31 May 2011
If the foreign country deduct the with holding tax while the time payment to Indian company which was located in STPI and claiming exemptions as per IT act.(50% exports & 50% domestic turn over) now the WHT portion is the expense item or current asset item in the books of company.(My doubt is that amount was not paid to Indian government to claim as refund).Please clear my doubt.
As the money received by the Indian company is after deduction of WHT, it should be treated under current assets in the indian company books. also the amount deducted as WHT by the foreign company can be claimed under the relief article as per DTAA
It will depend upon the DTAA which will be applicable in the instant case and in which manner tax credit is allowed by the indian tax authority. To the extent WHT is allowable, it will be part of current asset whereas it will be expense to the extent it is not allowable as tax credit.
CAclubindia
