TDS u/s 195

[Sanjeev Sharma]

An overseas company(A) dealing in educational books & materials has appointed a distributor in India company (B) on a non exclusive basis for selling of the books to Indian schools & institutions.

 

Company A has contracted with a printer in India to print the books on its behalf and deliver them to company B for sales. Printer raises an invoice on company A for the work done and company A pays in foreign exchange. For these books delivered by printer to company B , company A raises an invoice on company B in US $.

 

Can company B remit the amount in foreign currency to company A on the basis of invoice raised? Is it allowed by FEMA? Is Witholding Tax to be dedcuted .

 

Will this transaction be covered under deemed income of company A?

 

In case the printer is in EPZ , then what will be the scenario?

 

[sirish narasimhabommakanti]

Yes company B can remit the foreign currency for the invoice raised. It is permissible by FEMA. Witholding tax has to be made after examinig the PE status and the relevant country DTAA. The transaction will be covered for taxation in India but relevant DTAA has to be examined.

AI Summary

TDS obligation depends on permanent establishment and applicable treaty; remittance of foreign invoice payments permitted under FEMA. Company B may remit payment in foreign currency for the invoice and such remittance is permissible under FEMA. Deduction of withholding tax depends on whether the overseas company has a permanent establishment in India and on the relevant double taxation agreement; withholding should be considered after examining PE status and the applicable treaty. The receipt will be subject to Indian taxation principles as modified by the DTAA.