TDS on technical fees

Dear Annapoorna,

Ur case is though similar to the ruling sought in Danfoss Industries Private Limited - that reimbursements to foreign parent will attract TDS u/s 195 even when reimbursements do not have any profit element in them.

{Danfoss ruling can be obtained - https://aar.gov.in/}

Ur attention is also invited to this case law -

Where the assessee reimburses actual amount of salaries incurred by its foreign collaborator in deputing foreign technicians to India with the assessee, tax is deductible at source under Section 192 and not under Section 195. HCL Infosystems Ltd Vs. CIT [2002] 76 TTJ ( Delhi) 505.

But again exact facts pf the case needs to be examined before applying the above decisions.

Rate of TDS will be determinded having regards to DTAA.

One more thing - Since it is a international transaction between associated enterprises therefore transaction should be at "Arm's length price" as required by Transfer pricing rules.

Service Tax -

The nature of service should be amongst the list u/s 65(105) - Only then service tax will be payable.

Since it is a transaction betwwen associated enterprises service tax will be payable on "due basis".

Cenvat Credit cannot be utilized for making payment under "Reverse charge". However once paid the same can be taken as input credit.

Dear Mr. Aamir,

Thanks for the clarification.

again it seems that we need to obtain PAN for the parent company here else 20% will be the TDS rate, right?

so in conclusion:

1. Billing can be done as "Technical services"

2. TDS will apply as per DTAA

3. Service tax is payable to govt on due basis

4. Once payment is made to the parent company service tax can be availed.

and on return filing by the deputees in India- it seems they need to file the return here for their global income, right?

Dear Annapoorna,

PAN of Foreign parent - yes it is required.

Rate will be as per DTAA.

U r correct about Service Tax.

Since contract is with the parent company & not with the individual deputees - no need to file their retun in India.

thanks. US DTAA rate is 10%??