Section 220 is the substantive equivalent of 1961 s. 115 JH -- TRANSITION FRAMEWORK for foreign companies that BECOME RESIDENT in India (typically via POEM -- Place of Effective Management test under s. 6 ) for the first time. Where…
220
ITA 2025 · Section 220
Section 220 — - FOREIGN COMPANY FIRST-YEAR RESIDENT TRANSITION
Section 220 is the substantive equivalent of 1961 s. 115JH -- TRANSITION FRAMEWORK for foreign companies that BECOME RESIDENT in India (typically via POEM -- Place of Effective Management test under s. 6) for the first time. Where foreign company is RESIDENT in tax year T but was NR in earlier years, special transition adjustments apply: WDV recomputation; MAT applicability; loss / depreciation continuity; foreign income inclusion. The provision facilitates orderly transition without retroactive cascading.
BACKGROUND: FA 2015 introduced POEM (Place of Effective Management) test for company residence -- foreign company is resident in India if its POEM is in India in any tax year. CBDT Circular 6/2017 supplied POEM guidance. TRANSITION (s. 220): where foreign company becomes resident for first time, the provision provides WDV / loss / depreciation / MAT-credit transition rules per CG-prescribed Rules. Designed to avoid retroactive cascading on prior-year items. PRACTICAL: applies in cases where foreign company's effective management shifts to India (e.g., board members predominantly Indian / strategic decisions in India). POEM-driven residence is fact-intensive. PRACTITIONER: analyse POEM exposure for foreign-incorporated subsidiaries with Indian-located management; if positive POEM finding, s. 220 transition framework applies; specific Rules supply mechanics.
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