tax on permanent establishment

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

15 May 2013 Dear Sir,

our parent company ( korean ) was working in india for more than 9 months. when the customer made the payment , they deducted WHT @40% + surcharge on invoice value. They gave the reason for 40% deduction was , as the korean company has been working in india for more than 9 months it will be treated as PE and tax will be 40% + S.charge as PE comes under the status of Foreign company.

We haven't submitted any Lower deduciton certificate to the customer.

My query is:
1. The Law states 40% + on the Profits and not on the Invoice value .
Then why did they deduct on invoice value.
2. is there are any law mentioning , if Lower deduction certificate is not provided , the WHT will be deducted on invoice value.

please help me to solve this query.

CA. Anuj Gupta

CA. Anuj Gupta (Expert)
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15 May 2013 1. The Korean Company should have approached AO for lower deduction of tax certificate. If not then the Indian company has no choice but to deduct TDS on invoice value.
2. The TDS has been deducted by Indian Company in correct sense of law, however even now the Korean company can claim the refund for excess TDS deducted.

Anuj
femaquery@gmail.com

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srinivasan

srinivasan (Expert)
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15 May 2013 WHT U/S 195 is always to be done on gross value of amount paid or credited. Therefore to mitigate the inconvenience you can approach the AO us 195A 2 and get the WHT rates fixed for that project / client

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