Tds on inspection provided in foreign country

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Querist : Anonymous

Querist : Anonymous (Querist)

14 June 2015 please tell whether payment made to non resident upon inspection service provided in foreign country is liable for tds u/s 195?

srinivasan

srinivasan (Expert)
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15 June 2015 Normally inspection charges would fall under technical services and would be subjected to withholding tax @ 10% u/s 195 r.w.s. 115(1)(b)(B)as per the current provisions of income tax. If the payee does not have PAN then 20% u/s 206AA would apply

However if you can find that the DTAA of the relevant country has
(a) a make available clause
(b) the non-resident payee has given you tax residency certificate
(c) non-resident payee holds a Valid PAN and also given declaration on no PE in India. You can take the DTAA provisions to hold that the payment does not attract withholding tax.

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Querist : Anonymous

Querist : Anonymous (Querist)

15 June 2015 SIR, IN THE BELOW CASE, IT WAS HELD THAT IF PAYMENT MADE TO NON RESIDENT OF THE SERVICE PROVIDED OUTSIDE THE COUNTRY IS NOLT LIABLE TO DEDUCT TDS.

[2013] 40 taxmann.com 310 (Delhi - Trib.)
IN THE ITAT DELHI BENCH 'B'
Deputy Commissioner of Income-tax - Circle-3(1), New Delhi
v.
Chandabh Impex (P.) Ltd.*

PLEASE CLARIFY.

srinivasan

srinivasan (Expert)
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15 June 2015 The place of provision has no relevance after the insertion of the explanation to Sec. 9(1). The only exception could be the carve out of the section 9(1)(vii)(b) which can be relied if the service is provided outside India for earning a income outside India. It was on this score the ITAT Delhi has rendered the judgment.

Therefore to take that position both the twin conditions should be satisfied
(a) it should be rendered outside india
(b) it should be for earning a source of income outside India

Pleas note that the principles cannot be applied even if any one of the conditions is missing. Therefor it cannot be applied in general without going through the facts.

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