The objective of this section is to ensure that the tax on the income of non-residents and foreign companies is deducted at source, so that the department is not put to the trouble of recovering it from such persons whose connections with India,
||Whether TDS u/s. 195 is required for advertisement on Facebook, Google etc?
In the era of e-commerce and social networking, a lot of Indian Companies are using social marketing by placing advertisement on sites like Facebook, Google etc. These sites are owned by non-residents and payments are usually made using credit cards. Whether TDS provision u/s. 195 are applicable to such payments? Further website neither allows any reduction in payments nor their PAN is available with the payer. In such scenario how TDS obligation is to be discharged?
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||CA. H. N. Motiwalla
||Non-resident, tax deducted at source
No TDS is required to be deducted, as neither of the above companies have PE in India and payments made to them for advertisement cannot be considered as ‘royalty’ as held by the Mumbai Tribunal
Even though, the circulars stated above have been withdrawn vide circular no. 7 of 2009 dated October 22,2009, no TDS is required to be deducted as no income is chargeable to tax under section 195 of the Income-tax Act, 1961, as non-resident selling agents have rendered the services outside India for procuring the orders and commission is payable to them outside India.
The Supreme Court in GE India Technology Centre Pvt. Ltd. [327 ITR 456] has held as under:
“The most important expression in section 195(1) of the Income-tax Act, 1961 dealing with deduction of tax at source consists of the words “chargeable under the provisions of the Act”. A person paying interest on any other sum to a non-resident is not liable to deduct tax if such sum is not chargeable to tax under the Act. Section 195 contemplates not merely amounts,
The refund can be issued to the employer as the tax has been borne by it.