TDS on Commission

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Shariq (Querist)
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09 October 2010 My name is Shariq Zafar from Kanpur, India. I am business man.

My question is I am running a partnership export concern in Kanpur. I have paid Rs. 120.00 Lacs to my foreign agent in full financial year as commission. Is it comes under the TDS liability. if yes pls tell me the complete procedure.

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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10 October 2010 Commission received by a foreign agent from an Indian exporter is an income deemed to accrue or arise in india by virtue of the business connection in India. Therefore tax has to be deducted under section 195. However if there is DTAA existing with that foreign country, the Indian exporter can seek shelter of Article 7 of the treaty to say that the commission income is not taxable in India in the absence of a Permanent establishment in India for the foreign agent meaning thereby that income tax need not be deducted at source.
But the issue may invite litigation due to divergent interpretations of courts and in view of the withdrawal of Circular No 23 dated 23-7 1969, circular No 163 dated 29/5/1975 and circular No 786 dated 7/2/2000.
The above explantions are from my understanding of the issue and is not an advise or opinion.