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TDS on payment made to purchase of software from NR

Uday G (Business) (254 Points)

17 December 2009

Hi Friends,

Kindly inform me about the applicability of TDS on payment to be made for purchase of software from non resident company.

Also let me know the position, after the Judgment of High court of Karnataka in case of Samsung electronics on this subject.

Thanks,

Uday.

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3 Replies

MAHENDRA KUMAR BAGRECHA (FCA) (1402 Points)
Replied 17 December 2009

Dear Uday,

After karnataka high court decision in case of samsung, it is advisable to apply to AO u/s 195(2) if you have any doubt regarding TDS deduction. In karnataka, this decision is binding to everybody till Hon.Supreme court gives stay. With due respect to the High court, this judgement has raised various confusion in business community and We only can hope stay from SC on this decision. With due respect to the court, in my personal view, judges have not used their mind properly in giving their decision and has rendered this decision by concentrating only on section 195 and has totally ignored concept of accrual of income.

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Sunil (Trader) (2611 Points)
Replied 17 December 2009

With due respect to the Honourable High Court, the gave the ITD in Karnataka more than what they prayed for. However, as per the Act itself, the DTAAs still over ride the provisions of section 195 for the rates of tax in force and you could apply the provisions of Article 7 of DTAAs with respect to import of goods etc. Otherwise you would have to deduct 40% TDS even from payments against L/Cs for raw materials and finished industrial goods and Indian exporters would also face same problems with an exhorbitantly high rate of TDS by other countries in reciprocal actions.

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