Section 5(2) of the Income-tax Act provides that a Non resident is liable to tax in respect of Income received or deemed to be received in India by or on his behalf and income that accrues or arises or deemed to accrue or arise in India during the previous year.
As per Section 9, certain incomes are deemed to accrue or arise in India even though they may actually accrue or arise outside India. This section is applicable to all assessees irrespective of the residential status , nationality,domicle and place of business.
In the given case, we need to determine whether the company is having any business connection in India. In order to determine the business connection, the following conditions shall be satisfied :-
1) The taxpayer has a "business connection" in India
2) by virtue of the "business connection" in India, income actually arises outside India.
Meaning of Business connection :-
It includes a profession connection. It includes a person acting on behalf of a non-resident and who performs any one or more of the following :-
a) He exercises in India an authority to conclude contracts on behalf of the non resident
b) He has no such authority but habitually maintains in India a stock of goods from which he regularly delivers goods on behalf of the non-resident.
c) He habitually secures order in India for the non-resident or for non residents under the same managment.
If these conditions are satisfied, it will be taxable in India