, residence, place of management or any other criterion of a similar nature. 3. Whereby reason of the provisions of paragraph 1, a person other than an individual is a resident of both Contracting States, the competent authorities of the Contracting States shall by mutual agreement endeavour to settle the question. In the absence of such agreement, such person shall not be considered to be a resident of either Contracting State for the purposes of enjoying benefits under the Agreement. ]
Pl advise.
CAclubindia
