Case Law (SC) – A non-resident company does not require to have a permanent office within the country to be chargeable to tax on any income accruing in India. As per Section 9, income accruing or arising, directly or indirectly, through or from any business connection in India is deemed to accrue or arise in India and is accordingly chargeable to tax as business income u/s 28 of the Act

 Pride Foramer S.A. v. CIT [ 2025 INSC 1247] dated 17.10.2025.

Issue before Court is: -

‘Whether, in the facts of the case, the appellant can be said to have been carrying on business during the relevant period, so as to avail deduction of business expenditure under Section 37(1) read with Section 71 of the Act, and carry forward unabsorbed depreciation of previous years under Section 32(2) of the Act?’

 ‘Clarification of business, purpose of business, lull in business etc.’

 Decision: -

“14. The Tribunal rightly noted a business going through a lean period of transition which could be revived if proper circumstances arose, must be termed as lull in business and not a complete cessation of the business.

15. The word ‘business’ has a wide import and connotes some real, substantial and systemic or organised course of activity or activity with a set purpose. [Narain Swadeshi Weaving Mills v. Commissioner of excess Profits Tax (1954) 2 SCC 546] In CIT v. Malayalam Plantations Ltd. (1964) 53 ITR 140 (SC). this Court further underlined that the expression ‘for the purpose of business’ is wider in scope than the expression ‘for the purpose of earning profits’ and would encompass in its fold “many other acts incidental to the carrying on of a business”. The Bench observed as follows:

“The expression ‘for the purpose of business’ is wider in scope than the expression ‘for the purpose of earning profits’. Its range is wide: it may take in not only the day-to-day running of a business but also the rationalisation of its administration and modernisation of its machinery; it may include measures for preservation of business and for protection of its assets and property from expropriation, coercive process or assertion of hostile title; it may also comprehend payment of statutory dues and taxes imposed as a pre-condition to commence or for carrying on a business; it may comprehend many other acts incidental to the carrying on of a business.” (emphasis supplied) 16. Continuous correspondences between the appellant and ONGC with regard to supply of manpower for oil drilling purposes and its unsuccessful bid in 1996 demonstrates various acts aimed at carrying on business in India which unfortunately did not fructify in procuring a contract.

17. In this factual backdrop, the High Court erred in holding that the appellant was not carrying on business as it had no subsisting contract with ONGC during the relevant period.

18. The other issue on which the High Court misdirected itself was to infer as the appellant did not have a permanent establishment and corresponded with ONGC from its foreign office, it cannot be said to carry on business in India. This view is wholly fallacious and contrary to the very scheme of the Act which does not require a non-resident company to have a permanent office within the country to be chargeable to tax on any income accruing in India.

19. A combined reading of the charging provisions under Section 4 and Section 5(2) of the Act read with Section 9(1)(i) makes it amply clear that a non-resident person shall be liable to pay tax on income which is deemed to accrue or arise in India. Under Section 9(1)(i), income accruing or arising, directly or indirectly, through or from any business connection in India is deemed to accrue or arise in India and is accordingly chargeable to tax as business income under Section 28 of the Act. None of these provisions make it mandatory for a non-resident assessee to have a permanent establishment in India to carry on business or have any business connection in India. The issue of ‘permanent establishment’ may be relevant for the purposes of availing the beneficial provisions of the Double Tax Avoidance Agreement (DTAA) between India and France which is not a relevant consideration for the purposes of this case.

20. In an era of globalisation whose life blood is trans-national trade and commerce, the High Court’s restrictive interpretation that a non-resident company making business communications with an Indian entity from its foreign office cannot be construed to be carrying on business in India is wholly anachronistic with India’s commitment to Sustainable Development Goal relating to ‘ease of doing business’ across national borders.

21. For the aforesaid reasons, we allow the appeals and set aside the judgment and order of the High Court. Orders passed by the ITAT are revived and Assessing Officer is directed to pass fresh Assessment Orders for the relevant Assessment Years in terms of the ITAT orders.”