Knowledge Center

  • TDS u/s 195 on payments to Non-Residents on what amount??

    March 8 2014

    On what amount TDS u/s 195 is required to be deducted while making payments to non-residents? Whether on gross amount or on net amount i.e. only on the income element ? In case where TDS has not been deducted what amount should be taken as base by the Income Tax officers for treating the assessee as being in default??? 

    The CBDT has issued Instruction No. 02/2014 dated 26.02.2014 in which it has referred to the judgements of the Supreme Court in Transmission Corp of A. P. 299 ITR 587 and GE India Technology Pvt. Ltd 327 ITR 456 on the issue of deduction of tax at source u/s 195 while making payments to non-residents.

    The CBDT has directed AOs u/s 119 that in a case where the assessee fails to deduct TDS u/s 195, the Income Tax officer cannot treat the whole sum remitted to the non-resident as being chargeable to tax but he has to determine the appropriate proportion of the sum chargeable to tax as mentioned in s. 195(1) for treating the assessee as being in default u/s 201. Such appropriate proportion of the sum would depend on the facts & circumstances of each case i.e. nature of remittance, income component therein etc..

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  • Revised form FC-GPR for reporting issue of shares and convertible debentures under Foreign Direct Investment (FDI) scheme

    February 12 2014

    Foreign Direct Investment in an Indian entity by an NRI/Foreign Entity in the form of shares or by way of Convertible Debentures is required to be reported to RBI in Form FC-GPR within 30 days of issue of such shares/convertible debentures.

    RBI has now revised such Form FC-GPR to gather additional details such as Brownfield/Greenfield investments and the date of incorporation of investee company

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  • Permanent Establishment (PE) under DTAA – Can a subsidiary be a PE??!!

    February 8 2014

    A subsidiary company carrying on business in India controlled by a foreign holding company - whether such legal control is enough to term Subsidiary Company as a PE of its foreign holding company?

    In a recent ruling the Delhi Court in the case of E-Funds Corporation, while deciding on a number of issues like: fixed place PE, Service PE, Agency PE, Apportionment of Profits to a PE has dealt with a very interesting issue for Multinational Companies (MNCs) wishing to establish a Subsidiary Company in India.

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  • No TDS on Service Tax element – CBDT clarifies

    January 17 2014

    CBDT has issued a circular clarifying that wherever in terms of the agreement/contract between the payer and the payee, the service tax component comprised in the amount payable to a resident is indicated separately, tax shall be deducted at source under Chapter XVII-B of the Act on the amount paid/payable without including such service tax component.


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  • Divisibility of an EPC contract into Off-Shore & On-Shore – whether still ‘looked at’!!! by courts?

    January 13 2014

    After the Vodafone judgement a number of Advance Authority Rulings (AAR) were echoing the concept of "looking at" the consortium agreements thereby disregarding the dissecting approach, when it came to the taxability of an Engineering, Procurement & Construction contract (EPC). AAR disregarded the concept of divisibility and consequently sought to tax such consortium as an Association of Person (AOP). 

    However, in a recent ruling of Uttrakhand High Court in the case of Samsung Heavy Industries Co. Ltd vs. DIT has held that Even in a composite contract, Income Tax Department can not assess off-shore profits without showing how it is attributable to the Permanent Establishment in India.

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  • CBDT Issues Important Directives On Safe Harbour Rules

    December 25 2013

    Pursuant to the Safe Harbour Rules in Rules 10TA to 10TG, the CBDT has issued a letter dated 20.12.2013 in which it has laid down important directives and clarifications on the manner in which the Safe Harbour Rules are meant to be implemented. The directives and clarifications are as follows:

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