Applicability of section 195

[venugopal m.s]

We are importing the raw meterials for our manufaturing from the various countries thru the letter of credit form the bankers. At the time due date of LC we will pay the ncessary amount to the foreign customers thru the LC. In our case Section 195 is applicable or not.

[Ravi Chopra]

Mere an activity of sale and purchase of goods does not give rise to any income which is taxable in India and therefore, the provisions of Section 195 are not applicable.

AI Summary

Section 195 applicability: payments under letters of credit for import of goods do not attract withholding obligation. Whether payments under letters of credit for import of raw materials attract a withholding obligation under Section 195; where the transaction is a pure sale and purchase of goods with no income accruing in India, Section 195 does not apply and no tax is deductible at source.