Do TDS (tax deduction at source) provisions come into play?
Section 195 of the IT Act casts an obligation on a person responsible for paying any sum which is chargeable to tax in India to a non-resident to deduct income tax at source at the time of payment or credit. It is well established that the liability to deduct tax applies to non-residents as well as residents. Thus, in our view, a non-resident purchaser (i.e. the payer) is liable to deduct the tax at source if the transaction is liable to tax in India. Liability for deduction of tax is, therefore, on the transferee company. Is the Indian company an agent as the taxman would like to believe? According to Section 160(1) of the IT Act, agent of the non-resident is representative assessee, and Section 161 discusses the liability of representative assessee. Section 163 defines agent to include a person who has a business connection with the non-resident. In our view, it is difficult to consider the Indian company as an agent, merely because it is a subsidiary of the non-resident. The road ah
