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Section 195

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Iqbal Singh Grover (Querist)

12 March 2011 Hi..
My client is a foreign company (UK) which has been assigned a contract to build a hotel in India. The person making the payment to my client is a domestic company and wants to deduct TDS @ 40%.. Is there any way we can ask the resident co.for a lower deduction of tax.. I understand that we can use section 195(2) and 195(3). If I am not wrong, even the DTAA with UK is silent on this.. Please suggest me what to do.. Thanx..

K.Srini

K.Srini (Expert)

14 March 2011 In the case of foreign company engaged in business in india for a construction contract etc. one has to verify whehter the same could constue a project PE in India. In such case the rate of withholding tax has to be decided by refering to the AO u/s 195(2)or (3). Pl. note that DTAA with UK has the non-discrimination clause as well. Hence advice your client to approach the AO u/s 195(3) and not to accept for withholding tax @ 40%.

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