Status of indian co. with > 51% shares held by a foreign co.

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Sumeet (Querist)
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06 June 2012 Hello,

Can any one please guide me on the foll query:

If a Foreign company takes more than 51% stake in an Indian company, will the Indian company be deemed to be a Foreign company as per IT Act (as majority ownership is with a foreign company). If so, will the Indian entity be taxed at 40% plus surcharge & cess?

Management control will be with the Indian company with business operations in India and Dubai. So control is with Indian company but majority ownership is with Foreign entity. So will the tax rate 40% or 30%. Please can anyone illuminate asap?

Ca Anand Dubey

Ca Anand Dubey (Expert)
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06 June 2012 As per section 6(3)of Income Tax A company is said to be resident in India in any previous year, if—

(i) it is an Indian company ; or

(ii) during that year, the control and management60 of its affairs is situated wholly in India.
In your case your company satisfy clause (i)as its and Indian Company, even clause (ii) also .
the tax rate will be 30% as its domestic company