As per Effects Doctrine Extra-territorial operation of Section 195 of
the I.T Act, it was held, that any state may impose liabilities, even
upon persons not within its allegiance, for conduct outside its borders
that has consequences within its borders which the State represents.
Therefore, when the dominant purpose of entering into agreements between
the two foreigners is to acquire the controlling interest which one
foreign company held in the Indian company, by other foreign company,
the transaction would certainly be subject to municipal laws of India,
including the Indian Income Tax Act.
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