| Question And Answer | |
|---|---|
| Subject: | TDS on payment made outside India for settlement of dispute |
| Category: | Income-Tax |
| Querist: | CA KARAN SHAH |
| Answered by: | Advocate Shashi Ashok Bekal |
| Tags: | Settling the dispute, Tax deduction at source, TDS, TDS u/s 195 |
| Date: | October 11, 2021 |
ABC company of USA has filed civil law suit against XYZ company of India in the court of USA alleging breach of confidentiality and misappropriation of trade secret.
Now both the parties have agreed mutually to fully settle the dispute, wherein XYZ company will pay sum of USD 250000 to ABC company, and ABC company will withdraw the case.
Q1. whether such payment made by XYZ company will be deductible expense from business income?
Q2. Under which section TDS will be applicable and at what rate?
Q3. under what expense head such payment should be booked in profit and loss account?
As we understand, it would be important to ascertain in which jurisdiction the breach has been committed, and the nature of breach for the purpose of claiming a deduction.
It would be advisable to approach the Department with an application under section 197 of the Income-tax Act, 1961 or the Board for Advance Ruling to gather a conclusive answer.