Tax liability of a company under Assessment of Companies :
A company is chargeable to income-tax on its total income that had accrued or arisen in the previous year calculated under the different heads of income and in accordance with the basic principles explained in the initial chapters of the book. The determination of the total income of a company is dependent on whether or not the company was resident in India during the relevant previous year.
Chapter 2 discusses in detail as to how the residential status of a company is to be determined and it also explains how to determine the scope of total income of company under section 5. Students are also advised to study the provisions of section 9 explained in that chapter which has much relevance to company taxation.
Thus we may conclude that the liability of a company to tax depends on the following:
(a) Whether it is an Indian company as defined in section 2(26)?
(b) Whether the company has made the prescribed arrangements for the declaration and payment of dividends within India or not?
(c) The pattern of its shareholding: Is it a company in which the public are substantially interested or a subsidiary of such a company?