How does the Income Tax Act define ‘Income from Business Connection’, and what are the key factors considered in determining whether a business connection exists for taxation purposes?
✅ Q.3 – How does the Income Tax Act define ‘Income from Business Connection’, and what are the key factors considered in determining whether a business connection exists for taxation purposes? A. Meaning of “Business Connection” under the Income-tax Act The term “Business Connection” is used in Section 9(1)(i) of the Income-tax Act, 1961. It means: A relationship or connection between a non-resident and a business activity carried out in India , which results in income accruing or arising to the non-resident in India. It creates a taxable presence for foreign (non-resident) entities even if they do not have a physical office in India. B. Statutory Basis – Section 9(1)(i) Section 9(1)(i) says: Income of a non-resident is deemed to accrue in India if it arises, directly or indirectly, through: A business connection in India A source of income in India A property, asset, or capital asset in India Transfer of a business asset located in India Thus, Business Conn...