Circular No. 726-Income Tax Dated 18-10-1995

SECTION 194J – FEES FOR PROFESSIONAL OR TECHNICAL SERVICES

1153. Clarification regarding payments to persons resident in India by foreign companies or foreign law firms that have no presence in India
1154. Representations have been received from some law and account­ancy firms that are receiving fees for professional services from foreign companies or foreign law and accountancy firms saying that the latter find it very difficult to comply with the re­quirement of tax deduction at source under section 194J of the Income-tax Act and its payment to Central Government in the prescribed manner and within the prescribed time in the absence of any agent or business connection or permanent establishment in India. They have, therefore, requested that the provisions of section 194J of the Act may not be made applicable to the fees for professional services paid by foreign companies or foreign law and accountancy firms to persons resident in India.
1155. After carefully considering the practical difficulties involved, it is felt that, any fees paid through regular banking channels to any chartered accountant, lawyer, advocate or solici­tor who is resident in India by the non-residents who do not have any agent or business connection or permanent establishment in India may not be subject to the provisions of tax deduction at source under section 194J of the Income-tax Act.
1156. However, foreign companies or foreign law and accountancy firms are required to send a quarterly statement, indicating the name and address of the person to whom the payments are made, to the Deputy Secretary, Foreign Tax Division, CBDT, Department of Revenue, Ministry of Finance, New Delhi. The first quarterly statement would be from the quarter ending 31st December, 1995.

Circular : No. 726, dated 18-10-1995.