sec 195 provisions on contract on sale and purchase

This query is : Resolved

finance mantra (Querist)
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18 June 2011 A sole proprietor want to purchase books from a non domestic company registered in UK and doing business from there. he want make remittence to uk in USD.

problem ----- is this transaction is liable to sec 195 of indian income tax.

plz, i require expert opinion

CA Sreenivasa Rao Munaga

CA Sreenivasa Rao Munaga (Expert)
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18 June 2011 Any amount that is to be remitted to UK should attract sec 195.

The person who is liable to pay the payment should deduct tax from it and remit the remaining amount to him.

Let us know if you have doubts.

Thanks,
CA M Sreenivasa Rao
R&S Associates

CA KRISHNA KUMAR DARUKA

CA KRISHNA KUMAR DARUKA (Expert)
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18 June 2011 I think there is some misunderstanding. Section 195 says"

Any person responsible for paying to a non-resident, not being a company, or to a foreign company, any interest or any other sum chargeable under the provisions of this Act (not being income chargeable under
the head “Salaries”) shall, at the time of credit of such income to the account
of the payee or at the time of payment thereof in cash or by the issue of a cheque
or draft or by any other mode, whichever is earlier, deduct income-tax thereon
at the rates in force.

The payment in this case is being made to a foreign company having no business establishment in India for supply of materials and this income to the foreign company is not chargeable to tax in India. Therefore in my opinion there is no need to deduct any tax on this payment.

Views of other experts are welcome.

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CA Sreenivasa Rao Munaga

CA Sreenivasa Rao Munaga (Expert)
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18 June 2011 Yes, i missed to observe the word "Non Domestic Company". However, if it is a non domestic company, we are not required to deduct tax in such a case.

Thanks,
CA M Sreenivasa Rao
R&S Associates