Tds u/s 195

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

12 November 2014 A company made payment on account of contract/services received, to its subsidiary in Dubai . Whether TDS has to be made for the above payments if the subsidiary company does not have PE in India ? Whether dis allowance under Sec 40(a) attracts for the above payments if TDS is not made.? What is position TDS is made at a lower rate?

Please indicate the case laws (if any)

Thanks in advance

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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12 November 2014 Fees for services rendered by non-resident is deemed to accrue or arise in India, whether or not non-resident has place of business in India if he has rendered services in India.

Explanation to section 9 says, “For the removal of doubts, it is hereby declared that for the purposes of this section, income of a non-resident shall be deemed to accrue or arise in India under clause (v) or clause (vi) or clause (vii) of sub-section (1) and shall be included in the total income of the non-resident, whether or not,—

(i) the non-resident has a residence or place of business or business connection in India; or

(ii) the non-resident has rendered services in India.

TDS rate under IT Act is 25%

If the services were rendered outside India by non resident no TDS need to be made.

U/s.195(2), where the payer considers that the whole of such sum so payable to a non-resident would not be income chargeable of the recipient, he can make an application to the Assessing Officer to determine the appropriate proportion of such sum chargeable to tax, and thereupon shall deduct tax u/s.195(1) only on that proportion of the sum chargeable to tax. Similarly, sections 195(3) and 197 provide for the payee making an application to the Assessing Officer for issue of a certificate that income-tax may be deducted at lower rates of tax or not deducted on payment to be received by him, where such lower rate or non-deduction is justified.

Non deduction will attract dis allowance.

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