Case Study – 1

• Company  A  Co.  is  a  sourcing  entity,  for  an  Indian  multinational  group, incorporated  in  country  X  and  is  100%  subsidiary  of  Indian  company  (B  Co.).   The warehouses and stock  in them are  the only  assets of the company  and  are located in country  X.   All  the  employees  of  the  company  are  also  in  country  X.   The  average income wise breakup of the company’s total income for three years is,

(i) 30% of income is from transaction where purchases are made from   parties which are non-associated enterprises and sold to associated     enterprises;

(ii) 30% of income  is from  transaction where  purchases  are  made      from associated enterprises and sold to associated enterprises;

(iii) 30% of income is from  transaction where  purchases  are  made      from associated enterprises and sold to non-associated enterprises; and

(iv) 10% of the income is by way of interest.

Case Study – 2

• The  other  facts remain same as  that  in  Case Study  1 with the variation  that  A Co. has a total of 50 employees. 47 employees, managing the warehouse, storekeeping and accounts of the company,  are located in country X. The Managing Director  (MD), Chief Executive Officer  (CEO)  and sales  head  are resident  in  India. The  total  annual payroll  expenditure  on  these  50  employees  is  of  Rs.5 Crore.   The  annual  payroll expenditure in respect of MD, CEO and sales head  is of Rs.3 Crore.

Case Study – 3 & 4

• Case study 3 – The basic facts are same as in  Case study  1. Further facts are that all the directors  of  the  A  Co.  are  Indian  residents.   During  the  relevant  previous  year  5 meetings of the Board of Directors is held of which two  were held in India and 3 outside India with two in country X and one in country Y.
• Case study 4 – The facts are same as in  Example  3 but it is established by the Assessing Officer that although A Co.’s senior management team signs all the contracts, for all the contracts above Rs. 10 lakh the A  Co.  must submit its recommendation to B Co. and B Co. makes the decision whether or not the contract may be accepted. It is also seen that during the previous year more than 99% of the contracts are above Rs. 10 lakh and over past years also  the  same trend in respect of  value contribution of contracts above Rs. 10 lakh is seen.

Case Study 5

• An Indian multinational group has a local holding company A Co. in country X. The A Co. also has 100% downstream subsidiaries B Co. and C Co. in country X and D Co. in country Y.
• The A Co. has income only by way of dividend and interest from investments made in its subsidiaries. The Place of Effective Management (POEM)of A Co. is in India and is exercised by  ultimate  parent company of the group.
• The subsidiaries B, C and D are engaged in active business outside India. The meetings of Board of Director of B Co., C Co. and D Co. are held in country X and Y respectively.
• Is POEM of subsidiaries deemed to be in India?