14 December 2010
X ltd. Non-Resident foreign Co., had entered into collaboration on 21st Feb 2010 withan Indian company and it is in receipt of Following payments during previous year ending on 31-03-11. How would be tax liability of X Ltd. A.) Interest on 8% debentures for 50 Lakshs issued by an Indian company on 01-07-2010 in consideration of providing technical know how manufacturing process and design, interest date 31st March. B.) Service charges of 2.5% of Face value of Plamt and Machinery Rs. 500 Lakhs leased out to indian Company payable each year before 31st March.
15 December 2010
The answers to your queries are as follows:- (a)The interest under the income Tax Act shall be chargeable @20%+ surcharge@2.5% AND CESS@3%.Kindly specify the country so that if any relief provided any DTAA may be taken care of. (b)The same shall be taxable as royalty @10.5575% under the Income Tax Act. The DTAA needs to be checked for any relief in the same.
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