Circular - No applicability of TDS

[pardeep bisht]

Ref to reply form Mr Jain dtd 1/1/10 that no TDS to be deducted on commissions to parties who are having office in India. Please confirm circular no and SC ruling on the same.

[Rama Krishana]

You may read the section 9(1)(i) - explanation 1(b) which is run as, "(b) in the case of a non-resident, no income shall be deemed to accrue or arise in India to him through or from operations which are confined to the purchase of goods in India for the purpose of export ;" Therefore, the view of Mr. Jain was correct. Basic provision of Income Tax Act, 1961 clears the situation itself.

AI Summary

Non-resident source rule: commissions for purchases in India destined for export fall outside Indian-source income, so withholding may not apply. Income of a non-resident arising from operations confined to purchase of goods in India for export is not deemed to accrue or arise in India; consequently, commission payments strictly tied to such purchase-for-export operations are outside the Indian source of income and the withholding provisions based on Indian-sourced income do not apply.