TDS on payment to a non resident

Where the transaction is a straightforward purchase of a physical item or capital equipment from a non-resident:

• The non-resident generally earns business income or trading profit.

• If the non-resident has no permanent establishment, business connection, fixed place, dependent agent, or other taxable presence in India, that profit is ordinarily not taxable in India.

• Therefore, section 393(2) withholding should generally not apply.

• The fact that the Indian buyer capitalises the item and claims depreciation is not decisive.

• This conclusion is based on the chargeability principle under section 393(2); it is not a blanket exemption for every capital-asset purchase.