TDS to be deducted in case of Non- Resident

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This query is : Resolved

Pradnya Manohar Madhavi (Querist)
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30 June 2010 A new provision of Income Tax Act tax at higher of the prescribed rate or 20% will be deducted on all transactions liable to TDS, where the Permanent Account Number (PAN) of the deductee is not available. The law will also apply to all non-residents in respect of payments / remittances liable to TDS. Taking into consideration the provisions of law what will be the answer for the following mentioned querry:
A Ltd import the professional/Technical services from Thailand. Service provider of Thailand does not have any Permanent Establishment or Fixed Base in India. Thailand Service does not have PAN in India. As per the clause of DTAA we have to see Article 7 of DTAA i.e Business profit. Taking into consideration provisions of Article 7 professional services imported by A Ltd were not taxable in India.
In this case whether TDS to be deducted on the professional fees/technical fees as per provisions of Income Tax Act or not?

CA.Mini

CA.Mini (Expert)
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30 June 2010 since the DTAA overrides the Income tax law tds need not be deducted and the Indian Co. can argue the nondeductibility of the TDS on Prof fees paid to NRI.

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