TDS U/s 195
This query is : Resolved
Querist : Anonymous
Querist :
Anonymous
(Querist)
04 June 2010
I had to make payment to company based in UAE for the purchase of material.
For making the purchase payment in Foreign currency, what is the procedure and It is liable to TDS in 195 or not.
For making the purchase payment in Foreign currency, what is the procedure and It is liable to TDS in 195 or not.
04 June 2010
In case of purchase of material , no need to deduct tds u/s 195.
04 June 2010
In case of purchase of material , no need to deduct tds u/s 195.
04 June 2010
AGREE WITH EXPERT.
04 June 2010
NOT REQUIRE TO DEDUCT TDS
04 June 2010
Section 195 vs. Section 206AA –
implications of Samsung Ruling
Tax withholding in respect of non-resident payees are governed by provisions of the Section 195 of the Act which uses the phrase – “any other sum chargeable under the provisions of this Act”.
Recently, the Karnataka High Court in the case of Samsung Electronics and Others (227 CTR 335), has
held that any payments in the nature of income per se to non-resident taxpayers would require tax withholding in accordance with provisions of the Section 195(1) of the Act unless a certificate has been obtained for lower or nil withholding of tax.
Whether Samsung ruling suggests that all the payments made to non-residents are covered within the ambit of provisions of the Section 195 and consequently all the income recipients has to obtain PAN or face the consequences of the Section 206AA?
Reference can be drawn from following judicial precedents wherein a view has been taken that provisions the Section 195 should have application only, when transaction is chargeable to tax in India and not on all the transactions.
ABC Limited (2006) 289 ITR 438 – AAR
CIT vs. State Bank of India 13 DTR 294 – Rajasthan HC
Mahindra and Mahindra Limited 313 ITR (AT) 263 – Mum Trib. Special Bench.
CIT vs. M/s Illinois Institute of Technology (India) Private Limited (321 ITR 95) – Karnataka HC
It is pertinent to draw the attention to the recent decision of the Delhi High Court in the case of Van Oord ACZ India (P) Limited – ITA No 439 of 2008, wherein it is held that taxes under the Section 195 of the Act are required to be deducted only when the income is chargeable to tax in India. Hon’ble High Court has observed that “The obligation to deduct the tax at source arises only when the payment is chargeable under the provisions of the Income Tax.” While delivering the judgement, High Court also observed that “even otherwise, because of our analysis of what (239 ITR 587) decides, we, with due respect, are not in agreement with some of the observations made in the aforesaid judgment of the Karnataka High Court.”
Recently, Special Bench of Chennai ITAT in the case of ITO vs. Prasad Production (ITA No663/ MDS/ 2003) held that provisions of the Section 195 of the Act are not applicable when no part of payment made to non-resident is chargeable to tax in India.
Support can also be drawn from recently-nserted provisions of the Section 195(6) of the Act read with circular no. 4 of 2009, which allows payer to remit the funds based on a certificate obtained from a
chartered accountant and without obtaining no objection certificate from the tax officer.
In view of the above discussions, a possible view is emerging that taxability of the transaction is the primary condition for the application of provisions of the Section 195 of the Act. Hence, in the cases when the provisions of the Section 195 are not applicable a view can be adopted that there is no need to obtain a PAN and consequently provisions of the Section 206AA is not applicable.
implications of Samsung Ruling
Tax withholding in respect of non-resident payees are governed by provisions of the Section 195 of the Act which uses the phrase – “any other sum chargeable under the provisions of this Act”.
Recently, the Karnataka High Court in the case of Samsung Electronics and Others (227 CTR 335), has
held that any payments in the nature of income per se to non-resident taxpayers would require tax withholding in accordance with provisions of the Section 195(1) of the Act unless a certificate has been obtained for lower or nil withholding of tax.
Whether Samsung ruling suggests that all the payments made to non-residents are covered within the ambit of provisions of the Section 195 and consequently all the income recipients has to obtain PAN or face the consequences of the Section 206AA?
Reference can be drawn from following judicial precedents wherein a view has been taken that provisions the Section 195 should have application only, when transaction is chargeable to tax in India and not on all the transactions.
ABC Limited (2006) 289 ITR 438 – AAR
CIT vs. State Bank of India 13 DTR 294 – Rajasthan HC
Mahindra and Mahindra Limited 313 ITR (AT) 263 – Mum Trib. Special Bench.
CIT vs. M/s Illinois Institute of Technology (India) Private Limited (321 ITR 95) – Karnataka HC
It is pertinent to draw the attention to the recent decision of the Delhi High Court in the case of Van Oord ACZ India (P) Limited – ITA No 439 of 2008, wherein it is held that taxes under the Section 195 of the Act are required to be deducted only when the income is chargeable to tax in India. Hon’ble High Court has observed that “The obligation to deduct the tax at source arises only when the payment is chargeable under the provisions of the Income Tax.” While delivering the judgement, High Court also observed that “even otherwise, because of our analysis of what (239 ITR 587) decides, we, with due respect, are not in agreement with some of the observations made in the aforesaid judgment of the Karnataka High Court.”
Recently, Special Bench of Chennai ITAT in the case of ITO vs. Prasad Production (ITA No663/ MDS/ 2003) held that provisions of the Section 195 of the Act are not applicable when no part of payment made to non-resident is chargeable to tax in India.
Support can also be drawn from recently-nserted provisions of the Section 195(6) of the Act read with circular no. 4 of 2009, which allows payer to remit the funds based on a certificate obtained from a
chartered accountant and without obtaining no objection certificate from the tax officer.
In view of the above discussions, a possible view is emerging that taxability of the transaction is the primary condition for the application of provisions of the Section 195 of the Act. Hence, in the cases when the provisions of the Section 195 are not applicable a view can be adopted that there is no need to obtain a PAN and consequently provisions of the Section 206AA is not applicable.
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