Section 9(1)(iv) — Income Deemed to Accrue or Arise in India

Section 9(1)(iv) of the Income-tax Act, 1961, deals with income that is deemed to accrue or arise in India through the transfer of a capital asset situated in India. This provision is significant as it extends the tax net to include income from the transfer of capital assets located in India, even if the transferor is a non-resident. The statutory test under this section involves determining the location of the capital asset and the nature of the transfer. The burden of proof typically lies with the taxpayer to demonstrate that the income does not fall under this provision. In practice, this section is crucial for transactions involving foreign entities that hold assets in India, ensuring that gains from such transfers are subject to Indian tax laws.

Common Litigation Flashpoints

1. Determining the situs of the capital asset
2. Characterization of the income as capital gains
3. Applicability to indirect transfers of assets
4. Interpretation of 'transfer' under the Act

Judgments on Section 9(1)(iv) — Income Deemed to Accrue or Arise in India

• Vodafone International Holdings B.V. vs Union of India & Anr. — SC,
  Section 9 of the Income Tax Act does not cover indirect transfers of capital assets situated in India.
• The Authority for Advance Rulings (Income Tax) and Others vs Tiger Global International II Holdings — SC,
  The DTAA between India and Mauritius allows capital gains to be taxed only in Mauritius, provided the entity holds a valid TRC.
• The Commissioner of Income-Tax, Bombay City II vs Shri Sitaldas Tirathdas — SC,
  Income is not deductible if it is applied to discharge an obligation after it reaches the assessee.
• Aditya Birla Nuvo Limited vs The Deputy Director of Income-tax — HC,
  The beneficial ownership of shares, despite being registered in the name of a permitted transferee, determines the taxability of capital gains in India.