Tds on payment of commission to foreign agaents

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Gangadhar V.Haldikar (Querist)
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20 March 2013 Whether Tax is required to be deducted at source on the payment made to Foreign Agent for Sales promotion and sales effected outside of India? References to the Answer are appreciable.

CA. PIYUSH GOEL

CA. PIYUSH GOEL (Expert)
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20 March 2013 dear Gangadhar...

in your case TDS is not required to be deducted.

amount paid to sales agent accrues at the place where sales are affected.

if in your cases amount paid to the agent outside india and all the sales effected outside india due to such promotion then TDS is not required to be deducted..

refer supreme court judgement in the case of CIT v/s Union Tile Exporters.

and also refer proviso to clause (d) of sec. 9(1)

Gangadhar V.Haldikar

Gangadhar V.Haldikar (Querist)
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20 March 2013 Dear Piyush, thanks for quick reply. I would like to have your attention to the Explanation 2 to the section 195 inserted by the Finance Act 2012 w.r.e.f.1/04/1962 as below -

For the removal of doubts, it is hereby clarified that the obligation to comply with sub-section (1) and to make deduction thereunder applies and shall be deemed to have always applied and extends and shall be deemed to have always extended to all persons, resident or non-resident, whether or not the non-resident person has—

(i) a residence or place of business or business connection in India; or

(ii) any other presence in any manner whatsoever in India.]

Your valuable advice required in the light of above Explanation also please note that the decision referred by you is prior to such insertion and circular No.786/2000 is withdrawn.

CA. PIYUSH GOEL

CA. PIYUSH GOEL (Expert)
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29 March 2013 dear Gangadhar....

explanation 2 of sec 195 says regarding compliance of sub section 1 of sec. 195..

and sec. 195(1) applies only where amount payable to non resident is chargeable to tax in India..

if the amount payable is not chargeable to tax then there is no question to deduct TDS..

explanation 2 applies where amount payable to non resident is chargeable to tax in India..

In your case commission is not chargeable to tax in India..

means sec. 195(1) is out of scope...accordingly explanation 2 also..

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