CBDT has issued the much awaited Guiding Principles of Place of Effective Management (POEM) of a Company which is applicable from AY 2017-18. Important features being:
1. POEM guidelines shall not apply to companies having turnover or gross receipts of Rs. Fifty (50) Crore or less in a FY.
2. Active Business outside India (ABOI) test has been provided, so as not to cover companies outside India which are engaged in active business.
3. Prior approval from Pr. CIT/ CIT required to initiate inquiry for POEM.
4. AO to obtain approval from Collegium of Pr. CIT before holding that POEM of a non-resident company is in India.
5. The intent is to target shell companies and companies which are created for retaining income outside India although real control and management of affairs is located in India.
6. It is not intended to cover foreign companies or to tax their global income, merely on the ground of presence of Permanent Establishment or Business connection in India.
