TDS

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An Indian company X proposes to convert one of the existing wholly owned subsidiary in India to a joint venture by issuing shares to a Venturer based in Israel. The shareholding of the said joint venture will result as: X 51% + Israel venturer 49%.

The Israel company has a pilot plant for which it has a global patent and is transferring this plant to the JV, for which it will receive equity shares as compensation.

The Israel company will also grant a technology license in favour of the JV. In consideration for this license, the Israel Company will be paid Royalty on the Sales effected by JV, using such Technology. 

Queries:

 

1) Applicability of TDS on the Technical know how provided by the Israel Company to the Indian Joint venture:

If the considerationfor Technical know how is paid in the form of allotment of Equity shares of the JV Company

2) If the Technical know is not shown separately and is added alongwith the cost of equipments supplied - TDS       implications if any. 

Thank you.

Replies (2)

It is better to show TDS separately and incorporate TDS deduction in this JV. You can adjust equity after providing for TDS deduction amount. 

AO are always on a look for such cases for scrutiny.

Let others also reply.

agree with mihir

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