Tds u/sec. 195 of income tax (Income Tax)

This query is : Resolved

Author : Anonymous

( Author )
28 June 2012

Hello Experts,
We are software development co. we purchase a software design from an Australian co.

Should we deduct TDS u/sec 195?

Please advice.

Shekhar

CA CS Amit S. Kedia

( Expert )
28 June 2012

No,TDS is not required to deducted.
There is no TDS on Royalty/Fess for technical services.The payment is directly made by the non resident.

Author : Anonymous

( Author )
28 June 2012

Could you please backed your reply with any case law.

thanks in advance

CA CS Amit S. Kedia

( Expert )
28 June 2012

No need to have case law on the matter which is mentioned in the section itself.
please read Article VII and XII of DTAA with australia.

Author : Anonymous

( Author )
29 June 2012

Thanks for your advice.

If non resident dont have PAN, so in this should we require to do anything?

Form 15CB is required or not?

Arihanth Kumar Jain G

( Expert )
29 June 2012

No offence to previous comments.

DTAA quotes Royalty/FTS, as may be taxable in India also. So as such there is no direct exemption.

Purchase of software (i.e., off shelf or readily available product) may not be taxable in India if NR does not have a PE in India. As such tds shall be Nil

Purchase of designs (i.e., right to use related) shall be part of royalty and taxable in India. Rate as per DTAA or Act, whichever beneficial.

(Also S 206AA compliance w.r.t PAN, may be adviced, though I strongly believe it shall not override DTAA)

However this is a debatable view for long already. Suggest deduct tds if possible.

Arihanth Kumar Jain G

( Expert )
29 June 2012

And Form 15cb/ca compliance is required.

Author : Anonymous

( Author )
29 June 2012

Thanks Arihant for your valuable comments.

If the vendor is other than company, so i think we will treat this as personal independent services, as he have no PE in India & he will not stay in India more than 183 days.

Please correct me if i am wrong.

Arihanth Kumar Jain G

( Expert )
29 June 2012

Im afraid we cant apply Article on Independent personal services here, as this is a case of FTS. Software designing does not fall under professional services as referred under the Article.

So we will have to look into Royalty/FTS Article, which again will end up with taxability irrespective of PE.