25 May 2010
One of foregin company charging the royalty payment from its subsidiary company in INdia. The Indian subsidiary company was deducting & deposting TDS as per appliable law. All the TDS returns were filed by Indian Company. At the end of the year , due to havey losses to indian company, both the company decided to reverse the royalty transaction. Indian subsidiary reversed the royalty payment in its book as on 31.03.2010. THe total royalty payment is Rs 100 lacs and Withholding / TDS Tax was Rs 10 lacs.
25 May 2010
2. Whether the foreign company , filling the return regulatory can file the return with NIL Income or gross income u/s 115A @ 10 %, as receipient of the services also reverse the entry and no expenses claimed in its books of account.
There are two alternative solution to your query, The Indian Company can reverse the transaction in it's books and claim a refund from Income tax department as per procedure laid down in circular no 7/2007 dated 23.10.2007. In that case the Indian company need to revise TDS returns and also ensure that the foreign company has not taken refund from IT Department. Alternatively the foreign company file a return in India with nil Income and claim refund. In this case no need to revise TDS return by Indian company.
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