TDS on comission paid to foreign agency

A learner (Corporate Accounts ) (345 Points)

11 February 2011  

Dear All,

Our company is selling airline tickets to international customers through agencies located outside india. These agencies are not selling any tickets to Indian customers and cater to international needs only. They are indepedent agents who collects money from customers on their own.

We give comission/incentive to these foreign agents on selling tickets, but we dont pay them this comission . Rather, we give them credit in our books for this comission which they can use in selling tickets.

Further, we are accounting this incentive in our boks of accounts as comission and paying service tax on THIS COMISSION as well under reverse charge.

MY QUERY IS:  Shall we deduct TDS on this comission. Prior to October 2009, this was certainly a tax free transaction as notified via Circular : No. 786, dated 7-2-2000, so we never deducted tax. But post the circular 7 of 2009 dated 22nd October,2009 ( which has withdrawn all earlier circulars) how shall we treat this.

FYI

  1. That foreign agent has no branch or permanent establishment in India.

My  view on the same is:  since agent has no business connection in india, it should not be taxed in India.

Please suggest , how should we go about it.

Thanks to all.

Best Regards,

"A Learner"