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TDS u/s 195 query

Started by ketanvyas1975, November 19, 2013, 01:46:42 PM

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My client wants to make payment of subscription money to a foreign entity for a periodical (magazine) supplying international prices and statistics of commodity for its business purpose. Whether TDS u/s 195 will apply in such a case? Whether the payment can be termed as royalty for supply of information u/s 9 of the Income Tax Act?

There is DTAA with the country of recipient as per which rate of deduction for Royalty shall not exceed 10%. However, the recipient does not have PAN and hence section 206AA shall apply as per which the rate is 20%. In such a case, what will be the rate of deduction?


Since 206aa is not withstanding  anything contained in the other provisions the tax rate will be 20percent plis cess


The tax is to be deducted only if the income of the non-resident is taxable in India.  Since you are making subscription for magazine to a nonresident whose income is not taxable in India no tax need to be deducted.  Supreme Court in GE India Technology Centre (P) Ltd. vs. CIT (2010) 234 CTR (SC) 153 : (2010) 327 ITR 456 (SC) setting aside the decisions in Samsung Electronics Co. Ltd. & Ors. (2009) 227 CTR (Kar) 335 : (2010) 320 ITR 209 (Kar) and CIT (International Taxation) & Anr. vs. Sonata Information Technology Ltd. (2010) 232 CTR (Kar) 20 has held that most important expression in s. 195(1) consists of the words "chargeable under the provisions of the Act".


I agree with the above but my question is (1) whether payment for subscription for receiving statistics etc. for business purpose will amount to royalty or not. if it is royalty, it is surely taxable in india and hence TDS will be deductible (2) of it is royalty, tax of 10% as prescribed in DTAA will apply or as prescribed in section 206AA?


In my view a magazie cannot be treated as a software.  The magazine has limited shelf life like a newspaper.  Hence payment made for supply of magazine does not amount to royalty.  If any income is taxable in India then tax has to be deducted.