CIRCULAR NO.8 OF 2017 [F.NO.142/11/2015-TPL], DATED 23-2-2017

SECTION 6 OF THE INCOME-TAX ACT, 1961 – RESIDENTIAL STATUS – CLARIFICATION FOR DETERMINATION OF PLACE OF EFFECTIVE MANAGEMENT (POEM) OF A COMPANY, OTHER THAN AN INDIAN COMPANY

CIRCULAR NO.8 OF 2017 [F.NO.142/11/2015-TPL]DATED 23-2-2017

The concept of POEM for deciding the residential status of a company, other than an Indian company, was introduced by the Finance Act, 2015. The existing provision of clause (ii) of sub-section (3) of section 6 of the Income-tax Act, 1961 (the Act) shall come into effect from 1st April, 2017 and accordingly, applies to Assessment Year 2017-18 and subsequent years. Guiding Principles for determining POEM of a company were issued by Circular No. 6 of 2017 on 24th January, 2017. Press Release on POEM guidelines dated 24th January, 2017 has, Inter alia, stated that the POEM guidelines shall not apply to a company having turnover or gross receipts of Rs. 50 crores or less in a financial year.

2. In view of above, it is clarified that existing provision of clause (ii) of sub-section (3) of section 6 of the Act, shall not apply to a company having turnover or gross receipts of Rs. 50 crores or less in a financial year.

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