Withholding tax on sale of shares on foreign company

[PANKAJ GROVER]

A Ltd. is a foreign company which is holding the shares in an Indian company C Ltd .Now the shares of C Ltd. are sold by A Ltd. to another foreign company B Ltd. for Rs. 100 lakhs (long term). Also there is No DTAA between the Indian company C Ltd. and the company A ltd.. Here the issue arises that whether the company B Ltd. is required to withhold tax on the payment to A Ltd. and if yes, then at which rate and amount. Please also explain the relevant provisions for our reference

[shruti mittal]

as per my opinion:

No TDS should be deducted ..... because whatever the amount paid by B ltd to A ltd .. not considered as an income which is chargeable under income tax...Consider all provsions of TDS as a whole.

[PANKAJ GROVER]

Thanks Shruti for your reply, our concern is whether provisions of Section 195 are applicable to such transaction and withholding tax needs to be deducted.

 

Thanks

 

Pankaj Grover

[deepak gulati]

The TDS / WHT is not applicable as both the parties are non residents, had payer been Resident Tax was to be deducted.

AI Summary

Withholding tax on share sale may not apply when both seller and buyer are non residents and no DTAA exists. Whether withholding tax arises when a foreign buyer pays a foreign seller for long term shares of an Indian company and no DTAA exists; the query asked if Section 195 applies and at what rate. Respondents opined no TDS should be deducted because the payment between nonresidents was not regarded as income chargeable in India, and that withholding would be relevant if the payer were resident.