TDS on overseas logistics payments applies only to income chargeable in India; pure reimbursements and offshore services were outside withholding.

Section 195 TDS applies only to sums chargeable to tax in India, so reimbursements of actual logistics expenses paid to overseas agents, being pure pass-through amounts without income element, were outside withholding. The profit component was also not taxable in India because the non-resident entities rendered services wholly outside India, had no permanent establishment, and carried on no operations in India from which income could be attributed under sections 5 and 9 read with the DTAA. Mere agency terminology in the agreements was insufficient to create a dependent-agent permanent establishment. Accordingly, no tax was required to be deducted at source on the remittances.

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Issues: Whether the assessee was liable to deduct tax at source under section 195 on remittances made to overseas logistics agents, including the profit element, and whether such receipts were chargeable to tax in India on the basis of accrual, business connection, or permanent establishment.

Analysis: The remittances comprised two distinct components, namely reimbursement of actual logistics es and a share of profit. Applying section 195, deduction at source arises only when the sum paid to a non-resident is chargeable to tax in India. The reimbursement component was held to be a pure pass-through without income element and therefore outside TDS. For the profit component, the Court examined sections 5 and 9 of the Income-tax Act, 1961 and the relevant DTAA principles, and held that the overseas entities rendered services wholly outside India, had no permanent establishment in India, and did not carry on any operations in India through which the profit could be attributed or deemed to accrue in India. The agreements did not establish a real agency relationship so as to create a dependent-agent permanent establishment; the mere use of agency terminology was insufficient.

Conclusion: The assessee was not liable to deduct tax at source on the payments made to the overseas entities, and the remitted amounts were not chargeable to tax in India so as to attract section 195.

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