Strawberry Ltd., a non-resident German company, has the following incomes in India during the year ended on 31.03.2024: (i) Dividend income of…

CA Final · Direct Tax Laws and International Taxation · MTP · November 2024
Strawberry Ltd., a non-resident German company, has the following incomes in India during the year ended on 31.03.2024: (i) Dividend income of 12,50,000 from XY Ltd., an Indian company listed on recognized stock exchange. (ii) 8% debentures of 20,00,000 received from X Ltd., an Indian Company, on October 1, 2023, in consideration of providing technical knowhow (date of payment of interest being March 31 every year). (iii) Dividend of 5,50,000 on Global Depository Receipts of Y Ltd., an Indian company, issued under a scheme of Central Government against the initial issue of shares of the company and purchased by Strawberry Ltd. in foreign currency through an approved intermediary. (iv) Business Income of 8,00,000 from a unit established at Mumbai. (v) Income by way of royalty (other than referred to in section 44DA) amounting to 10,00,000, from Z Ltd., an Indian company, in pursuance of an agreement approved by Central Government. As per DTTA between the two countries, such royalty is taxable @22%. With brief reasons for the treatment of the above incomes, you are required to compute the tax liability of Strawberry Ltd. for the Assessment Year 2024-25.

Suggested Answer and Working Notes:

Computation of total income and tax liability of Strawberry Ltd., a non-resident German company, for the A.Y. 2024-25 Particulars ₹ Profits and gains from business or profession Business Income from a unit established at Mumbai 8,00,000 Income from other sources Dividend income from XY Ltd. an Indian company 12,50,000 Fees for technical services [would be equivalent to the amount of debentures of 20,00,000 received from an Indian company, issued in consideration of providing technical knowhow] 20,00,000 Interest on Debentures [₹ 20,00,000 x 8% x 6/12] 80,000 Dividend on Global Depository Receipts (GDRs) of Y Ltd. an Indian company, issued under a scheme of Central Government against the initial issue of Y Ltd. and purchased in foreign currency by Strawberry Ltd. 5,50,000 Royalty income received from Z Ltd. an Indian company in pursuance of an agreement approved by Central Government 10,00,000 Gross Total Income/ Total Income 56,80,000 Computation of tax liability Dividend income of 12,50,000, taxable @20% u/s 115A 2,50,000 Dividend on GDRs of 5,50,000, taxable @10% u/s 115AC 55,000 Royalty income of 10,00,000, taxable @20% u/s 115A, since it is in pursuance of an agreement approved by the Central Government 2,00,000 FTS of 20,00,000, taxable @40%, since it is not in pursuance of an agreement approved by the Central Government 8,00,000 Interest on debentures of 80,000, taxable @40%, since debt is incurred in Indian currency, it is not eligible for concessional rate of 20% u/s 115A 32,000 Business income of 8,00,000 [taxable @40%] 3,20,000 16,57,000 Add: Health and education cess@4% 66,280 Tax liability 17,23,280

Topics: Non-Resident Taxation

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