Amounts Received from Foreign Company

[KrishnaChaitanya Somanagurthy]

One of Our Clients is engaged in providing Consultancy Services to a Foreign Airlines Company. These Consultancy services covers Development and Maintenance services to Software used by the airlines. The Foreign Company Does not have any presence in India. Our Client has received Fixed Consultancy fee (in Foreign Currency) every month along with reimbursement of Rental Expenditure, purchase of Laptop and other Expenses.

Is there any TDS to be deducted by Foreign Company for payments made to Indian Consultants.

Whether The Consultant will be treated as agent and whether the Foreign Company is said to have PE in India .

Any FEMA implications on the Same.

Thanks

[DR.MARIAPPAN GOVINDARAJAN]

In my view TDS is to be done.

[Padmanathan KV]

THERE IS NO TDS LIABILITY AS THE FOREIFN AIRLINES HAS NO PLACE OF BUSINESS IN INDIA AND IS NOT AN ASSESSEE. HENCE TDS PROVISIONS DO NOT APPLY. THE CULSANTAMT ANT THE AIRLINES TRANSACT BUSINESS ON A PRINCIPAL TO PRINCIPAL BASIS AND NOT AS A PRINCIPAL-AGENT BASIS. IF THE AMOUNTS ARE RECEIVED THROUGH NORMAL BANKING CHANNELS, THERE IS NO FEMA VIOLATION.

AI Summary

Tax withholding on cross-border consultancy: withholding may not apply where foreign principal lacks India presence, subject to agency/PE analysis.
Whether TDS applies depends on the foreign payer's taxable presence and the parties' relationship: TDS provisions do not apply where the foreign company has no place of business in India and is not an assessee and transactions are on a principal-to-principal basis. FEMA issues are unlikely if payments are made through normal banking channels.