Tds u/s 195

This query is : Resolved

Rahul (Querist)
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23 August 2011 Dear All

The facts are as follows:

B Ltd (India) is a subsidiary of A Ltd ( Japan ). A Ltd Japan recovers from B Ltd the cost of usage server.

In other words, the parent company in Japan incurrs cost of server and allocate the cost to its subsidiary company and

accordingly recovers the same from the Subsidiary company in India.

Query:

Is the Indian Subsidiary is required to deduct any TDS on payment made to Parent company for usage of Server located in Japan.

Please let me know any other information required to solve the query.

Abrar

Abrar (Expert)
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24 August 2011 If the cost is pure reimbursement for expense incurred on Indian subsidiary's behalf, then TDS is not required.

However, from the fact of the case it appears that the holding company is charging on an adhoc basis. This could be a kind of Royalty. Hence, WHT u/s 195 would be mandatory in addition to Serivce tax u/s 66 A of Fin Act.

CA. Anuj Gupta

CA. Anuj Gupta (Expert)
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25 August 2011 I agree that it shall be better to deduct TDS as that may be classified as Equipment Royalty.

However :-
Who controls the server?
Whether Parent Company can use the server as per its terms or thats a standard facility availed by Parent Co. from Foreign Company?

These questions can change the face of whole situation.

Anuj
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