TDS u/s 195

[Dhirendra Srivastava]

Dear All

The facts are as follows:

B Ltd (India) is a subsidiary of A Ltd ( Japan ). A Ltd Japan recovers from B Ltd  the cost of usage server.

In other words, the parent company in Japan incurrs cost of server and allocate the cost to its subsidiary company and

accordingly recovers the same from the Subsidiary company in India.

Query:

Is the Indian Subsidiary is required to deduct any TDS on payment made to Parent company for usage of Server located in Japan.

Please let me know any other information required to solve the query.

[hari saini]

Yes, WHT to be deducted on usage of server. This will be covered under fee for technical service & royalty nder sec 195 and WHT to be deduct accordingly.

[Dhirendra Srivastava]

ThanksMr.HAri

 

But if it an be proved that Some other vendor is residing in the country where parent co. is situated had raised the invoice for such usage and remmitance is actually equal to the invoice raised by such outside vendor, then whether it will amount to reimbursement and accordingly no TDS would have been Deducted

[hari saini]

Hi Dhirendra,

IF vendor is providing Invoice with supporting of actual bill  than no WHT will be deduct  as this will be treated as Reimbursement of expenses.  

AI Summary

Withholding on cross border server charges depends on whether the payment is service consideration or a reimbursement.
Payment characterisation controls withholding: where the parent's charge for server use is consideration for services (fee for technical services or royalty) withholding under section 195 applies; where the parent is merely reimbursing an external supplier and provides matching third party invoices as support, the payment is treated as reimbursement and withholding would not apply.