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Which among the following is a correct statement about the residential status of a company?  1. A company can be classified as "not ordinarily resident' 2. A company can never be classified as "not ordinarily resident" 3. A company can be classified as "not ordinarily resident" with permission from the Ministry of Finance 4. A company can be classified as "not ordinarily resident' with permission from the Ministry of Commerce 

Which among the following is a correct statement about the residential status of a company?  1. A company can be classified as "not ordinarily resident' 2. A company can never be classified as "not ordinarily resident" 3. A company can be classified as "not ordinarily resident" with permission from the Ministry of Finance 4. A company can be classified as "not ordinarily resident' with permission from the Ministry of Commerce  Correct Answer 2

Companies can be classified into two residential status categories only. A company can either be a resident or non-resident.

A) Resident: A company is said to be resident in India in any previous year if i) it is an Indian company, or ii) during the year, the control and management of its affairs are situated wholly in India. 

(I) Indian Company : Section 2(26): Indian company means a company formed and registered under the Companies Act, 1956 and includes:

  1. a company formed and registered under any law relating to companies formerly in force in any part of India, other than the state of Jammu and Kashmir and the union territories,
  2. a corporation established by or under a central, or state or provincial act.
  3. any institution, association, or body which is declared by the Central Board of Direct Taxes to be a company under Section 2(17). 
  4. in the case of Jammu and Kashmir, a company formed and registered under any law for the time being in force in that state.
  5. in the case of any of the union territories of Dadra and Nagar Haweli, Daman and Diu, and Pondicherry, a company formed and registered under any law for the time being in force in that union territory.

In all the above cases, it is necessary that the registered or, as the case may be, the office of the company. corporation institution, association, or body is in India. 

(ii) Control and Management of the Affairs of the Company

  1. A non-Indian company is a resident in India if the control and management is wholly situated in India.
  2. The term "Control and Management" refers to "head and brain" which directs the affairs of policy framing, finance, disposal of profits and vital things concerning the management of a company.
  3. A company may be resident in India even though its entire trading operations are carried on abroad.
  4. If the management and control are situated in India, the company is resident in India.
  5. It does not matter where it is registered and where the act of selling and buying of the goods takes place. 

B) Non-Resident:

  1. If a company does not satisfy any of the aforesaid conditions of residence, it is said to be a 'non-resident' company.
  2. In other words, if the company is not registered in India, and its control and management is situated wholly or partially outside India, it is regarded as a non-resident. 

A company can be a resident or nonresident only. Thus, a company can never be classified as not ordinarily resident.

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