Withholding tax

Basics of Section 195 of Income Tax Act, 1961

Income Tax - To Whom does Section 195 applies? a) A resident Making Payment to Non-Resident and, b) A Non-Resident making payment to a Non-resident. As per Section 195, it says Any person responsible for paying to non-resident…any person not only includes Resident but also non-resident making payment to a non-resident...

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Form 15CA & 15CB- Things to be kept in mind

Income Tax - The new rules for preparation, filing/ issuing forms 15CA and 15CB are effective from 01st April’2016. With these new rules coming into effect significant changes have come into effect for furnishing forms 15CA & 15CB. Some of the key changes for furnishing form 15CA & 15CB that have come into effect from 01st April’2016 are: ...

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Interesting Cases for TDS u/s 195 – Foreign Remittance from India

Income Tax - Withholding taxes u/s 195 in respect of transactions with Non-Residents has always been a bone of contention between Assessee and tax authorities. Though liability for deduction of TDS is clear in respect of some transactions like royalties, fees for technical services, interest etc., ...

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Foreign Remittance: TDS u/s 195: Reimbursement of Expenses

Income Tax - Taxability of Reimbursement of expenses has always been a contentious issue. In most of the cases, assessee gets away with non-taxability of reimbursement of expenses on the plea of no profit element. However, in some cases, even without profit element, tax authorities and courts have held reimbursement of expenses as income of recipient ...

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A brief Study on International Taxation

Income Tax - International taxation in a simple language means the study of Taxation beyond the National Level. Though we all are very much aware about our Indian Taxation Laws but as time is demanding something more so, there is a need to study the taxation at another level....

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Additional Income-tax on distributed income by company for buy-back of unlisted shares

Income Tax - 20% Withholding Tax Rate on profits distributed by unlisted companies to shareholders through buy-back of shares Existing provisions of Section 2(22)(e) provide the definition of dividends for the purposes of the Income-tax Act. Section 115- O provides for levy of Dividend Distribution Tax(DDT) on the company at the time when company dist...

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Vodafone pays over USD 400 mn more to buy Essar's 33 per cent stake

Income Tax - Ending year-long battle, UK-based Vodafone has agreed to pay USD 400 million more to its Indian partner Essar for buying its 33 percent stake in the joint venture Vodafone-Essar. With this, Essar closed the deal to sell its 33 percent stake at USD 5.46 billion as against USD 5 billion decided earlier. ...

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After Vodafone verdict IT department will investigate more cross-border mergers involving Indian assets

Income Tax - The government will look into more cross-border mergers involving Indian assets, like the Vodafone-Hutchison deal, after the Bombay High Court on Wednesday rejected UK-based Vodafone's petition against the imposition of tax by authorities here....

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Reminder : Person receiving income subject to withholding tax is required to obtain Permanent Account Number (PAN)

Income Tax - The Finance (No.2) Act of 2009 introduced section 206AA under the Income Tax Act, 1961 (the ITA) to provide that any person who is entitled to receive any sum or income or amount, on which tax is to be withheld under the ITA shall furnish PAN to the person responsible for withholding of tax. In case PAN is not furnished, minimum withholdi...

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Replacement of dividend distribution tax with withholding tax to boost business

Income Tax - The cost of doing business in India could come down if the dividend distribution tax (DDT) levied on foreign shareholders is replaced with a withholding tax as under the current system, apex chamber Ficci has said. According to the chamber, foreign shareholders are unable to claim credit in the home country for DDT paid in India, resultin...

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No penalty for deduction of TDS at Lower Rate under wrong section

Jitendra Sharma Vs JCIT (Intl Taxation) (ITAT Indore) - Jitendra Sharma Vs JCIT (Intl Taxation) (ITAT Indore) ITAT Indore held that no penalty under Section 271C to be levied for deduction of tax under Section 194IA @1% instead of Section 195 @ 20.6% on purchase of property from Non Resident. FULL TEXT OF THE ITAT JUDGEMENT The above captioned appeals fi...

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Section 195- Withholding Tax- Royalty- Levy of Surcharge & cess

M/s. Wipro Limited Vs Add. CIT (ITAT Bangalore) - M/s. Wipro Limited Vs ACIT (ITAT Bangalore) In this case relief was allowed by learned CIT (A) in respect of levy of surcharge and cess by directing the AO that surcharge and cess should be levied only in the cases where the non resident vendors are residents of countries with which DTAA allows with...

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No income tax on Revenue from IDC/Management /Referral Agreement under India-Singapore DTAA

Edenred Pte Ltd Vs DDIT (International Taxation) (ITAT Delhi) - The issue under consideration is whether income tax levied on revenue received from IDC agreement, management agreement, and referral agreement as per the India-Singapore DTAA?...

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Interest Income as ‘Beneficial owner’ cannot be taxed under Article 11(3)(c) of India-Mauritius Tax Treaty

DCIT Vs HSBC Bank (Mauritius) Ltd. (ITAT Mumbai) - The issue under consideration is whether as per India-Mauritius DTAA, Interest Income from Foreign Currency loan and Securities would be eligible to tax in India?...

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Non-compete fees paid to employee is part of salary & hence Not Taxable in India as per DTAA

The Director of Income-Tax Vs Sasken Communication Technologies Ltd. (Karnataka High Court) - The issue under consideration is whether the amount paid to the employees under the non-compete agreement is covered by the expression ‘salary/profits in lieu of salary’ or not? and If not then whether the TDS will be applicable or not?...

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S. 40(a)(i) Tax Withholding on ‘Other sum chargeable’ of non residents

F.No.500/39/2015 (US FT & TR-V) - (26/10/2016) - For the purpose of making disallowance of other sums chargeable under Section 40(a)(i) of the Income-tax Act, 1961, in the case of non-residents, the appropriate portion of the sum chargeable to tax under the Act, ie, income component therein shall form the basis of such disallowance....

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Relaxation from deduction of tax at higher rate U/s. 206AA

Notification No. 53/2016-Income Tax - (24/06/2016) - 37BC. Relaxation from deduction of tax at higher rate under section 206AA.– (1) In the case of a non-resident, not being a company, or a foreign company and not having PAN the provisions of section 206AA shall not apply in respect of payments in the nature of interest, royalty, fees for technical ...

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CBDT relaxes conditions for furnishing of Form 15CA & Form 15CB

Notification No. 93/2015 - Income Tax - (16/12/2015) - Notification No. 93/2015 - Income Tax G.S.R. 978(E) dated 16th December, 2015 A CA certificate in Form No. 15CB will be required to be furnished only in respect of such payments made to non-residents which are chargeable to tax and the amount of payment during the year exceeds Rs. 5 lakh. No Form 15...

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Recent Posts in "Withholding tax"

No penalty for deduction of TDS at Lower Rate under wrong section

Jitendra Sharma Vs JCIT (Intl Taxation) (ITAT Indore)

Jitendra Sharma Vs JCIT (Intl Taxation) (ITAT Indore) ITAT Indore held that no penalty under Section 271C to be levied for deduction of tax under Section 194IA @1% instead of Section 195 @ 20.6% on purchase of property from Non Resident. FULL TEXT OF THE ITAT JUDGEMENT The above captioned appeals filed at the instances […]...

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Section 195- Withholding Tax- Royalty- Levy of Surcharge & cess

M/s. Wipro Limited Vs Add. CIT (ITAT Bangalore)

M/s. Wipro Limited Vs ACIT (ITAT Bangalore) In this case relief was allowed by learned CIT (A) in respect of levy of surcharge and cess by directing the AO that surcharge and cess should be levied only in the cases where the non resident vendors are residents of countries with which DTAA allows withholding rate […]...

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No income tax on Revenue from IDC/Management /Referral Agreement under India-Singapore DTAA

Edenred Pte Ltd Vs DDIT (International Taxation) (ITAT Delhi)

The issue under consideration is whether income tax levied on revenue received from IDC agreement, management agreement, and referral agreement as per the India-Singapore DTAA?...

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Interest Income as ‘Beneficial owner’ cannot be taxed under Article 11(3)(c) of India-Mauritius Tax Treaty

DCIT Vs HSBC Bank (Mauritius) Ltd. (ITAT Mumbai)

The issue under consideration is whether as per India-Mauritius DTAA, Interest Income from Foreign Currency loan and Securities would be eligible to tax in India?...

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Basics of Section 195 of Income Tax Act, 1961

To Whom does Section 195 applies? a) A resident Making Payment to Non-Resident and, b) A Non-Resident making payment to a Non-resident. As per Section 195, it says Any person responsible for paying to non-resident…any person not only includes Resident but also non-resident making payment to a non-resident...

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Posted Under: Income Tax |

Non-compete fees paid to employee is part of salary & hence Not Taxable in India as per DTAA

The Director of Income-Tax Vs Sasken Communication Technologies Ltd. (Karnataka High Court)

The issue under consideration is whether the amount paid to the employees under the non-compete agreement is covered by the expression ‘salary/profits in lieu of salary’ or not? and If not then whether the TDS will be applicable or not?...

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DTAA overrides the Act, even if it is Inconsistent with the Act

DCIT Vs Bharath Fritz Werner Ltd. (ITAT Bangalore)

whether the assessee has to deduct tax at source at the rates prescribed in section 206AA in case the payees are unable to furnish their PANs, even if tax liability arises out of the treaty?...

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Form 15CA & 15CB- Things to be kept in mind

The new rules for preparation, filing/ issuing forms 15CA and 15CB are effective from 01st April’2016. With these new rules coming into effect significant changes have come into effect for furnishing forms 15CA & 15CB. Some of the key changes for furnishing form 15CA & 15CB that have come into effect from 01st April’2016 are: ...

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Posted Under: Income Tax | ,

Interesting Cases for TDS u/s 195 – Foreign Remittance from India

Withholding taxes u/s 195 in respect of transactions with Non-Residents has always been a bone of contention between Assessee and tax authorities. Though liability for deduction of TDS is clear in respect of some transactions like royalties, fees for technical services, interest etc., ...

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Posted Under: Income Tax |

Reimbursement of Audit fees to foreign parent company: Taxable

SPX India Pvt. Ltd. Vs CIT (ITAT Delhi)

SPX India Pvt. Ltd. Vs CIT (ITAT Delhi) Tax was required to be deducted at source on share of ISO audit expenses paid to foreign parent company, as element of income was embedded in receipt of auditor.  FULL TEXT OF THE ITAT JUDGEMENT Assessee is in appeal before us against the order of ld. CIT […]...

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Reimbursement of technical expenses-Cost Allocation: Non-Taxable

Bureau Veritas-Indian Division Vs ADIT (ITAT Mumbai)

Bureau Veritas-Indian Division Vs ADIT (ITAT Mumbai) Technical expenses allocated by head office to assessee-Indian division was in nature of reimbursement of technical expenses to head office and not on account of any specific technical services having been ‘made available’ and, therefore, such amount could not be brought to ...

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No TDS on reimbursement of expenses to Sister concern on Cost basis

ITO Vs Vishinda Diamonds (ITAT Mumbai)

ITO Vs Vishinda Diamonds (ITAT Mumbai) Sister concern made purchases of rough diamonds on behalf of assessee. Sister concern made payment of core service charges to vendor after deducting tax at rate of 15 per cent as per article 13 of the India-UK DTAA. Assessee reimbursed expenses to sister concern. HELD, There was no element […]...

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Per-Day Allowance during employee stay abroad: Non-Taxable

CIT Vs Information Architects (Bombay High Court)

CIT Vs Information Architects (Bombay High Court) The amounts paid by the assessee to its employees towards overseas maintenance allowance. These amounts were paid towards expenses at the rate of IEP 50 per day per employee. Held that these amounts constitute only reimbursement for the expenses incurred by the employees at a particular am...

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No TDS on Reimbursement of cost to cost management expenses to parent company

CIT Vs Expeditors International (India) (P.) Ltd. (Delhi High Court)

CIT Vs Expeditors International (India) (P.) Ltd. (Delhi High Court) Assessee-company was engaged in business of supplying chain management, logistics and freight forwarding related to movement of goods and cargo within India or outside by road, rail, air or ship – It involved activities of packing, loading/unloading, trucking, tend...

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No Tax on Payment for link charges to USA telecom service providers

Convergys Customer Management Group Inc. Vs ADIT (ITAT Delhi)

Convergys Customer Management Group Inc. Vs ADIT (ITAT Delhi) The assessee made payment for link charges to telecom service providers in the USA and cross-charged the portion of the cost incurred by it in connection with the India half link to CIS, which was accordingly reimbursed by CIS to assessee. The assessee has merely procured [&hel...

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Foreign Remittance: TDS u/s 195: Reimbursement of Expenses

Taxability of Reimbursement of expenses has always been a contentious issue. In most of the cases, assessee gets away with non-taxability of reimbursement of expenses on the plea of no profit element. However, in some cases, even without profit element, tax authorities and courts have held reimbursement of expenses as income of recipient ...

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Posted Under: Income Tax | ,

A brief Study on International Taxation

International taxation in a simple language means the study of Taxation beyond the National Level. Though we all are very much aware about our Indian Taxation Laws but as time is demanding something more so, there is a need to study the taxation at another level....

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Posted Under: Income Tax |

Air France Pool Participation Income Not Taxable in India as per DTAA

Air France Vs Addl. CIT International Taxation (ITAT Delhi)

Air France Vs Addl. CIT International Taxation (ITAT Delhi) The issue under consideration is whether Indian branch is deriving income from technical handling to IATP Pool Members and non IATP Members is taxable in India? ITAT states that, in the present case, it can be seen that the Indian Branch office is merely a branch […]...

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Form 15CA & Form 15CB- Compliance for Foreign Remittances

About Form 15 CA and Form 15 CB: The Income Tax Law of our country requires authentication of foreign remittances (payments) made to a Non Resident or Foreign Company, for any amount which is taxable as per the existing laws. For this purpose, certain rules and guidelines have been framed by the Income Tax Act for making foreign remittanc...

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Capital Gains of Cyprus Co not taxable in India as per DTAA prevailing at that time

DCIT Vs Narmil Infosolutions Pvt. Ltd. (ITAT Delhi)

The issue under consideration is whether the sale of shares by a Cyprus company to the assessee of an Indian company, who was holding a technology Park [immovable property] as only asset, is taxable in India in view of the Double Taxation Avoidance Agreement between India and Cyprus?...

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Countrywise Withholding tax rates / Chart as per DTAA

Country wise Withholding tax rate on Dividend (not being covered under Section 115-O), Interest, Royalty and Fee for Technical Services ...

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Posted Under: Income Tax |

Countrywise Withholding Tax rates as per IT Act vis a vis Tax Treaties/DTAA

Certain income of non-resident, inter-alia, dividend, interest, royalty or fees for technical services shall be taxable as per the rates prescribed under the Income-tax Act or as per the rates prescribed under the DTAAs, whichever is more beneficial to such non-resident. ...

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Posted Under: Income Tax |

TDS on legal service received from outside India

Legal fees is deemed to accrue or arise in India, whether or not non-resident has place of business in india or has rendered services in India. ...

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Posted Under: Income Tax |

How to e-File Form 15CA and 15CB

In this article we have discussed the procedure for e-filing of form 15CA and Form 15CB by remitter and Chartered Accountant using their digital Signature on e-filing website of Income Tax Department i.e. http://incometaxindiaefiling.gov.in...

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Exemption from PAN furnishing U/s. 206AA to non-resident

In order to reduce compliance burden, it is proposed to amend the said section 206AA so as to provide that the provisions of this section shall also not apply to a non-resident, not being a company, or to a foreign company, in respect of any other payment, other than interest on bonds, subject to such conditions as may be prescribed....

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Posted Under: Income Tax |

TDS on Foreign Payment for Event to be held outside India

As per section 195(1) of Income Tax Act, any person responsible to for paying to a non-resident, not being a company, or to a foreign company, any interest or any other sum chargeable to tax shall, at the time of credit of such income or at the time of payment, whichever is earlier, deduct income-tax thereon at the rates as applicable....

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Posted Under: Income Tax |

Section 195 TDS on Commission paid to Non-resident: An Analysis

Please also refer the case JLC Electromet Pvt. Ltd. Vs ACIT (ITAT Jaipur).  I’m trying to analyse only some of the provisions applicable, only for understanding purpose. As per Section 195 of Income Tax Act, any person who makes payment to non-resident by way of interest (except the interest as specified in Sections 194LB or […]...

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Posted Under: Income Tax |

Section 195(1) & 40(a)(ia) talks about tax deduction where sum is chargeable to tax

JLC Electromet Pvt. Ltd. Vs ACIT (ITAT Jaipur)

Coming to the provisions of section 40(a)(ia) of the Act, the said section also provides that any interest, royalty, fees for technical services or other sum chargeable under this Act on which tax is deductible at source under chapter XVII-B and such tax has not been deducted or after deduction has not been paid on or before the due date ...

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Section 206AA not override provisions of section 90(2)

DCIT Vs BEML Ltd. (ITAT Bangalore)

Section 206AA does not override provisions of section 90(2) and in case of payment made to non-resident, assessee correctly applied rate of tax prescribed under concerned DTAAs and not as per section 206AA because provisions of the DTAAs were more beneficial and DTAA acquired primacy in such case....

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No TDS on Commission to non-resident agents for procuring export orders

Punjab Stainless Steel Inds. Vs ACIT (ITAT Delhi)

Commission paid to foreign agents for procuring export orders could not be treated as income taxable in India when parameters of DTAAs were applied to transactions in question. Also non-resident agents did not have PE or business connection in India. Therefore, impugned payment could not be held as taxable in the hands of non-resident age...

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Basic Understanding on Form 15CA and 15CB

Earlier, the person making a remittance to Non-Resident was required to furnish a certificate in specified format circulated by RBI. Basic purpose was to collect the taxes at a stage when the remittance is made as it may not be possible to collect the tax from the NR at a later stage....

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TDS on Commission to foreign agents having No PE in India for services rendered outside India

Vimta Labs Limited Vs DCIT (ITAT Hyderabad)

ITAT held that the business receipts of the foreign residents are not taxable in India since the agents have no PE in India and therefore, the assessee was not required to make TDS u/s 195 of the Act. Therefore, the assessee’s appeals for all the three A.Ys are allowed....

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Section 195 TDS on payment of any other sum to a non-resident

Provisions of tax deduction at source (TDS) with regard to payment of any other sum to a non-resident is covered under section 195 of the Income Tax Act, 1961 which are explained hereunder....

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Posted Under: Income Tax |

TDS u/s 195 cannot be deducted in case no title in goods passed from foreign suppliers to assessee outside India

Organising Committee for Winter Games, 2009 Vs DCIT (ITAT Delhi)

Since the title in goods passed from foreign suppliers to assessee outside India at the port of shipment and AO failed to show as to how income of foreign parties was chargeable to tax in India, therefore,  no income had accrued to foreign parties in India in terms of section 5 and section 9, therefore, section 195 did not apply to payme...

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Software purchased across the counter as shrink proof software is not akin to royalty

Opus Software Solutions Pvt. Ltd. Vs ACIT (ITAT Pune)

It was held that where the software is purchased across the counter as shrink proof software, then it is not akin to royalty both under the Income Tax Act or the DTAA. The Tribunal held that since the definition of ‘royalty’ has not been amended under DTAA,...

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Posted Under: Income Tax |

Tax Deducted at Source on Payments to Non Residents

I am trying to start the series of Frequently Asked Questions on Payments to Non Residents. I have prepared the same based on my past experience and based on questions asked to me by my clients or professional colleagues....

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Posted Under: Income Tax |

Section 40(a)(i) not applicable if No tax is deductible U/s. 195(1)

Barclays Bank Plc, Mumbai Vs Addl. DIT (ITAT Mumbai)

If no tax is deductible under section 195(1), section 40(a)(i) of the IT Act will not come in the way of the appellant claiming such deduction from its income: Barclays Bank Plc case...

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Applicability of DTAA cannot be determined suo-moto by AO

M/s. Google India Private Ltd. Vs. Addl. CIT (ITAT Bangalore)

M/s. Google India Private Ltd. Vs. Addl. CIT (ITAT Bangalore); TDS on royalty payments under section 195(2): Applicability of DTAA cannot be determined suo-moto by AO without there being any application...

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Section 206AA not overrides other provisions of Income Tax Act, 1961

Nagarjuna Fertilizers and Chemicals Limited Vs ACIT (ITAT Hyderabad)

Assessee cannot be held liable to deduct tax at higher of the rates prescribed in section 206AA in case of payments made to non-resident persons having taxable income in India in spite of their failure to furnish the Permanent Account Numbers....

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Budget 2017-Person responsible for paying’ in case of payments covered U/s. 195(6)

The existing provisions of section 204 of Act, has defined the meaning of 'person responsible for paying' to include employer, company or its principal officer or the payer. Further clause (iii) of section 204 of the Act, inter alia, provides that in the case of credit or payment of any sum chargeable under the provisions of this Act...

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Posted Under: Income Tax |

S. 40(a)(i) Tax Withholding on ‘Other sum chargeable’ of non residents

F.No.500/39/2015 (US FT & TR-V) (26/10/2016)

For the purpose of making disallowance of other sums chargeable under Section 40(a)(i) of the Income-tax Act, 1961, in the case of non-residents, the appropriate portion of the sum chargeable to tax under the Act, ie, income component therein shall form the basis of such disallowance....

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All about Section 206AA read with Rule 37BC & recent Changes

All about Section 206AA of Income Tax Act, 1961 to be read with Rule 37BC of Income Tax Rules, 1962 alognwith recent changes as applicable from 24th June 2016 after considering the amendment effected by Notification No. 53/2016-Income Tax dated: 24.06.2016. Section-206AA Analysis (1) Notwithstanding anything contained in any other provisi...

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Posted Under: Income Tax |

Relaxation from deduction of tax at higher rate U/s. 206AA

Notification No. 53/2016-Income Tax (24/06/2016)

37BC. Relaxation from deduction of tax at higher rate under section 206AA.– (1) In the case of a non-resident, not being a company, or a foreign company and not having PAN the provisions of section 206AA shall not apply in respect of payments in the nature of interest, royalty, fees for technical services and payments on transfer of any...

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CBDT relaxes conditions for furnishing of Form 15CA & Form 15CB

Notification No. 93/2015 - Income Tax (16/12/2015)

Notification No. 93/2015 - Income Tax G.S.R. 978(E) dated 16th December, 2015 A CA certificate in Form No. 15CB will be required to be furnished only in respect of such payments made to non-residents which are chargeable to tax and the amount of payment during the year exceeds Rs. 5 lakh. No Form 15CA and 15CB will be required to be furni...

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Withholding tax Impact on Property transaction by Non-Residents Indian/Foreign Nationals

As per Section 194-IA If property is sold by resident than buyer requires to deduct TDS at 1% on sale Value. Whereas section 195 require deducting TDS on payment to Non-Resident at normal tax rate applies to transaction i.e. 20% in case long term held property and 30%+cess on short term held property....

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Posted Under: Income Tax |

Withholding Taxes – Applicable Section, Rules, Rates and Procedures

Any person responsible for paying to a non-resident, not being a company, or to a foreign company, any interest (not being interest referred to in section 194LB , 194LC or 194LD) or any other sum chargeable under the provisions of this Act (not being income chargeable under the head "Salaries" ) shall, at the time of credit of such incom...

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Posted Under: Income Tax |

Section 206AA cannot override beneficial provisions of tax treaty

In this article, author attempts to brief ITAT (Pune) judgement of Serum Institute of India Limited describing the rate of tax deduction on payments made to non-resident recipient who do not have Permanent Account Number (PAN). ...

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Posted Under: Income Tax |

Purchase cannot be treated Bogus based merely on the basis of statements given before Sales tax department

ITO Vs Deepak Popatlal Gala (ITAT Mumbai)

AO was not justified in making the addition on the basis of statements given by the third parties before the Sales Tax Department, without conducting any other investigation. In the instant case also, the assessing officer has made the impugned addition on the basis of statements given by the parties before the Sales tax department....

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Taxability of sale of software and support services under India US DTAA

M/s Halliburton Export Inc. Vs Asstt. D.I.T. (ITAT Delhi)

Assessee, a US company, entered into agreements with various customers in India for rendering software services - Assessing Officer held that payments received by assessee from sale of software and provision of maintenance and other support services to customers in India...

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TDS on interest paid by assessee Indian branch of a Belgian bank to its head Office

Antwerp Diamond Bank NV Vs ADIT (ITAT Mumbai)

Next ground of appeal is about disallowance of interest paid by the assessee to HO amounting to Rs.8.57Crores.During the assessment proceedings, AO found that interest of Rs.8,56,15, 525/- was paid by the assessee to HO on subordinate debts and term borrowing....

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Interest Payment from India- TDS u/s 195 and Tax Planning

Interest Income from India- Foreign Remittance- Taxation and Planning. A. Taxation as per Domestic Law: A.1. Definition of Interest- 2(28A) "interest" means interest payable in any manner in respect of any moneys borrowed or debt incurred (including a deposit, claim or other similar right or obligation) and includes any service fee or oth...

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Posted Under: Income Tax |

Effect of BEPS project on common tax structures used by MNEs in digital economy

The legal structures adopted by MNEs for tax planning purposes in the traditional businesses are often applied even in the digital businesses. These structures can essentially be broken down into four elements as elaborated in the February 2013 OECD Report on ‘Addressing Base Erosion and Profit Shifting’:...

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Posted Under: Income Tax |

Additional Income-tax on distributed income by company for buy-back of unlisted shares

20% Withholding Tax Rate on profits distributed by unlisted companies to shareholders through buy-back of shares Existing provisions of Section 2(22)(e) provide the definition of dividends for the purposes of the Income-tax Act. Section 115- O provides for levy of Dividend Distribution Tax(DDT) on the company at the time when company dist...

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Posted Under: Income Tax | ,

Role of Chartered Accountant in Your Growth

What a chartered accountant does exactly is something unknown, which is of course if you’re not an accountant yourself. For many people, an accountant is something that they feel they only need once a year when they are doing their taxes returns. But business and CA are more than just taxes. If you are only using your CA for your tax re...

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Posted Under: Income Tax |

Vodafone pays over USD 400 mn more to buy Essar's 33 per cent stake

Ending year-long battle, UK-based Vodafone has agreed to pay USD 400 million more to its Indian partner Essar for buying its 33 percent stake in the joint venture Vodafone-Essar. With this, Essar closed the deal to sell its 33 percent stake at USD 5.46 billion as against USD 5 billion decided earlier. ...

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Posted Under: Income Tax |

Withholding tax need not to be deducted on payments made for services like transcription and data processing –AAR

R.R. Donnelley India Outsource Private Limited (AAR Delhi)

Indian firms outsourcing routine work to their overseas subsidiaries would not have to deduct withholding tax on the payments made to them. In a landmark ruling, the Authority of Advance Ruling (AAR) ( A.A.R. No.883 of 2010 dated 16.05.2010 - Applicant R.R. Donnelley India Outsource Private Limited) held that firms are exempted from dedu...

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Authorised Dealer not liable to deduct tax on remittance to non-resident of sale proceeds representing short term capita

DDIT Vs. The Hongkong and Shanghai Banking Corporation Limited (ITAT Mumbai)

The decision is relevant to authorised dealers making remittance to non-residents. Though the decision is rendered in the context of remittance to individual’s resident in the UAE, all non-resident Indians can benefit from the principle laid down in ...

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Withholding tax not required on payment to non-resident agents of artists in absence of a permanent establishment

In a recent ruling, the Mumbai Income-tax Appellate Tribunal (the Tribunal), in the case of Wizcraft International Entertainment Pvt. Ltd. (the assessee) held that commission paid by an entertainment event management firm in India to a UK based ...

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Posted Under: Income Tax |

Roaming charges paid by telecom service providers not in nature of ‘rent’ which attracts withholding tax

On the issue of whether such payments are, alternatively, in the nature of fees for technical services (FTS), liable to tax withholding under any other provision of the ITL, the Mumbai ITAT restored the matter to the Tax Authority for fresh adjudication in the light of the Supreme Court's (SC) directions in the case of Bharti Cellular Ltd...

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Posted Under: Income Tax |

Section 195- Deductibility of Tax on disputed Payment

the assessee-company had made various payments to its holding company M/s. Alstom Holdings, France but no deductions of tax at source were made. - there is justification for the assessee’s conviction at the time of payment that no tax was deductible at source. It was neither a composite payment....

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Posted Under: Income Tax |

Foreign artistes are chargeable to tax in India but their agents are not in the absence of PE- ITAT Mumbai

The Asst. Director of Income Tax Vs. M/s. Wiz craft International Entertainment Pvt. Ltd. (ITAT Mumbai)

Commission paid to agents for services rendered outside India is not chargeable to tax in India and there is no obligation to deduct tax u/s 195. As Agent was not a performer, his income was not covered under Article 18 of the DTAA but was covered by Article 7 and as the services were rendered outside India and there was no PE, the same w...

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Posted Under: Income Tax |

Interest on refund has to be granted when withholding tax is paid pursuant to the AO’s order under section 195(2)

ADIT Vs. Reliance Info comm Ltd. (ITAT Mumbai0

ADIT v. Reliance Infocomm Ltd. - It is held that the assessee would be entitled to interest on the refund under the provisions of clause (b) of section 244A(1) of the Income-tax Act, 1961 if the refund became due under an order passed in any appeal or any other proceeding, as referred to in section 240 of the Act....

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Payments to non-residents would be subject to withholding tax only if the income is chargeable to tax- SC

GE India Technology Centre Private Ltd. Vs Commissioner of Income Tax & Anr. (Supreme Court of India)

Appellant(s) are the distributors of imported prepackaged shrink wrapped standardized software from Microsoft and other Suppliers outside India. During the relevant assessment year(s) appellant(s) made payments to the said software Suppliers which according to the appellant(s) represented the purchase price of the abovementioned software....

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DTC- 2010- Major amendments related to assessment, appeal, penalty and withholding tax

Direct Tax Code (DTC) 2010 consolidates the withholding tax provisions as well as the procedural law dealing with reporting of income (including branch profits), net wealth and dividends distributed. To ensure compliance with the reporting requirements under DTC 2010, certain amendments have been proposed to the penal provisions, as also ...

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Posted Under: Income Tax |

After Vodafone verdict IT department will investigate more cross-border mergers involving Indian assets

The government will look into more cross-border mergers involving Indian assets, like the Vodafone-Hutchison deal, after the Bombay High Court on Wednesday rejected UK-based Vodafone's petition against the imposition of tax by authorities here....

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Posted Under: Income Tax |

Withholding tax deductible only if non-resident’s income chargeable to tax in India

The Supreme Court on Thursday rejected the income-tax department’s contention that companies based in India were liable to deduct tax when they make any payment overseas, offering relief to domestic firms and multinational companies based here that w...

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Posted Under: Income Tax |

Reminder : Person receiving income subject to withholding tax is required to obtain Permanent Account Number (PAN)

The Finance (No.2) Act of 2009 introduced section 206AA under the Income Tax Act, 1961 (the ITA) to provide that any person who is entitled to receive any sum or income or amount, on which tax is to be withheld under the ITA shall furnish PAN to the person responsible for withholding of tax. In case PAN is not furnished, minimum withholdi...

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Posted Under: Income Tax |

Fee for technical services may be taxable in India even if completely rendered outside India

Ashapura Minichem Ltd. Vs Assistant Director of Income Tax (ITAT Mumbai)

The decision of tribunal reaffirms the position that after amendment to section 9 of the Act, what is required is that, the services should be utilized in India in order to be taxable in India irrespective of the situs of rendering of the services....

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Replacement of dividend distribution tax with withholding tax to boost business

The cost of doing business in India could come down if the dividend distribution tax (DDT) levied on foreign shareholders is replaced with a withholding tax as under the current system, apex chamber Ficci has said. According to the chamber, foreign shareholders are unable to claim credit in the home country for DDT paid in India, resultin...

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Posted Under: Income Tax |

I-T department asks Sanofi Aventis to Pay 650 Crore withholding Tax over its Acquisition of Shantha Biotech last year

Close on the heels of Vodafone-Essar contesting a tax case in the Bombay High Court, tax sleuths have snared another multi-national company for tax evasion. This time, French pharma firm Sanofi Aventis, that acquired India’s Shantha Biotech last year, has been asked to pay Rs 650 crore as capital gains tax to the Indian government. ...

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Posted Under: Income Tax |

Vodafone was advised by Income Tax department to pay withholding tax before payment

THE Indian tax authorities had advised British telecom major Vodafone to pay tax on its $11-billion acquisition of Hutchison Essar before it sealed the transaction, according to a recent income tax order. In a letter on March 23, 2007, the Income Tax (I-T) department had asked Vodafone to pay withholding tax, nearly one-and-a-half month b...

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Posted Under: Income Tax |

Swiss bank not willing to share info and alternatively offered to tax their foreign clients'

Swiss banks have offered to tax the money deposited with them by Indians and other foreigners and "immediately deliver the cash" to governments of respective countries, rather than sharing the details of their clients. Switzerland has come under increasing global pressure to share information about black money stashed in its banks. Possi...

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Posted Under: Income Tax |

Withholding tax obligation applies on payments to non-residents only if there is income chargeable to tax in India

ITO Vs. Prasad Production Ltd. (ITAT Chennai)

The Special Bench of the Tribunal, departing from the Karnataka High Court’s decision in the case of Samsung Electronics, rules that withholding tax obligation on payer applies on payments to non­residents only if there is income chargeable to tax in India. Further obtaining CA’s certificate is an alternative procedure for lower or n...

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Taxpayer obligated to withhold tax only if payment is chargeable to tax under the provisions of Income Tax Act

Van Oord ACZ India (P) Ltd. (Delhi High Court)

This Tax Alert summarizes a recent ruling of the High Court (HC) of Delhi in the case of Van Oord ACZ India (P) Ltd. (Taxpayer) [2010-TIOL-187-HC-DEL-IT] on withholding tax obligation arising under the provisions of the Indian Tax Law (ITL) in respect of reimbursement of expenses to non-resident companies. The Delhi HC held that a payer i...

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Liability to withhold tax would arise only if payment to overseas entities liable to be taxed in India

In a decision that could have a bearing on all cross-border transactions, including those related to the Indian Premier League teams that are currently being probed by tax authorities, the Delhi High Court has ruled that any liability to withhold tax would arise only if payments to overseas entities is liable to be taxed in India....

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Posted Under: Income Tax |

The obligation to deduct the TDS u/s 195 (1) arises only when the payment is chargeable to tax

Van Oord ACZ India (P) Ltd. Vs CIT (Delhi High Court)

The assessee, an Indian company remitted mobilization & demobilization charges of Rs. 8.65 crs by way of reimbursement to its parent company, a company based in Netherlands. The assessee applied to the AO u/s 195 (2) for a Nil withholding rate though the AO held that tax had to be deducted at 11%....

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Remittance to Non-Residents and Frequently Asked Questions related to Withholding Tax Obligations and recent Challenges before Indian Revenue

The Indian income-tax law requires any person who makes remittance to a non-resident to withhold appropriate tax which corresponds to the income-tax liability of the non-resident. Essentially, there are three modes available to the remitter to determine the Withholding Tax (WHT) liability. The remitter could approach the Authority for Ad...

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Posted Under: Income Tax |

AAR on Payment for end to end international long distance telecom services not taxable

Cable and Wireless Networks India Private Ltd., In re. (Authority for Advance Rulings)

Cable & Wireless Networks India Private Limited („the applicant?) is engaged in the business of providing international and domestic long distance telecommunication services in India. It proposes to enter into an agreement with its group company, Cable and Wireless UK („C&W UK?) to provide end to end international long distance teleco...

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All overseas payments are subject to withholding tax, whether or not the income is taxable : Karnataka High Court

Due to recent ruling of Karnataka High Court order, all overseas payments will now be subject to withholding tax, whether or not the income is taxable. Not only is this in dramatic contrast to previous High Court decisions, it's also a judgment that will lead to higher cost of business, increased uncertainty and maybe even more litigati...

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Posted Under: Income Tax |

Bombay HC dismissed the SABMiller writ petition on the ground of decision in Vodafone

Citing the Supreme Court order in the Vodafone case, the Bombay High Court today dismissed the SABMiller writ petition against a showcause notice issued by the Income Tax Department. CNBC-TV18's Ashwin Mohan reports on how this matter is similar to the Vodafone case? This case is similar to the Vodafone tax tussle. The Income Tax Departme...

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Where income is shared by two or more persons, credit for withholding tax is to be shared in same ratio

CIT Vs. Punjab Financial Corporation (Punjab & Haryana High Court)

In a recent ruling in the case of Punjab Financial Corporation (“the assessee”)1, the Punjab and Haryana High Court (“the Court”) held that credit for withholding tax (“WHT”) would be available in the same proportion in which the parties share the income under the provisions of section 1992 of the Income Tax Act, 1961 (the “...

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Tax Sword Looms Large On Cross-Border Acquisitions

Since August last year, the world has been watching. It all began with a show cause notice issued to Vodafone BV (based in the Netherlands), holding it to be an “assessee in default” for not withholding tax at source when it made payments to a Hutchison Group company (based in Cayman Islands) for acquiring shares of another Cayman Isl...

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Posted Under: Income Tax |

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