Section 220 — Foreign company said to be resident in India. Successor to s.115JH of the 1961 Act.
Section 220 is in Chapter XIII — Determination of Tax in Special Cases, which runs from section 190 to section 235.
Sub-section (1) applies to a foreign company that is a resident in India in a tax year having not been a resident in earlier years. Overriding the Act and subject to conditions notified by the Central Government, the provisions on computation of total income, unabsorbed depreciation, set off and carry forward of losses, collection and recovery, and special provisions relating to avoidance of tax apply to it with the exceptions, modifications and adaptations specified in that notification for that year. Sub-section (2) extends the same treatment to any later tax year that ends on or before the date on which the assessment proceedings in which residence was determined are completed. Sub-section (3) deals with subsequent failure of a notified condition: the benefit, exemption or relief is deemed wrongly allowed, the Assessing Officer may recompute the total income as if the exceptions, modifications and adaptations had not applied, and section 287 applies with the four-year period in section 287(8) counted from the end of the tax year in which the failure occurs. Sub-section (4) requires every notification to be laid before each House of Parliament.
A foreign company that becomes resident in India moves from being taxed on Indian-source income to being taxed on worldwide income, and the Act's ordinary rules on losses, depreciation and recovery do not fit that transition; the section allows those rules to be adapted by notification for the years in question.
| What | Figure | The condition on it | Where |
|---|---|---|---|
| Period for rectification under section 287 following a failure of conditions | 4 years | The section 287(8) period, reckoned from the end of the tax year in which the failure to comply with the condition takes place | Sub-section (3)(c) |
The adaptations do not come from the section — they come from a Central Government notification, and the section only lists the five areas the notification may modify. Sub-section (2) is the practical trap: residence determined in one year's assessment pulls in every succeeding year that ended on or before the completion of that assessment, so a determination made late can reach back over several closed years. If a notified condition later fails, recomputation proceeds as though the adaptations had never applied, and the four-year rectification period runs from the end of the year of failure.
A foreign company is held, in the assessment for a tax year, to be resident in India for the first time. Sub-section (1) then applies the Act's rules on computing total income, unabsorbed depreciation, losses, collection and recovery and anti-avoidance to it with whatever exceptions, modifications and adaptations the Central Government's notification specifies — the section supplies none of them itself, and the notification has to be laid before each House of Parliament. Under sub-section (2) the same treatment carries into any later tax year that ends on or before the day that assessment proceeding was completed. If a notified condition later fails, the benefit already given is deemed wrongly allowed and the Assessing Officer may recompute, with the four-year period in section 287(8) counted from the end of the tax year in which the failure happened, not from the year the benefit was claimed.
Two places: the Central Government's notification under sub-section (1), which is where the actual modified rules live and which is laid before each House of Parliament, and the assessment proceeding in which the foreign company is first held resident. A failure of the notified conditions is met later as an order of the Assessing Officer recomputing the income, section 287 applying to it.
shall apply with such exceptions, modifications and adaptations as specified in that notification for such tax year
See the full 1961 to 2025 concordance.
See the notifications index.
