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Dtaa between India & Thailand

loveseema (Partner, CA) (104 Points)

29 May 2013

I just want to know that is payment made by indian firm for testing of samples by NR company( Thailand) subject to TDS u/s 195. Tax residency certificate given by NR..

regards

CA Loveseema

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10 Replies

Bharat chandan (student) (158 Points)
Replied 30 May 2013

Dear maam,

Please elaborate what kind of transaction is it?
What kind of sample checking?

Raju (Meger, Aquisi,Takeover) (Audit Assitant) (56 Points)
Replied 30 May 2013

mam will u please elaborate your problem ???

Jitndr (Final Student) (92 Points)
Replied 30 May 2013

DTAA between India and Thailand doesnot contain any specific provision for TDS on technical fees. Thus, the rates provided under section 195 would prevail.

The appicable rate is 51.5% (where payment is below 1 crore)

Bharat chandan (student) (158 Points)
Replied 30 May 2013

Mr Jitendr can u explain on what basis tax will be at 51.5%
Any referance to section?

Jitndr (Final Student) (92 Points)
Replied 30 May 2013

Dear Bharat,

I have wrongly quoted the tax rate. 51.5% was applcable between 1964 and 1976. Current TDS rate is 10.3%.

Sorry for the inconvinience.

Also, if the NR company, doesnt have PAN, TDS is to be deducted @ 20.6%.

Jitndr

Bharat chandan (student) (158 Points)
Replied 31 May 2013

Dear jitndr
Its ok
That is how we learn things

I m sorry but can u please explain ur answer of TDS @ 10.3%? Any referance to section and sub section

How did you treat this transaction? As what? Royality FTS?????????

Jitndr (Final Student) (92 Points)
Replied 31 May 2013

Dear Bharat,

I have treated this as fees for technical service. I have taken the rates from Direct Taxes Recknor by Vinod Singhania. The specified section is Sec.195, but i couldnt find anything mentioned about TDS rates in the section.

Jitndr

loveseema (Partner, CA) (104 Points)
Replied 06 June 2013

Thanks all for replying..

But I really need an expert opinion as to what procedure should I follow to ascertain the Tax dedcution laibilty in case of a non resident company. Please specify what all details you need.

Bharat chandan (student) (158 Points)
Replied 06 June 2013

Dear Seema,

Firstly sorry for not replying to PM as my net was not working

There are two condition as follows:

1. Company is not having Quality control department and therefor they are appointing someone else just to check whether the goods are as per the conditions specified in the contract or not.

2. The company has appointed to check the quality of goods And they are also taking advice to improve any quality of soul.

As per my view, In the first condition the transaction is just a normal event in the production process and do not involve professional skill.

But in the second condition as they are giving advice (process, design, patent could be any thing similar) the said work is Royality as defined by explanation 2 of section 9(1)(vi) and the TDS needs to be deducted.
Kindly clarify whether in your case which of the above condition is applicable.

And Mr. jitendr and also to Seema madam

the rate of TDS u/s 195 for royality and FTS is 25% (as amendnded by FINANCE ACT, 2013 which is passed) even if deductee doesn't provide PAN.

Secondly If the condition 1 is applicable then, there is a need of TRC and preparation of Form 15CB.

Dear Seema kindly reply so that we can conclude this.
I will search for case laws to justify my answer.

If anyone like my openion then click on Thanks user.

1 Like

MEHUL SHAH (Auditing Taxation XBRL Training ) (440 Points)
Replied 06 October 2013

Regarding your query for FTS under India-Thailand treaty for testing samples, if you need an Expert Legal opinion, do mail me the details at mehul @ raseshca.com. I have recently represented many such cases at Appellate level in the course of my professional assignments and have been through the prons and cons.

Also, we have a recent judgement that AO cant treat the same as Income from other sources but has to treat it under Article 7.