Saturday, March 14, 2015

TDS on payment to Foreign Consultant

The Supreme Court delivered a judgment in which an Indian company was denied no objection
certificate (NOC) to remit the 'success fee' to a Swiss firm because it did not deduct tax at source.
In this case, GVK Industries Ltd v ITO, the Indian firm sought the services of ABB of Zurich to raise
finance from Indian and foreign sources. After rendering the services, the foreign firm sent invoice to GVK for the success fee. When GVK approached the tax authorities for NOC, it was denied. Its argument that the Swiss firm had no place of business here, all services rendered were from abroad, and no part of success fee could be said to arise in this country attracting tax liability were rejected. The revenue authorities contended that the Swiss firm actively arranged loans and provided various services that attracted the income tax provisions. Therefore, tax must be deducted before remitting the fee abroad. Andhra Pradesh High Court ruled in favour of tax authorities u/s 9(1). This view was upheld by Supreme Court

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