Deduction of surcharge and education cess levied on non-domestic companies

[MAHESH MATHUR]

As per DTAA with Germany Tax on Technical Services is 10% As Article 12. As per Finance Act TDS for Non-Resident Companies for such services is also 10%. However, as per Finance Act there is a further levy of Surcharge @2.5% on Non Domestic Companies if Income to be remitted is more than 1 crore plus levy of Education Cess @ 3%. How much Deduction should be made in such a situation? Should it be resticted to 10% only or it should be at 10.56%?

AI Summary

DTAA withholding rate governs whether surcharge and education cess may be added to domestic TDS obligations.
The issue is whether the DTAA withholding rate for technical services to nonresident companies is final or must be increased by domestic surcharge and education cess. One position applies the DTAA rate alone; an opposing position treats the DTAA as the basic rate to which surcharge and cess are added. Contributors note departmental circulars supporting the treaty-rate-as-final view, while others rely on statutory charging measures to justify adding surcharge and cess to determine the TDS deduction.