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Non Resident TaxWithholding

Section 195CA Kapil Goel FCA LLBAdvocateDelhi High [email protected]

991!"!#$

mailto:[email protected]:[email protected]

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%mportance o& 'ection

19()ore and )ore Cro** Border +a,ment*

%ncrea*ed revenue-* attention like &orm 1(CA and1(CB

+ro&e**ional Diligence &or CA-*

Gatea, to %nternational /a0ation &or Dome*tic+er*on*

De&ault con*euence* &or pa,er2Demand u/s Section 201; Interest of 201(1A)

Penalty u/s Section 221 &/or 271C

Prosecution u/s Section 27!

Disallo"ance of e#$ense u/s Section %0(a)(i)

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Revenue

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3niue Feature* o& *ection 19( a*compared to other /D' provi*ion*3nlike per*onal pa,ment* e0empted in *ection

194C etc5 no e0clu*ion &or the *ame in *ection 19(6all pa,ment* covered e#cl salaries providedchargea7ilit, there8 eg pa,ment to &oreign

architect &or re*idential hou*e con*truction etc3nlike thre*hold criteria *pecied in *ection 194C

etc: no 7a*ic limit in *ection 19( even ;e 1pa,ment i* covered

3nlike other provi*ion* in Chapter

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7ective 7ehind *ection

19(• on resident transient connection

• Potential Di'culty in ecoery *ain+ little/noassets in

India

• ,o Aoid -assles of recoery from on resident

• AA; in !# %/; ("( E CBD/ Circular o& 19"4

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ature o& /D'

+rovi*ion* 2'CSC ie"s in .li ily 12 I, 22,*e $ur$ose of ,DS $roisions in C*a$ter 34II ! is to see t*at t*e sum "*ic* is c*ar+ea5le under Section %

for ley and collection of income6ta# t*e $ayer s*ould deduct ta# t*ereon at t*e rates in force if t*eamount is to 5e $aid to a non6resident8 The said TDS provisions are meant for tentativededuction of income-tax subject to regular assessment 8 (see ,ransmission Cor$oration of A8P8 td8and Anr8 8 CI, re$orted in 91::: 2: I,

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%mportant concept* on /D'

particularl, u* 19(• +a,er ha* to 7onadel, take cogniIance o& all availa7le

&act*5 6cannot make error o& &act 7ut error o& udgment i*tolera7le2 re&er )adra* high court in Chennai port tru*t%/A 149!(85

• +a,er role u* 19( cannot 7e euated to role o&inve*tigator and a**e**ing oJcer a**e**ing pa,ee5 7utlimited role i* to en*ure due diligence on part o& pa,er5

• /here cannot 7e impo**i7le and in&alli7le onu* on pa,er

a* /D' provi*ion i* machiner,procedural provi*ion 6ha*to implemented in manner in hich it i* orka7le86mum7ai 7ench %/A/ in 137 TTJ 662 National Aviation case)

• 'ection 19( it*el& cannot decide ta0a7ilit, o& pa,ee hichi* tackled el*ehere 6*ection 9 E other charging *ection*8re&er 'C deci*ion in li Lil, 1! itr !!(6hole act i*integrated code o& ta0ation8

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agran +raka*han ca*e

4( %/; !##;evenue-* onu* 7e&ore proceeding again*t

pa,er u* !1

...........it i* clear that deductor cannot 7etreated an a**e**ee in de&ault till it i* &oundthat a**e**ee ha* al*o &ailed to pa, *uch ta0directl,. %n the pre*ent ca*e: the %/ authoritie*had not adverted to the 0planation to *. 191nor had applied their mind a* to hether thea**e**ee ha* al*o &ailed to pa, *uch ta0directl,. /hu*: to declare a deductor: ho&ailed to deduct the ta0 at *ource a* ana**e**ee in de&ault: condition precedent i*

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agran +raka*han ca*e

4( %/; !##>/he &act that a**e**ee ha* &ailed to pa, ta0

directl, i* thu*: &oundational and uri*dictional&act and onl, a&ter nding that a**e**ee ha*&ailed to pa, ta0 directl,: deductor can 7edeemed to 7e an a**e**ee in de&ault inre*pect o& *uch ta0.....>

A$$lied 5y uc= 5enc* I,A, in ICICI Case 1,,> :

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vervie o& *ection 19(

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vervie o& *ection 19(

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'ection 19(618 2 Ke,

+hra*e*• Any $erson res$onsi5le for $ayin+ to a; ($ayer)

• A on resident not to a com$any or to aforei+n com$any ; ($ayee)

• Any Interest or ot*er sum c*ar+ea5le under t*e $roisions of t*e Act;

• S*all at t*e time of credit or $ayment"*ic*eer is earlier;

• ?f t*e su5@ect $ayment;

• S*all deduct t*e ta# at rates in force

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+a,er Covered

+a,ment 7, 7ranch to Hanother 7ranch a7roadhether pa,ment 7, a >per*on? to a >pa,ee? u*

19(M N ( )em7er 'pecial Bench %/A/ inSumitomo Mitsui Banking Corp (others incl9 !T" #9 $ol !T%T SB %BN %mro& Mum !T%T"resdner Bank& British Bank at 1'# !T" 5&19 S)T '* CB"T Circular No +,

-a.ment /. %gent to -rincipal %/road 0or!ndian Collections (SC Narsee Nagsee 5 !TR1+& Bang !T%T 11 TT #,2 N %F =D; F

+;+;/O ;'%D/ N +3;CHA'; /

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+a,er Covered

Phether on ;e*ident +a,er Covered2 gpurcha*e o& %ndian co. *hare* 7, A &rom B 7oth arenon re*ident* 2 contract and pa,ment out*ide%ndiaM5 +a,ment out*ide %ndia 7, Branch o& %ndianCo %n *ingapore to &oreign people &or *ingapore7ranch 7u*ine** purpo*e* 6dail, hou*e keeping8etcM

;e&er BHC in =oda&one 'ep !15 'C in li Lil,6*upra8

Section 1: em5odies a mac*inery t*at "ouldrender ta# collection eBectie and must 5e

construed to eBectuate t*e c*ar+e of ta# . There

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;e*pon*i7le &or )aking +a,ment

• SC in . ,ec*nolo+y case 2% C, 1 & !-C

4odafone case

• 4oluntary Payments e+ em5ers*i$ fees $aidto oerseas 5usiness c*am5er; may 5e utual

concern o$eratin+ on utuality 5asis

• Contractual ?5li+ation "*et*er mustE .+Dama+es $aid to on resident $erson for non

su$$ly of $lant and mac*inery

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Chargea7le to ta0 under

the Act• >urisdictional Fact must e#ist li=e reasons must

u/s 1%< for reo$enin+; DI Satisfaction must forsearc* u/s 12; satisfaction must u/s 1C referSC in Arun Gumar s H?I

• SC . case on a5oe $*rase

•ies reasona5le autonomy to $ayer todecide sum c*ar+ea5le and its amount

• a+natise Proision of Section %;;: and:0(2)/,reaty Proisions ; 1: to 5e read "it*C*ar+in+ $roisions

• Hniue from ot*er sections of ,DS

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CBD/ in*truction no.!!14

!"!!14 After considerin+ SC orders in 27 I, % (.

,ec*nolo+y case); ,ransmission Cor$oration

case (2::I,

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CBD/ in*truction no.!!14

!"!!14- Pros$ectie or retros$ectie ("*et*er

adanta+e can

5e ta=en in on+oin+ $endin+ $roceedin+s at A? leel or a$$ellate leel)E Seems can 5ea$$lied to $endin+ $roceedin+s also;

- ?ne $ossi5le "ay to com$ute incomecom$onent ule 10 ( determination ofincome in case of non residents can 5euseful tool) &

- Possi5le "ay to collate reuisite informationis e#ercise of $o"er u/s 1() from

reci$ient of income

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ActHo to approach ta0a7ilit, o& non re*ident pa,ee

hile proceeding u* 19( o& the Act2 Step &, ae the classi/cation of

transaction 0eg whether covered u1s '0&20vii2 or u1s '0&20i2 resp. dealing with 3ees

for technical services and 4usinesstransaction in general etc2

Step 5, "hec the taxability under )ncome

Tax ct

argea e to ta0 un er Act2 ct or

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argea e to ta0 un er Act2 ct orDT1Treaty whichever is bene/cial

prevails

Nature of Income Act (apart from section 5 where-ever

applicable)

Treaty/DTAA

Business/Profession Section 9(1)(i): Concept of Business

Connection

Article 5;7; 14: Concept of

Permanent Establisment!PE

or "i#e$ Base

Salary Income Section 9(1)(ii) Article 15

Dividend Income Section 9(1)(i%) an$ section 115A Article 1&

Interest Income Section 9(1)(%) an$ section 115A Article 11

Royalties Section 9(1)(%i) an$ section 115A Article 1'

Fees for technical

services/FTS

Section 9(1)(%ii) an$ section 115A Article 1'

Capital Gains Section 9(1)(i) an$ section 45 Article 1

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Act+a,ment* &or hich *tand can 7e taken on

chargea7ilit, point 7, pa,er it*el&: ithoutapproaching A/D' u* 19(6!82

• Payments for capital account, loans8 theirrepayment% gift remittance etc

• Payment for revenue account, Simpliciterraw material import

• Payment expressly exempt under the cte section &9

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/a0ation o& *ervice*F/'2 %mportant Concept*

6no F/' in D/AA5 Connected ith + 44DA etc8Make Available

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/a0ation o& *ervice*2 %mportant

Concept*Independent Personal Servies

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+a,ee Covered• on resident on com$any and Forei+n

Com$any (section 2 deJnitions)

• Status at t*e time of $ayment or $recedin+ yearE

• +a,ment to agent o& non re*ident 6'C ar*ee (%/; 148

• Phether cover* re*ident 7ut not ordinaril,

re*ident a* pa,ee u* 19(M 'eem* o

• Branch+ o& on re*ident A**e**ee CBD/Circular o !119$1 N 6&oreign 7ank 7ranchN practical a, out N 7ranche* o7tain 19(68

certicate*8

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+recaution* in appl,ing D/AA and

;e&erral check

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+a,ment covered• K*ere o credit nor $ayment I,A, in C> Intl case• Payment in Gind SC rulin+ in Gac*an+an+a Sea Foods

td !N 334'1' A$$roin+ AP-C order !$( %/; $44

• Ad@ustment of Payment SC >! !oda !! %/; !"1 ;um I,A, S! in a*indra and a*indra; um I,A,aymond #$ %/D "91

• Payment su5@ect to A$$roal Adver*e vie* in Kar HC

in 3nited Breerie* Ltd !11 %/; !($ 6&av vie* in BHCin !(9 %/; 91 E !49 %/; 1418

• 'ome treatie* create* c*ar+ea5ility at satisfaction ofL$aymentM of oyalty etc6 Phether td* ari*e* at thetime o& provi*ion or at pa,ment *tage 6herechargea7ilit, get* completed8 divided vie* N AA;

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+a,ment covered• Adhoc N +rovi*ion N Phether attract* /D' lia7ilit,M;e&er 'C in 4# %/; 1 5 (( %/; $995 Kanga +alkivala etc+o**i7le vie /D' lia7ilit, i* attracted hen *ervice

provider etc can claim pa,ment o& amount credited8• +a,ment o& Advance 2 %n ; +a,ee &ollo* accrual

*,*tem po**i7le vie no chargea7le income ari*e* *oa* to attract /D' u* 19( 6Hoever re&er contra

o7*ervation* in AA; at !$" %/; "!"8• %ncome /a0 ;e&und %ntere*t /hereon Oe* 19( applie*

67ut cla**ication di*pute hether covered uart 1!%ntere*t income or i* covered under 7u*ine** income6ma0. rate8 Held 7, Del %/A/ in +ride Foramer 11$ //$9 covered uart 1! @ 1R

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+a,ment covered• ;emuneration to on re*ident +artner* 6in ca*epartner* are carr,ing activitie* out*ide %ndia &or rm-*7u*ine** N could 7e argued that *ame i* not chargea7l

to ta0 in %ndia8

• Aard amount under court rule2 DHC 1!" DL/ 6!$841 S Held not applie* 5 *ame 7, BHC in !$( %/; !(4

• =oid Agreement* +a,ment N Delhi %/A/ in ric**on #1%/D "" N no /D' applie*

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'ection 19(6!82 Application 7, +a,er

to revenue2 o Format

• SC ie"s on aforesaid $roision in . case ist

• !ased on $rinci$le of $ro$ortionality

• A$$lies "*en $ayer *as no dou5t forc*ar+ea5ility is a is Payee Com$utationin dou5t

• Is not a$$lica5le to eery forei+n remittanceas reenue see=s to =ee$ trac= of forei+n

$ayments t*rou+* t*is and for adminconenience N ot tena5le

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to revenue2 o FormatK*et*er a$$lies to forei+n com$any alsoE

Seems yes

K*et*er can 5e ta=en for il ,DSE M Contrar,

deci*ion* in 11 %/D #( 6O'8 5 #1 %/; 1$!5 !# // 4!(

68 N Better vie 2 O' 6Bang %/A/ Biocon+harma

Ca*e AD=;' vie8

hether &or all pha*e* o& ork N *eparatecerticate i* reuiredM Held Oe* in 11 %/D #(

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to revenue2 o FormatPrit petition po**i7le to 7e led again*t19(6!8 and *ection !$4 revi*ion al*o po**i7le2re&er Bom7a, High Court in LE/5 )c Kin*e,and Diamond 'tar ca*e*

For appeal again*t 19(6!82 Phere cum ta0arrangement *ection !4# po**i7le8 *cope o&

*ection !4# hether much iderM

Ca*e 'tud,2 ;elating to LB 7enet in %ndia'ingapore D/AA

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'ection !$AA618 (1) ot"it*standin+ anyt*in+ contained in anyot*er $roisions of t*is Act any $erson entitled to

receie any sum or income or amount on "*ic* ta#is deducti5le under C*a$ter 34II! (*ereafterreferred to as deductee) s*all furnis* *is Permanent

Account um5er to t*e $erson res$onsi5le fordeductin+ suc* ta# (*ereafter referred to asdeductor) failin+ "*ic* ta# s*all 5e deducted at t*e*i+*er of t*e follo"in+ rates namelyO

( i ) at t*e rate s$eciJed in t*e releant $roisionof t*is Act; or

( ii ) at t*e rate or rates in force; or

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'ection !$AA6182 'alient Feature*• Pord u*ed i* >entitled to receive?

• verride* the hole Act incl Finance Act

• Applie* hen ta0 i* deducti7le under an, o& the

provi*ion* o& Chapter ;ate* in Force? i* dened u* !6"A86iii82

D/AAAct hich ever i* 7enecial applie* read ithCBD/ Circular o "!# 1199( 6al*o applie* to *ame

term u*ed in *ection 19(618• %n*erted 7, the Finance 6o. !8 Act: !9 .e.&. 1;+;

4'1'

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7ective 7ehind *ection

!$AA 8%n order to *trengthen the +A mechani*m:it i* propo*ed to make amendment* in the %ncome

/a0 Act to provide that an, per*on ho*e receipt*

are *u7ect to deduction o& ta0 at *ource i.e. thedeductee: *hall mandatoril, &urni*h hi* +A to thedeductor &ailing hich the deductor *hall deduct ta0at *ource at higher o& the &olloing rate* )emorandum 0plaining +rovi*ion* o& Finance o !Bill !9

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+re** ;elea*e on !$AA Clari

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%**ue* u* !$AA!on residents

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%**ue* u* !$AA"#et#er 2$6AA applies to setion 1%2 pa&'ents(

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'ection 19(6$8 2 ;ule

"BB'ection 19( U6$8 /he per*on re&erred to in *u7*ection 618 *hall &urni*h the in&ormation relating topa,ment o& an, *um in *uch &orm and manner a*

ma, 7e pre*cri7ed 7, the Board.V

;ule "BB. 618 /he in&ormation under *u7*ection6$8 o& *ection 19( *hall 7e &urni*hed 7, the per*on

res$onsi5le for ma=in+ t*e $ayment to a non6resident : not 7eing a compan,: or to a &oreigncompan,: a&ter o7taining a certicate &rom anaccountant a* dened in the .#$lanation to *ection!## o& the %ncometa0 Act: 19$1 6old language tillSe$tem5er 2018

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7ective o& *ection

19(6$8L88,*e $ur$ose of t*e underta=in+ and t*ecertiJcate is to collect ta#es at t*e sta+e "*en t*eremittance is made as it may not 5e $ossi5le to

recoer t*e ta# at a later sta+e from t*e non6residents8 ,*ere *as 5een su5stantial increase inforei+n remittances ma=in+ t*e manual *andlin+and trac=in+ of certiJcates di'cult8 ,o monitor and

trac= transactions in a timely manner it is $ro$osedto introduce e6Jlin+ of t*e information in t*ecertiJcate and underta=in+8 ,*e amendmentt*erefore $ro$oses to $roide t*at t*e $ersonres$onsi5le for deduction of income ta# s*all furnis*t*e information relatin+ to $ayment of any sum to

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e ;ule "BB 6.e.&11!18 Ke, point*2

i8 Amended rule reuire* reporting in ca*e*here ta0a7ilit, i* there in hand* o& recipient nonre*ident5

ii8 Additionall, it *pecie* li*t o& !# pa,ment* &orhich no in&ormation i* reuired to 7e &urni*hed atall5

iii8 %n 7eteen it a* *ugge*ted in a noticationhich a* not en&orced that 9 pa,ment* do notreuire an, reporting5

iv8 'mall pa,ment* not e0ceeding ;* (:

6aggregate ;* !(:8 onl, reuire* ling o& +art Ao& Form 1(CA5

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e ;ule "BB 6.e.&11!18 Ke, point*2

vi8 'alar, al*o included 6provided chargea7le ande0ceeding *mall pa,ment criteria8 not coveredearlier5

vii8 'pecic dut, on AuthoriIed dealer tomaintain 1(CA hich can 7e called upon 7, incometa0 authorit, in an, proceeding under the Act5

viii8 ;evi*ed Form 1(CB 6part B o& 1(CA8 aim tocapture almo*t entire proce** o& determination o&ta0a7ilit, in cro** 7order pa,ment a* glaring&rom2a8 ta0a7ilit, under Act ithout con*idering

D/AA5 78 Phere D/AA i* con*idered detail* &or /;C5a lica7le D/AA5 it* relevant article5 ta0 lia7ilit

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Concern* and %**ue*a8 Phat i* *ignicance o& >*um not chargea7le to ta0? inamended rule "BB vi* a vi* *pecied !# pa,ment*5

78 'tatu* &or commi**ion pa,ment5 import pa,ment and &reightpa,ment in ne &ormat &or reportingM

c8 DiTerence in opinion 7eteen BAK 6authoriIed dealer 8 andpa,erdeductor Pa, outMd8 Phether declaration on plain paper can 7e *uJcient in >non

chargea7le? ca*e* in*tead o& 1(CAMe8 %n*ulation &rom reporting in rule "BB do not automaticall,

7ar* revenue to uiI pa,er on it* deci*ion &or no /D' 6hencee0erci*e o& 7onade opinion mu*t on part o& $ayer 8

&8 Complicated ca*e* 6here D/AA involved: diTerence in courtruling* on ta0a7ilit, like *o&tare purcha*e etc8 2 7etter toreport and make compliance 6a* al*o reWect due diligence onpart o& pa,er85

g8 Credit card pa,ment* and per*onal pa,ment* 6e#ce$t +ift

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Form o 1(CA and Form

1(CB

- Documentation 5y CA "*ile issuin+ Form 1C!- A+reement and Inoices; ,a# esidency

CertiJcate- Declaration1"erti/cate from payee for N no

P. ta# residency 5eneJcial o"ner treatyentitlement etc and IndemniJcation from $ayee

-

Payment details- Corres$ondences- ,ec*nical Adice N $roe 5onaJdes- Proof of serices 5ein+ rendered in case of rou$

Com$any transactions- .6mails etc re+ardin+ $ricin+ in case of rou$

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Form 1(CB2 0ample o& language8xample o0 Certi

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)< T=# )

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Critical +oint* in Form

1(CBene*iiar& o* Pa&'ent+ ,ou'ents -.a'ined

Form o 1(CB hether applie* to allpa,ment*M ;ule ver*u* Act 19(618 ver*u*19(6$8

o appeal again*t CA Certicate 1$ %/D (!1

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m7roiling %**ue* /;C/a0 ;e*idenc, certicate u* 9648 E 6(8 2() An assessee, not being a resident, to who# an agree#ent referred

to in sub*section (!) applies, shall not be entitled to clai# any relief

under such agree#ent unless 6$b[a certificate of his being a resident ] inany country outside +ndia or specified territory outside +ndia, as the

case #ay be, is obtained by hi# fro# the overn#ent of that country

or specified territory-/

() .he assessee referred to in sub*section () shall also provide such

other docu#ents and infor#ation, as #ay be prescribed-]

6onl, reuired here D/AA applied to give 7enet to non

re*ident8

http://law.incometaxindia.gov.in/DIT/HtmlFileProcess.aspx?FooterPath=D:/WebSites/DITTaxmann/Act2010/DirectTaxLaws/ITACT/HTMLFiles/2013&DFile=ftn60b_section90.htm&tar=middlehttp://law.incometaxindia.gov.in/DIT/HtmlFileProcess.aspx?FooterPath=D:/WebSites/DITTaxmann/Act2010/DirectTaxLaws/ITACT/HTMLFiles/2013&DFile=ftn60b_section90.htm&tar=middle

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Amendment* 7, nance act !1! in

*ection 19( on re*ident to non re*ident tran*action covered 7,

adding e0planation ! to *ection 19(618 to overcome 'Corder in =oda&one ca*e 41 %/; page 1

'u7 *ection " a* in*erted in *ection 19( givingdelegated poer *tating >!ot0it#standin an&t#inontained in subsetion 1) and subsetion 2)4 t#e oard 'a&4

b& noti*iation in t#e 5**iial aette4 spei*& a lass o* persons

or ases4 0#ere t#e person responsible *or pa&in to a non

resident4 not bein a o'pan&4 or to a *orein o'pan&4 an&

su'4 0#et#er or not #areable under t#e provisions o* t#is At4

s#all 'ake an appliation to t#e Assessin 5**ier to deter'ine4

b& eneral or speial order4 t#e appropriate proportion o* su'

#areable4 and upon su# deter'ination4 ta. s#all be deduted

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;eim7ur*ement*AC%/ v*. )odicon etork 6+8 Ltd. 6!"8 14 '/ !46Delhi8.

%pplied /. Bang !T%T in C>! !N)RM%T!)NS?ST8MS @ M%N%>8M8NT C)NSA7T%NTS -6T7T" on so0tare cost reim/ursement (re0er M@MSB !T%T*

or costs contri/utions re0er 8@? %danceruling& MS Real 8state adance ruling& Case o0M3sD !nens.s S.stems !ncD AS% %pplicant (notechnical serices inoled etc* & %dance Ruling

in %BB 7td& eld the reim/ursement o0 research

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;eim7ur*ement*Documentation important5 to en*ure *ame i* on actual2 ;e&er• Gu High Court ruling in the ca*e o& 'CA;L/ D'%G' +=/ L/D /A< A++AL o. 1#49 o& !#5

• Delhi %/A/ Grand +ri0 4 D/; 6Del86/ri78 !4#5 .#$editors International 11< ,,> 2;

• !an+ !enc* in International Air$ort td 11 I,D %%;

• Krupp 3dhe !- IC?. ,A3 APP.A ?822 ?F 200:

• CI, s Siemens A=tion+esellsc*aft 10 I, 20 (!om)

• Information Arc*itec*ts !-C

• ,e=mar= lo5al Solutions C um I,A, I,A o8 71/um/2007 Fe5ruary 2 2010

• athpa hakri oint =enture v* AC%/ )um7ai %/A/ " '/ 1$

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BHC in Krupp Gm7H /he learned Coun*el appearing on 7ehal& o& the;evenue ha* *tated that the r*t and *econd ue*tionrelate to the *ame i**ue namel, hetherreim7ur*ement o& e0pen*e* ould 7e lia7le to 7e

included in the income and hence the, are taken uptogether Held

%n *o &ar a* the i**ue o& reim7ur*ement i* concerned:the /ri7unal held that though there a* a conWict

7eteen the udgment o& the Kerala High Court: hicha* relied upon 7, the Commi**ioner o& %ncome /a06Appeal*8 and the udgment o& the Calcutta High Courtin the ca*e o& C%/ =*. Dunlop ;u77er Compan,Limited.

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BHC in Krupp Gm7H%t ould &ollo a vie hich a* &avoura7le to thea**e**ee: con*i*tent ith the udgment in =egeta7le+roduct* Limited /he ue*tion a* to hether areim7ur*ement &or e0pen*e* ould &orm part o& theta0a7le income i* not re*integra in *o &ar a* thi*Court i* concerned. %n Commi**ioner o& %ncome /a0=*. 'iemen* Aktionge*ell*cha&t(: a Divi*ion Bench o&thi* Court held that it a* in agreement ith the vie

taken 7, the Calcutta High Court in Dunlop ;u77erCompan, Limited 6*upra8 and 7, the Delhi High Courtin Commi**ioner o& %ncome /a0 =*. %ndu*trialngineering +roduct* 6+rivate8 Limited.

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BHC in Krupp Gm7HFurther re&er2a8 Delhi Bench %/A/ in Grand +ri0 6in conte0t o&*ection 194C reim7ur*ement* to CHA etc8 4

D/; !4# E 0peditor* %nternational 11# //$(!

78 BHC in %n&ormation Architecht*

c8 DHC in Forti* E Lear Automotive*

d8 Guarat High Court in 'CA;L/ D'%G'+=/ L/D e8 Bang Bench in %nternational AirportLtd 11$ %/D 44$

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;e&und o& /D' u* 19(Re0und o0 sums deducted2 CB"T Circular no o0

4'' 431'34''; Contract cancellation 6hen

noremittance to non re*ident: in ca*e amount

remitted to

non re*ident *ame i* returned to pa,er85

'u7*euente0emption under la5 deduction o& ta0 tice5 7,

mi*take5

higher td* rate applied hen la provide* loer

rate:

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ther intere*ting %**ue* related

to19( /ime limit u* !1 &or non re*ident pa,eeM

Di*alloance u* 46a86i8 &or capitaliIed co*tith o /D'

Di*alloance u* 46a86i8 &or 'ection 4! ca*e*or here income a**e**ed on e*timated 7a*i*M

Advance ;uling recour*e to 7e eighted

'ection 46a86iii8 Delhi %/A/ Dolphin !# '/ 141

o 'urchargeducation ce** i& treat, rate*applied: ordinaril, 6'C # %/; 4$ etc8 'ection 44BB44BBB *ection 11! application

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m7roiling %**ue*+ro&e**ional pa,ment v* technical *ervice*under the act can 7e diTerentl, cla**iedM

+rima Facie Oe* 6re&er ! .. 01 0!3 +.4

201 )Phether a&ter amendment in *ection 96186vii8

that *ervice* can 7e rendered an,here 6placeo& utiliIation important8 ha* an, eTect on

D/AAMFav .Bom7a, high court and %/A/ deci*ion in

%*hikaa ca*e po*t amendment

/reat, Concept o& ma=in+ aaila5le technolog,

read into *ection 96186vii8 in diluted manner

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m7roiling %**ue*nu* on revenue to prove *ervice* ma=eaaila5le technolog, and recipient ha*+7u*ine** connection in %ndia

Be&ore retros$ectie amendment in *ection 9&or no /D' on *tated tran*action* 2 no adver*evie po**i7le again*t pa,er u* !146a86i8Agra %/A/ in Virola International case

(itatonline.org);ole o& 'ection 19( in 'haring o& proceed* 2

Delhi %/A/ in Hughe* ca*e (1 '/ ($ 6applied1# %/; !#98

Concept o& 7u*ine** connection E permanente*ta7li*hment vi* a vi* *u7*idiar e0 lained

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Delhi high court in #:< technologies 5C* "T; Page C9which states as under,

Ay620076200

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Commi**ion 0pen*e +o*t

Pithdraal o& Circular o "#$!K GCommissionG simpliciter is not ees or Technical Sericesu3s 9(1*(ii* o0 the %ct and same /eing in the nature o0G/usiness incomeG 0or recipient o0 income3pa.ee3nonresident= is also not taxa/le in !ndia ide section 9(1*(i* in

case o0 a/sence o0 /usiness connection in !ndiaD There0ore=since chargea/ilit. 0or non resident agent proiding sericesto !ndian -art. is clear as per a0oresaid understanding andsince there is N!7 chargea/ilit. under the %ct itsel0 0or nonresident pa.ee= option to approach %%R3%) u3s 195319= inm. considered ie= is not reHuired to /e exercised= in 0acts

o0 instant caseD This is supported 0rom SC3other rulings in a2 Shoorji Plaoonji 6' )T; BB(b2 Perofrming rights &9* )T; &&c2 "al =" in ( )T; 5&*urther= one ould /e on much stronger 0ooting= in casereleant "T%% contains in %rticle 14 (mainl.* dealing ith

ro.alt. and 0ees 0or included serices Gmake aaila/leG

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)< T=# )

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-yd 5enc* I,A, on ,DS u/s 1: on usance interest disallo"ance u/s %0(a)(i) B8NC EBF= ?"8R%B%" )*Agaral %ndu*trie* Ltd.: H,dera7ad. "ate o0 -ronouncement 2'3'34'1+ %/A *. $!9H,d!1! and 141 E 1"4H1

1G8 "e #ave #eard bot# t#e parties and perused t#e reord as 0ell as

one t#rou# t#e orders o* t#e aut#orities belo08 T#e o'ba& Fi#

?ourt in t#e ase o* ?IT Ds8 Did&ut ?orporation4 32H ITR 221 #eld t#at

Bthe a#ount paid by the purchaser on account delay in pay#ent of sale

price also constitutes a co#ponent of sale price and is a part of saleconsideration-& 1%8 T#e oordinate ben# in t#e ase o* Aar0al I'pe. Pvt8 Ctd8

in ITA !o8 73=

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B8NC EBF= ?"8R%B%" )* Agaral %ndu*trie* Ltd.:H,dera7ad. "ate o0 -ronouncement 2 '3'34'1+ %/A *.

$!9H,d!1! and 141 E 1"4H1

iii) ,*e res$ondent does not =no" "*o is e#actly t*e $ersonreceiin+ t*e com$onent of additional $urc*ase $rice(interest) for deferment of $ayment8 -ence $roisions ofsection 1: are not attracted8

i) ,*e $erson receiin+ t*e amount is not c*ar+ea5le to ta#in India8 -ence $roisions of section 1: are not attracted8

) .en under t*e $roisions of Dou5le ,a#ation Aoidance A+reements (D,AA) "it* Sin+a$ore and Indonesia t*isamount $aid is not lia5le to ta# in India in t*e *ands of t*e

reci$ient8 -ence $roisions of section 1: are not attracted8i) In any eent t*e $ayer is t*e issuin+ 5an= in India andnot t*e res$ondent8 ,*erefore $roisions of section 1: arenot attracted8

218 In ie" of t*e a5oe discussion and considerin+ t*e

totality of t*e facts and circumstances of t*e case "e do

%/A "4") !" A O !4 ( !N T8

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%/A no. "4")um.!" A**e**ment Oear 2 !4N( !N T8!NC)M8 T%I %--877%T8 TR!BAN%7 M3sD %nterp "iamond BankN6 E7F B8NC= MAMB%! (ro.alt. u3s 9(1*(i* amendment in %ctcannot rerite "T%%* (also re0er2 154 TT 1+5 *

1#. %n*o&ar a* the reliance placed 7, the learned Departmental;epre*entative on the deci*ion* o& the )adra* High Court and al*othe *cope o& LroyaltyM a* given in 0planation 4 and ( to *ection96186vi8 7rought in *tatute 7, the Finance Act: !1! are concerned:

e nd that the *ame i* not tena7le &or the rea*on that once thea**e**ee ha* opted &or the 7enet o& the D/AA: then there i* noreuirement &or re*orting to the denition and the *cope o&LroyaltyM a* given in *ection 96186vi8. /he *aid amendment cannot7e read into the treat, and ill not inWuence the denition o&LroyaltyM : a* given in Article 1!68. /hi* propo*ition i* *uarel,

covered 7, the deci*ion o& the Bom7a, High Court in 'iemen*Aktionge*ell*cha&t 6*upra8: the deci*ion o& "elhi igh Court inNokia Netork K4'1L 414 Taxman ,#D and "!T 3s 8ricson%B= K4'14L + !TR +'D

%lso re0er "elhi high court in !ntraso0t case ide order

dated 44nd Noem/er= 4'1 in !T% NoD1'+34''9=

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)um7ai %/A/ in Oa*hra lm* ca*e (201) 1%0 I,D2/2 I, 12 (um8)(,ri58)

Section 9(1*(i*2 !ncome deemed toaccrue or arise in !ndia Businessconnection Serice rendered a/road

"eduction at source "T%%;!ndia;A$;-oland;Brail;Canada;%ustralia Business pro

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)um7ai %/A/ in Oa*hra lm* ca*e (201) 1%0 I,D2/2 I, 12 (um8)(,ri58)

A**e**ee compan, a* engaged in 7u*ine** o& productiono& lm*: *hooting o& hich a* o&ten done out*ide %ndia. For*hooting lm* out*ide %ndia: it* production unit u*ed to goa7road and *ervice* reuired in connection ith ork o&

*hooting a7road ere availed &rom variou* over*ea*provider*. /he a**e**ee made pa,ment to ve *uchover*ea* *ervice provider* &or *ervice* availed in connectionith *hooting o& diTerent lm*. %t a* held that the *ervice*rendered 7, over*ea* *ervice provider* ould not &all ithin

am7it o& technical *ervice* a* given in 0planation ! to*ection 96186vii8 in*tead the, ere in nature o& commercial*ervice* and amount received &or *uch *ervice* con*tituted7u*ine** prot. 6A.O. !($ E !$"8

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AA; in ca*e o& ndemol U!1V 4 ta0mann.com 4

6AA;86BCA8 an !14 /he applicant a* engaged in the 7u*ine** o& production o&

televi*ion programme* &or 7roadca*ting and teleca*ting. Inter alia:the applicant produced a realit, *ho 6>the *ho?8 &or hich the*hooting took place in Argentina. For the purpo*e o& the *ho: it

engaged an Argentinian compan, &or providing line production*ervice* in Argentina.

/he i**ue rai*ed 7, the applicant 7e&ore the AA; a*2 hether theamount paid to the Argentinian compan, ould con*titute Fee* &or /echnical 'ervice* Uu* 96186vii8V or ;o,alt, Uu*. 96186vi8V or7u*ine** income Uu* 96186i8V and at hat rate ta0 *hould 7e

ithheld &rom the pa,ment*M 'ince the pa,ment* made 7, the applicant to the Argentinian

compan, ere &or production o& programme* &or the purpo*e o&7roadca*ting and teleca*ting: the *ervice* rendered ould 7e*pecicall, characteri*ed a* XorkX u*. 194C. If a $articular item iss$eciJcally c*aracteried in a $articular section of t*e Act it "ill

oerride t*e $roision in t*e +eneral section8 Since t*e serices areQ Q

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ther +opular +a,ment*)arketing +a,ment*%nternetBandidth +a,ment*

;epair Charge* 6H,d 7ench in 151 TTJ 126 &

VSNL Broadand)Adverti*ement in Foreign )edia 6)um7ai

7ench %/A/ in 'andoI ca*e8

/raining Fee* 6Ahd 7ench in -5. TT/ --5)

'impliciter right* pa,ment not ro,alt, 61H3 TTJ=66 321 ITR H=% et )

Mu'bai ben# ITAT Sie'ens 152 TTJ 6!"La

testing ser#ices$

%onnotation o 'ord anagerial tec*nical and cons+ltanc, in 15- TTJ!-1 9". 253

th i t t

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ther important

precedent*Fo0 ,TAA are to be read> ITAT in Findalo

reported at %H TTJ %H=

Protool to ,TAA in interal part o* treat&

IT? Ci'ited G2 IT, 23%

Pro*essional Servies> Mu'bai ITAT rap#ite India

Ci'ited G6 IT, 3GH @ PM ase 2-12TII61

IT/T00INTL) (0+ai Tri+nal$ a#ments

towards professional fees is not ro#alt# and

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Thank ?ouKapil Goel

[email protected]

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nr_tds_195[1]