Orange Ltd., a non-resident Japanese company, has the following incomes in India during the year ended on 31.03.2026: (i) Dividend income of…

CA Final · Direct Tax Laws and International Taxation · MTP · May 2026
Orange Ltd., a non-resident Japanese company, has the following incomes in India during the year ended on 31.03.2026: (i) Dividend income of 12,50,000 from RST Ltd., an Indian company listed on recognized stock exchange. (ii) 8% debentures of 20,00,000 received from MT Ltd., an Indian Company, on October 1, 2025, 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 TY Ltd., an Indian company, issued under a scheme of Central Government against the initial issue of shares of the company and purchased by Orange Ltd. in foreign currency through an approved intermediary. (iv) Business Income of 8,00,000 from a unit established at Madurai. (v) Income by way of royalty (other than referred to in section 44DA) amounting to 10,00,000, from ZX Ltd., an Indian company, in pursuance of an agreement approved by Central Government. As per DTAA 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 Orange Ltd. for the Assessment Year 2026-27.

Suggested Answer and Working Notes:

Computation of total income and tax liability of Orange Ltd., a non-resident German company, for the A.Y. 2026-27 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 RST 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 TY Ltd. an Indian company, issued under a scheme of Central Government against the initial issue of TY Ltd. and purchased in foreign currency by Orange Ltd. 5,50,000 Royalty income received from ZX 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 @35%, since it is not in pursuance of an agreement approved by the Central Government 7,00,000 Interest on debentures of 80,000, taxable @35%, since debt is incurred in Indian currency, it is not eligible for concessional rate of 20% u/s 115A 28,000 Business income of 8,00,000 [taxable @35%] 2,80,000 15,13,000 Add: Health and education cess@4% 60,520 Tax liability 15,73,520

Topics: Non-Resident Taxation

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