U.

Mohanan & Co Chartered Accountant

FORM 15CB
Income to a non-resident is taxable in India if satisfy the following conditions: 1. If Income is received (or deemed to be received) in India during the previous year and at the same time it accrues (or arises or is deemed to accrue or arise) in India during the previous year. 2. 3. If Income is received (or deemed to be received) in India during the previous year but does not accrue (or arise) during the previous year. If income is received outside India during the previous Year but it accrues (or arise or is deemed to accrue or arise) in India during the previous year. Whether Commission Income of non-resident agents who are operating outside India is satisfying any condition given above?

As Exporter paid commission in foreign currency to agents directly outside India so income is neither received in India nor deemed to received in India. Secondly if non-resident agent doesnt have any permanent establishment or permanent place in India then commission income neither arise in India nor deemed to accrue or arise in India.

With above discussion if the following conditions are satisfied the commission paid to non-resident is not taxable in India:-

Agent should be non-resident. Agent should operate its business activities outside India. Commission paid should be related to services provided outside India. Agent should not have any permanent establishment or permanent business place in India. Commission remitted to agent directly outside India.

As in the case of GE India Technology Cen. (P.) Ltd vs.Commissioner of Income-tax [2010] 193 taxman 234 (SC) HELD THAT In our view, section 195(2) is based on the principle of proportionality. The said sub-section gets attracted only in cases where the payment made is a composite payment in which a certain proportion of payment has an element of income chargeable to tax in India After withdrawal of circular No. 23, dated 23rd July, 1969, No. 163, dated 29th May, 1975 and No. 786, dated 7th February, 2000, vide CBDT circular 7/2009 [F. No. 500/135/2007-FTDI], dated 22-10-2009 there is a lot of confusion in mind of exporters relating to deduction TDS on commission paid to non-resident agents who operates outside India. As the Supreme Court interpreted that if income is not chargeable to tax in India at all then no need to file an application 195(2) to AO and obtain his permission for deduction TAS at lesser amount. Now it is clear after this judgement that if non-resident agents do not have any PE or business connection in India no needs to deduct TDS.

U. Mohanan & Co Chartered Accountant

Checklist For FORM 15CB

Sl. No 1.

Details
Name & Address of the Recipient & Beneficiary: Provide details of the recipient and actual beneficiary- the remittance may be made to a third person. Obtain Tax Residency Certificate issued by Tax Authorities of the country where the payee is located. If payee is a Branch, Tax Residency Certificate in respect of the Parent company [This information is important to determine which Tax Treaty would be applicable]. It is important that the TRC should specifically mention that the recipient is a tax resident of the home country under the particular Tax Treaty entered into with India. If tax residency Certificate is not immediately available, obtain a Self Declaration from the Payee to the effect that the Payee is a Tax Resident of a particular Taxing Jurisdiction. Make disclosure of your reliance on Payees Self Declaration in the Certificate.

Remarks

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Status of the Recipient: Whether Individual, Partnership Firm, Incorporated Company, Trust, Association of Persons (Society etc), Bank or Government or a Government Body or any other status [Taxability and Rate of tax depends upon the Status of the payee] Status : Non- Resident, Resident and ordinarily resident or Resident but not ordinarily resident. Nature of Remittance as per agreement/document: Whether Royalty, Fees for Technical Services, Professional Fees, Business Income, Interest, Dividend, Management Fees, Reimbursement of Expenses or Other Income etc.

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U. Mohanan & Co Chartered Accountant

6.

Ascertain the correct classification of income: To do so, following details & documents are requireda) Contract with the payee and other supporting documents, correspondence/emails, broachers etc. b) Invoices and supporting vouchers. c) In case of Reimbursement of Expenses, supporting invoices /voucher and other documentary proof d) Any other document which may help in determining the nature of payment/ quantum of income. [Classification of Income is very important as the ultimate taxability and applicable rate of tax depends upon the nature of income.]

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Ascertain applicable rate of TDS under applicable DTAA as well as under Domestic law.

Does the recipient have a Business Connection as defined u/s 9(1)(i) of the Act in India. Said to have Business Connection if :

Amount paid is towards commission for sales. The same is overseas commission paid for services rendered outside India by a nonresident. As per section 9 of the Income Tax Act and hence not liable to deduct TDS. DTAA will not be invoked, as the same in not an Income in India.

a) Habitually exercises in India, authority to conclude Contract, or b) Habitually maintains a stock of goods or merchandise in India and from which we delivers goods to merchandise, or c) Habitually secures orders in India mainly or wholly for us or other establishment which comes under our common control.
(To determine whether the Income is accrued or deemed to accrue in India)

8.

In case the remittance is for Net of Net of

U. Mohanan & Co Chartered Accountant taxes agreements: Whether tax payable has been grossed up? Provide computation.

9.

Particulars of the Bank (Name, Branch, Address, Account No.) through which the remittance is to be made and the currency in which payment is made.