Tds under section 195

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Asaithambi S (Querist)
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08 June 2013 Dear Experts,

I request your guidance and advise for my following query please.

'H Ltd', an Indian Company, importing a service from 'F Inc', an USA Company. For this service, 'F Inc' is raising invoice month wisely in the name of 'H Ltd' in USD.

Up to FY 2012-13, 'H Ltd' has settled the bill amount through Indian Banking after adding Service tax for import of service and deduct TDS after grossing up to the extent of bill amount with service tax and produce Form 15 CB and 15 CA to the Bank as per Indian Banking Regulations to complete the payment process.

'H Ltd' is a holding company of 'S Inc', an USA company.

From Apr-2013, 'H Ltd' has decided to settle the bill of 'F Inc' by way of Corporate Credit Card of 'S Inc' in order to avoid...
(a) Form 15 CB and 15 CA;
(b) Audit Fees for (a);
(c) Service tax for import of Service; and (d) TDS.

May I request your kind advise the payment process of 'H Ltd' from April-2013 is correct in law and may I know is it not need to deposit Service tax and TDS, only because of the way of payment done i.e. by way of Corporate Credit Card of 'S Inc', even though the bill is in the name of 'H Ltd'?

Thank you in advance please.

CA. Anuj Gupta

CA. Anuj Gupta (Expert)
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09 June 2013 This arrangement is not permissible under FEMA.

Also there shall be issues under transfer pricing audit for these type of arrangement.

Also I feel that you can't escape service and income tax liability by arranging affairs in this manner.

Anuj
femaquery@gmail.com

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