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?

 

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.