Category Archives: Deduction at Source (TDS)

C&F Agents

The Delhi High Court in CIT v. Cargo Linkers (2009) 179TAX151 held that the assessee C & F Agent is not liable to deduct tax at source under section 194C on the payments made to the airlines since the contract is actually between the exporter and the airline and assessee happened to be only an intermediary.

Post No. - 93

S. 245R TDS Questions

The AAR (Delhi) in Airports Authority of India Re (2008) 168ITR158 held that though the question of tax deduction u/s 195(1) is linked up with the tax liability of the non-resident /foreign company there is however no embargo under the proviso to section 245R (2) to seek such answer even when a separate appeal is pending at the instance of the non resident with an appellate authority on the sole question of determination of non residents liability under the provisions of the Act so that an application for advance ruling in the parallel is even maintainable on the point of determination of withholding tax rate. That perhaps for the reasons that implications of such non deduction at source are serious causing both disallowance of expenditure u/s 40(a) and levy of penalty u/s 271C. The AAR also held that the alternative route available u/s 195(2) does not operate as a legal bar to the maintainability of application before AAR.

Yet again the AAR in Mcleoud Russel India Ltd., In re (2008) 168ITR175 held that in relation to the tax liability of a non-resident arising out of a transaction for purchase of shares from a non-resident the resident applicant can very well file an application for determination of tax withholding rate.

Post No. - 92

Traveling expenses reimbursements to non residents

The Presidential Bench of the Delhi Tribunal in HNS INDIA VSAT INC. V. DY DIT (2005) 95ITD157 held that the payments made by the assessee to foreign contractors on account of traveling expenses was not covered buy the provisions of section 195 for the simple reason that the amount so paid was on account of reimbursements of actual expenses incurred by them and same therefore could not be as income of the concerned , much less income chargeable to tax in India so as to attract the provisions of section 195. However in this case since the assessee failed to produce any agreement casting such obligation to reimburse such payments it had to suffer a disallowance.

Post No. - 91

Multiple or single grossing up S. 195A

The Delhi bench in BJ Services Company Middle East Ltd. V. Asstt. CIT (2005) 4SOT 633 held that in the event of tax free salary payment the employer is obliged to compute tax on single grossing up and not on multiple grossing method. The assessee in this case revised their returns taking benefit of earlier ruling of the Delhi bench in ITO v. ONGC (IT Appeal No. 4723 (Delhi) of 1990).

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