Unit 2: Residential Status of Companies - Practice Quiz

1 Which company is formed and registered under the Companies Act, 2013 or an earlier Indian company law?

2 For income-tax purposes, which company is treated as a domestic company?

3 A foreign company is generally a company that is:

4 Which of the following can qualify as a domestic company even if it was formed outside India?

5 A company in which the public are substantially interested is commonly known as:

6 A company in which the public are not substantially interested is commonly known as:

7 Under the Income-tax Act, an Indian company is treated as resident in India:

8 What is the main test used to determine whether a foreign company is resident in India?

9 What does the abbreviation POEM stand for in company taxation?

10 POEM refers to the place where:

11 The residential status of a company is determined separately for each:

12 A foreign company whose POEM is outside India during the relevant previous year is generally:

13 Can a company's residential status change from one previous year to another?

14 For residential-status purposes, a company is generally classified as:

15 A resident company's total income generally includes:

16 A non-resident company is generally taxable in India on income that:

17 The taxation of a resident company on income earned worldwide is commonly called taxation of:

18 Income deemed to accrue or arise in India is generally taxable for:

19 Foreign income that accrues and is received outside India is generally included in the total income of which company?

20 Why is a company's residential status important for income-tax purposes?

21 Under Indian income-tax law, a company incorporated in India is generally classified as which type of company for tax purposes?

22 A company incorporated in the United Kingdom operates a branch in India. How is the company generally classified under Indian tax law?

23 Which statement best describes an Indian company under the Income-tax Act?

24 A company incorporated outside India has no branch or office in India but earns royalty from an Indian customer. Which classification is most appropriate?

25 Which factor is most relevant for distinguishing a domestic company from a foreign company?

26 A foreign company establishes a wholly owned subsidiary in India. What is the status of the subsidiary if it is incorporated in India?

27 Which of the following is a tax-relevant distinction between a branch and a subsidiary of a foreign enterprise in India?

28 Under Indian income-tax law, an Indian company is treated as resident in India for which period?

29 A foreign company is considered resident in India if, during the relevant previous year, its place of effective management is located in:

30 For determining POEM, the key consideration is generally the place where:

31 The board of a foreign company formally meets in Singapore, but all important strategic decisions are made by senior management in India. Which conclusion is most appropriate?

32 The residential status of a company is normally determined separately for:

33 A foreign company has its central management team in India for one previous year and moves it permanently to Germany in the next year. What is the likely result?

34 If a foreign company has independent regional operations and decisions are made separately in several countries, which factor becomes especially important in determining POEM?

35 Which income is generally included in the total income of a company resident in India, subject to applicable provisions?

36 A non-resident foreign company earns business income from activities carried out entirely outside India, and the income is received outside India. What is the usual Indian tax position?

37 A non-resident company receives interest directly in its overseas bank account from a loan used for an Indian business. Which principle may bring the interest into Indian taxation?

38 A non-resident foreign company earns profits through a business connection in India. Which income is generally relevant for Indian taxation?

39 A non-resident company first receives sales proceeds in its foreign bank account and later remits them to India. Which statement is generally correct about the remittance itself?

40 An Indian resident company earns dividend income from a foreign subsidiary and keeps the amount in an overseas account. What is the general tax implication in India?

41 Orion Ltd. is incorporated in Singapore. It has made the prescribed arrangements for declaration and payment in India of dividends payable out of its income taxable under the Income-tax Act, 1961. Its place of effective management is in Singapore. How should Orion Ltd. be classified for the relevant previous year?

42 A company incorporated under the Companies Act in India conducts all operations abroad, holds every board meeting in Dubai, and earns no Indian-source income. Which classification is correct under the Income-tax Act?

43 Nova Inc. is incorporated in the United States and has not made the prescribed arrangements for payment of dividends in India. Its POEM is found to be in India. Which description is legally accurate?

44 Which entity may fall within the definition of "company" under section 2(17) even though it is neither incorporated under Indian law nor under foreign corporate law?

45 A public company incorporated in India has its equity shares listed on a recognized stock exchange in India on the last day of the previous year. No single shareholder holds more than of its voting power. For income-tax classification, it will ordinarily be treated as:

46 Zenith SA is incorporated in France. During the previous year, it makes the prescribed arrangements for payment in India of dividends only out of the income chargeable to Indian tax. Which conclusion follows from that fact alone?

47 A foreign company reports the following percentages under the POEM guidelines: passive income , assets situated in India , employees situated or resident in India , and payroll relating to such employees . Which result is correct?

48 A foreign company has existed for only two previous years. Its passive income and total income were respectively ₹40 crore and ₹100 crore in Year 1, and ₹60 crore and ₹100 crore in Year 2. All other active-business-outside-India conditions are met. How is the passive-income condition evaluated?

49 A foreign company satisfies the active-business-outside-India conditions, and most board meetings are held in London. Evidence shows that the board routinely approves, without evaluation, strategic instructions issued by the parent company's chief executive from Mumbai. What is the strongest conclusion?

50 Directors of a foreign company electronically sign formal resolutions while located in London and Toronto. The commercially decisive proposals are formulated, evaluated, negotiated, and finally settled by senior executives in Delhi before signature. Which location is most relevant for POEM?

51 Shareholders residing in India approve a foreign company's merger, amend its constitutional documents, and appoint directors. Its independent board and executives formulate and execute all business strategy in Germany. In the absence of other facts, where is its POEM most likely located?

52 The chief executive of a foreign company makes all strategic financing, market-entry, and acquisition decisions while working in Chennai. The same executive also performs routine treasury functions there, while manufacturing occurs entirely abroad. Which factor is decisive?

53 A foreign company carries on active business outside India, and its board genuinely makes all key decisions at meetings held in Japan. An Indian subsidiary provides accounting reports, market research, and non-binding recommendations. What is the most appropriate POEM conclusion?

54 Atlas Inc., incorporated abroad, is resident in India because its POEM is in India. During the previous year, it earns business profits in Kenya, interest from Canada, and capital gains from assets in Brazil; all amounts are first received outside India. Ignoring treaty relief, which income falls within India's scope of total income?

55 A non-resident company earns ₹12 crore from a business operated wholly outside India. The amount is first received in Paris and later remitted to an Indian bank account. It also receives interest from an Indian resident on money borrowed and used exclusively for that resident's business outside India. Ignoring treaty provisions, how much is included in Indian total income on these facts?

56 A non-resident company performs consulting services entirely outside India, has no Indian business connection, and instructs its customer to make the first payment directly into the company's bank account in Mumbai. Ignoring treaty relief, which statement is correct?

57 A non-resident company employs an executive who renders services in India for four months. Salary for those services is paid by the company's foreign head office into the executive's overseas account. Ignoring treaty relief, how is the salary characterized for Indian tax incidence?

58 A Singapore company lends money to another non-resident company. The borrower uses the funds exclusively for its manufacturing business carried on through a factory in India. Interest is paid and received outside India. Ignoring treaty relief, which statement is correct?

59 A non-resident company sells shares of a foreign company outside India. The foreign company's shares derive substantially all their value from assets located in India, and the statutory value thresholds are satisfied. No exemption applies. What is the Indian tax consequence?

60 A non-resident company whose POEM is outside India earns ₹30 crore through an Indian branch and ₹45 crore through an independent Singapore branch. Both amounts are first received outside India, and the Singapore branch has no Indian business connection. Ignoring treaty relief, what amount is within the Indian scope of total income?