Withholding taxes

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This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

07 February 2012 One of my client has following query relating to Withholding Tax.Pls advise. the case detail is as below:-
1. An Indian Company (referred as HO) has a branch office overseas say Germany.
2. The Branch office is opened for administrative support only for servicing the end customer of the HO at the overseas location i.e Germany. The branch is remunerated on Cost + markup as per the Transfer Pricing study.
3. HO has sought service from a vendor based in Germany and has to therefore make professional fee payment to the vendor.

4. HO has two options:-
a. make payment from HO in India thereby withholding tax u/s 195
b. Directly remit money from the Germany branch office, thereby having no liability to withhold tax as per Indian IT law.

Query
1. Can Branch pay to the vendor locally in Germany thereby not withholding the tax as per IT law in India?
Will the position change if the services received from the vendor are for the branch office?

Pls give reference to case laws if available to support your views.

CA PARAS BAFNA

CA PARAS BAFNA (Expert)

12 February 2012
Income deemed to accrue or arise in India -

If fee is paid to the non resident and that fee is not related with its Germany-Office. -Such Income is taxable in India.
.

If fee is paid to him for the work related with the Germany Office, it is not taxable in India.

.
Please Refer Section 9(1)(vii) and Explanation-2.
.

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