Case Law Details
VSL India Private Limited Vs Commissioner of Service Tax (CESTAT Chennai)
CESTAT Chennai held that in agreements where one party is non-resident, it is responsibility of other Indian resident party to meet TDS obligation arising on account of the respective agreement.
Facts- The assessee had entered into an ‘Offshore Services Agreement’ with their holding company namely, M/s. VSL International Ltd., Switzerland (M/s. VSLI) whereby the holding company was to provide the appellant with requisite technical assistance in the fields of consultancy, advisory, operation and other services, as per the terms contained in the agreement. It was also clear that the above services were to be provided by the VSL group as such, including M/s. VSLI and all other subsidiary and affiliate companies with whom separate service agreements could be entered into. Thus, an agreement was signed between the appellant and M/s. VSL, Hong Kong for providing assistance in managerial, financial, sales, marketing, controls and audit, taxes, personnel and training and technical services.
Revenue alleged that as per the terms of the agreement, the appellant had to borne the TDS expenses of its AE over and above the amount shown in the invoice of AE, without including the TDS amount in the value of taxable services.
Conclusion- Held that in agreements where one is a non-resident and such nonresident doesn’t have any PE, then it becomes the responsibility of the other party who is an Indian resident, to meet with the TDS obligation arising on account of the agreement in question. Even if such clause is not there in the agreement, still the resident cannot escape the tax liability and hence it becomes incumbent upon it to deduct tax at appropriate rate, at source, before making the payment. We find that the decisions relied upon by the appellant support our above view.
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