TDS on commission payable to foreigner

This query is : Resolved

sandeep (Querist)
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30 January 2010 We are exporter of Garments and need to pay the commission to our foreign agent.
Is we need to Deduct the TDS on Commission payable to foreign agent and at what rate and under which section.

CA Vijay Kumar Gupta

CA Vijay Kumar Gupta (Expert)
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30 January 2010 yes @30.9% u/s 195 of the Income Tax Act,1961

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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30 January 2010 2. The deduction of tax at source under section 195 would arise if the payment of commission to the non-resident agent is chargeable to tax in India. In this regard attention to CBDT Circular No. 23 dated 23rd July, 1969 is drawn where the taxability of Foreign Agents of Indian Exporters was considered alongwith certain other specific situations. It had been clarified then that where the non-resident agent operates outside the country, no part of his income arises in India. Further, since the payment is usually remitted directly abroad it cannot be held to have been received by or on behalf of the agent in India. Such payments were therefore held to be not taxable in India. The relevant sections, namely section 5(2) and section 9 of the Income-tax Act, 1961 not having undergone any change in this regard, the clarification in Circular No. 23 still prevails. No tax is therefore deductible under section 195 and consequently, the expenditure on export commission and other related charges payable to a non-resident for services rendered outside India becomes allowable expenditure.
Circular : No. 786, dated 7-2-2000.

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CA Vijay Kumar Gupta

CA Vijay Kumar Gupta (Expert)
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30 January 2010 Difference of opinion

As per honourable Karnatka high court judgement in the case of CIT vs Samsung Electronics Ltd. & Ors. (2009)227 CTR(Kar)335 read with Transmission Corp. Of A.P. Ltd. vs CIT 1999 155 CTR(SC)489 ,every remittance/payment made by the assessee abroad needs tax deduction u/s 195. I welcome contrary views supported by latest judicial pronuncements and/or CBDT clarification.

CA Vijay Kumar Gupta

CA Vijay Kumar Gupta (Expert)
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E V SRI KRISHNA

E V SRI KRISHNA (Expert)
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13 March 2012 Hai everybody,

The decision of Samsung Electronics ( Karnataka High Court ) was overruled and nullified by Supreme Court in the case GE Technologies ( 2010 193 Taxman 234 ). Hence, do not quote and rely upon the Karnataka HC judgement as it is no longer valid and bad in law.