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.

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.