section 195
Deduction of tax at source - Payments to
non-residents
Deduction on gross amount and not amount net of taxes - Persons responsible for
paying to non-resident persons, any sums which are stipulated to be paid net of
taxes should carefully note that the calculation of tax to be deducted at
source as required by section 195, should be made not with reference to the net
of tax amount payable to the non-resident but should be made with reference to
the gross amount. The tax so calculated and deducted should be paid to the
credit of the Central Government as required by section 200, read with rule 30
of the Income-tax Rules, 1962.—Circular: No. 370 [F.No. 391/3/78-FTD], dated
3-10-1983.
In spite of the insertion of section 10(6A) by the Finance Act,
1983, the contents of Circular No. 370 [F. No. 391/3/78-FTD], dated 3-10-1983
would apply to payments of salaries, dividends, interest and other business
income to the non-resident concern/individuals by the Government or the Indian
concerns where the latter have taken upon themselves the tax liability of the
former.—Letter : F. No. 391/3/78-FTD, dated 9-7-1984 [Source : Bombay
Chartered Accountants Journal, September 1984 issue, pp. 740-41].
Application to ITO under section 195(2) - Where the person responsible
for paying any sum to a non-resident considers that the whole amount thereof
would not be income chargeable under the Income-tax Act in the case of the
recipient non-resident, he may make an application under section 195(2) to the
ITO for the determination of the appropriate portion of such payment which
would be taxable and in respect of which tax is to be deducted under section
195(1)—Circular: No. 152 [F. No. 484/31/74-FTD-II)], dated 27-11-1974.
Interest on moneys in NR account† - In the case of a
non-resident, any income from interest on moneys standing to his credit in a non-resident
account in any bank in India in accordance with the Foreign Exchange Regulation
Act, 1947 and any rules made thereunder, will not be included in the total
income, in view of section 6(i) of the Finance Bill, 1965. As such, no
tax is to be deducted at source from such interest with effect from April 1,
1965.—Letter : F. No. 12/29/65-IT(B), dated 1-6-1965. [See Circular : No.
43, dated 20-6-1970 below].
In view of the amendment of section 10(4A) with effect from April
1, 1969 the instructions contained in Circular Letter F. No. 12/29/65-IT(B),
dated 1-6-1965 regarding the non-deduction of tax at source under section 195
will apply only to interest credited to Non-resident (External) Accounts and
not to all types of non-resident accounts—Circular : No. 43 [F. No.
12/98/69-ITJ], dated 20-6-1970.
Payments to foreign banks having branch in India - Persons who wish to make
payments to foreign banks which have a branch office in India and which are
regularly assessed in the status of non-resident on the profits accruing in
India, should apply to the ITO having jurisdiction over the Indian branches of
such banks for a certificate authorising payment without deduction of
income-tax —Circular : No. 20(II-4), dated 3-8-1961.
Payments to foreign supplier towards systems software alongwith hardware - Where a taxpayer, engaged in
the business of export of software for computer application, imports any
systems software, supplied by the manufacturer of the computer hardware, along
with the hardware itself, the lump sum payment made to the foreign supplier for
acquisition of any right in relation to, or for use of, such systems software
will not be liable to tax in India as payment by way of royalty or otherwise.
Such lump sum payments will, henceforth, be allowed to be made without
deduction of tax at source under section 195(1)—-Circular: No. 588, dated
2-1-1991.
Form of application - A non-statutory form for an application seeking authorisation
for payments to non-resident has been specified—Circular : No. 695, dated
28-11-1994. (See page No. 5.90 of Taxmann’s Yearly Tax Digest &
Referencer, 1995 edn.).
Payments to agents of non-resident ship owners - The provisions of section 172
are to apply, notwithstanding anything contained in other provisions of the
Act. Therefore, in the case of non-resident shipping business, the provisions
of section 195 will not apply. Even where payments are made to shipping agents
of non-resident ship-owners or charterers for carriage of passengers, etc.,
shipped at port in India, the agent steps into the shoes of the principal, and
hence section 195 will not apply—Circular : No. 723, dated 19-9-1995.
Remittances to country with which DTAA is in force - In the case of remittance to
a country with which a Double Taxation Avoidance Agreement is in force, the tax
should be deducted at the rate provided in the Finance Act of the relevant year
or at the rate provided in the DTAA, whichever is more beneficial to the
assessee —Circular : No. 728, dated 30-10-1995.
Payments to NRIs in UAE - In respect of payments to be made to the Non-resident
Indians at the UAE, tax at source must be deducted at the following rates:
(i) Dividends :
(a)
5 per cent of the gross amount of the dividends if the beneficial owner is a
company which owns at least 10 per cent of the shares of the company paying the
dividend.
(b) 15
per cent of the gross amount of the dividend in all other cases.
(ii) Interest :
(a)
5 per cent of the gross amount of the interest if such interest is paid on a
loan granted by a bank carrying on a bona fide banking business or by a
similar financial institution.
(b) 12½
per cent of the gross amount of the interest in all other cases.
(iii) Royalties : 10 per cent
of the gross amount.
It is essential that the above rates which are enshrined in the DTAA
between India and UAE are strictly adhered to so as to avoid unnecessary
harassment of taxpayers—Circular: No. 734, dated 24-1-1996.
Payments to branches in India of foreign company/concern - Branch of a foreign
company/concern in India is a separate entity for the purposes of taxation.
Interest paid/payable by such branch to its head office or any branch located
abroad would be liable to tax in India and would be governed by the provisions
of section 115A of the Act. If the Double Taxation Avoidance Agreement with the
country where parent company is assessed to tax provides for a lower rate of
taxation, the same would be applicable. Consequently, tax would have to be
deducted accordingly on the interest remitted as per the provisions of section
195—Circular : No. 740, dated 17-4-1996.
Remittances to non-residents without NOC from the Income-tax Department - The Reserve Bank of India
have provided in their Office Manual that no remittance to non-resident shall
be allowed unless a No Objection Certificate has been obtained from the
Income-tax Department. It has since been decided that henceforth remittances
may be allowed by the Reserve Bank of India without insisting upon a No
Objection Certificate from the Income-tax Department and on the person making
the remittance furnishing an undertaking (in duplicate) addressed to the
Assessing Officer accompanied by a certificate from an Accountant (other than
an employee) as defined in the Explanation below section 288, in the
Form annexed to this circular. The person making the remittance shall submit
the undertaking along with the said certificate of the Accountant to the
Reserve Bank of India, who in turn, shall forward a copy thereof to the
Assessing Officer.
Undertaking
To
...................................................................................
(Designation of
the Assessing Officer)
...................................................................................
...................................................................................
I/We......................................................................................................................................................................................
(name,
address & Permanent Account Number)
propose
to make a remittance of ........................................................................................................................................…
(Amount)
being......................................................................................................................................................................................
(nature
of payment)
to...........................................................................................................................................................................................
(name and complete
address of the person to whom the remittance has been made)
after deducting a sum of Rs. .................. being the tax @
......................., which is the appropriate rate of tax deductible at
source on the said amount of remittance.
2. A
certificate from the accountant as defined in Explanation below section
288 of the Income-tax Act, certifying the nature and amount of income, amount
of tax payable and the amount actually paid, is also annexed.
3. In
case it is found that the tax actually payable on the amount of remittance
made, has either not been paid or has not been paid in full, I/we undertake to
pay the said amount of tax along with interest found due in accordance with the
provision of the Income-tax Act.
4. I/We
will also be subject to the provisions of penalty and prosecution for the said
default as per the Income-tax Act.
5. I/We
also undertake to submit the requisite documents, etc., for enabling the
Income-tax Department to determine the nature and amount of income and tax,
interest, penalty, etc., payable thereon.
(Name
and Signature)
Date......................................
Place....................................
(The Undertaking shall be signed by the person authorised to sign the
return of income of the person making the payment).
Certificate
I/We have examined the books of account of
M/s..............................................................................................................….
..............................................................................................................................................................................................
(Name, address and Permanent Account Number of person
making the remittance)
for ascertaining the nature of the remittance,
of...........................................................................................................................................................................................
(amount
of remittance)
of...........................................................................................................................................................................................
(Name and complete
address of the person to whom the remittance is being made)
and the rate at which the tax is deductible at source thereon and hereby
certify that a sum of Rs. ........................................... has been
deducted as tax at the appropriate rate and has been paid to the credit of the
Government.
................................................
Accountant
Place...............................
Date................................
Circular : No. 759, dated 18-11-1997.
Clarification one
Vide Circular
No. 767, dated 22-5-1998, it is provided that Circular No. 759, dated
18-11-1997 was issued by the Board to dispense with the requirement of
submission of a No Objection Certificate from Income Tax Authorities for
remittance to a non-resident as required by the Reserve Bank of India (RBI). In
Paragraph 2 of the said Circular, it was stated that henceforth remittances may
be allowed by the RBI without insisting upon a No Objection Certificate from
the Income Tax Department provided the person making the remittance furnished
an Undertaking in duplicate addressed to the Assessing Officer which was
accompanied by a Certificate from an Accountant (other than an employee as
defined in the Explanation below section 288) in the form annexed to the
said Circular. The person making the remittance had to submit the Undertaking
along with the said Certificate of the Accountant to the RBI, who would, in
turn, forward a copy thereof to the Assessing Officer.
A number of references have been received by the Board stating that RBI
had delegated powers to authorised dealers to allow certain types of
remittances to non-residents without obtaining approval of RBI. In such cases,
RBI cannot forward the Undertaking and Certificate of the accountant to the
Assessing Officer as prescribed in Circular No. 759. The RBI has already issued
a Circular - AD(MA Series) Circular No. 48, dated 29-11-1997 to all authorised
dealers in Foreign Exchange directing them to forward a copy of the certificate
together with a copy of the Undertaking to the office of the Assessing Officer
of the Income Tax Department as indicated in the Undertaking. In view of the
foregoing, it is clarified that Circular No. 759 would also be applicable to
remittances made through authorised dealers in Foreign Exchange.
In accordance with Circular No. 759, the Undertaking to be submitted by
the person making the remittance to a non-resident is required to be signed by
the person authorised to sign the return of income of the person making the
payment. The person authorised to sign a return of income in the case of a
company, in accordance with section 140 is the Managing Director and each
Undertaking for each remittance has, therefore, to be signed by the Managing
Director. Representations pointing out administrative difficulties experienced
by companies have been received. It has, therefore, been decided that the
Undertaking to be submitted at the time of making a remittance to a
non-resident shall be signed by the person authorised to sign a return or a
person so authorised by him in writing.
It is also clarified that Circular No. 759 will cover those remittances
for which RBI had prescribed the production of a No Objection Certificate from
the Income Tax authorities under its Exchange Control Manual. Further, if an order
under section 195(2) has been obtained by a person responsible for deducting
tax, the new procedure of filing an undertaking along with a certificate
prescribed in Circular 759 would not be applicable.
Clarification two
Vide Circular No. 10/2002, dated 9-10-2002 it is provided that :
Circular No. 759, dated 18-11-1997 was issued by the Central Board of
Direct Taxes to dispense with the requirement of a No Objection Certificate
from income-tax authorities for remittance to a non-resident as required by the
Reserve Bank of India. By the aforesaid circular, remittances were allowed to
be made by the RBI without insisting upon a No Objection Certificate from the
Department provided the person making the remittance furnished an undertaking
in duplicate accompanied by a certificate from an accountant. The format of the
application and the certificate has been circulated to the authorised dealers
by the Reserve Bank of India through their Circular No. AD (MA Series) Circular
No. 48, dated 29-11-1997.
However, it has recently been observed that often the certificates have
been issued prescribing nil deduction of tax at source in certain cases
where tax was liable to be deducted or prescribing deduction of tax at a lower
rate than was payable on the basis of the provisions of the Act and the
applicable DTAC. The certificate does not provide for necessary details or the
reasons for adopting a certain rate for deduction of tax. This results in
unnecessary calling of information from the assessees at a later stage and thus
gives rise to an avoidable perception of grievance on the part of the tax
payer. Therefore, in order to streamline the procedure as well as to ensure the
correct deduction of tax at source, the proforma of the undertaking to be given
by the remitter and the certificate to be issued by a chartered accountant have
been re-considered and new formats are being prescribed which are enclosed as
Annexures A and B to this circular. The revised proforma for ‘undertaking’ as
well as the ‘certificate’ shall to apply in terms of Circular No. 759, dated
18-11-1997. Other requirements of the Circular remain unchanged. It is
reiterated that the persons making the remittances shall submit the undertaking
and certificate as per Annexures A and B to the Reserve Bank of
India/authorised dealer banks, who shall in turn forward the same to the
Assessing Officer mentioned in the undertaking.
The Reserve Bank of India is being requested to circulate the amended
format of the ‘undertaking’ and the ‘certificate’ to their authorised dealers.
This circular comes into effect with immediate effect.
Annexure ‘A’
Form & Application for
remittance under section 195
|
1. |
Name and Address of the
Applicant |
: |
|
2. |
Name and Address of the
Assessing |
: |
|
3. |
Applicant’s
PAN Number |
: |
|
4. |
Name and address of the
beneficiary |
: |
|
5. |
Amount
and nature of remittance |
: |
|
6. |
Rate
of deduction of tax at source |
: |
|
7. |
Reference to provision of
Act/DTAA |
: |
|
8. |
Certificate |
|
(i) I/We propose to make the above remittance as
per deduction of tax at source indicated above. We have obtained a certificate
from M/s. ..... who is an accountant as defined in the section 288 of the
Income-tax Act, certifying the amount, nature and correctness of deduction of
tax at source.
(ii) In case the income-tax authority at any time
finds that tax actually deductible on the amount of remittance has either not
been paid or not paid in full, I/we undertake to pay the said amount of tax
along with interest due.
(iii) I/We shall also be subjected to the
provisions of penalty for the said default as per the provisions of Income-tax
Act.
(iv) I/We undertake to submit the requisite
documents, etc., for enabling the income-tax authorities to determine the
nature and amount of income of the beneficiary of the above remittance as well
as documents required for determining our liabilities under the Income-tax Act
as a person responsible for deduction of tax at source.
(v) The information given above is true to the
best of my/our knowledge and belief and no relevant information has been
concealed.
..............................................
Name and Signature
[To be signed by a person responsible for signing the return of income
(as to provisions of section 139A of the Income-tax Act) of the person making the
remittance].
Annexure ‘B’
Certificate
I/We
have examined the agreement (wherever applicable) between M/s.
............................
........................................................................... and
M/s.
............................................................................
requiring the
(remitters) (beneficiary)
above remittance as well as the relevant documents and books of account
required for ascertaining the nature of remittance and for determining the rate
of deduction of tax at source as per provisions of section 195. We hereby
certify the following :—
|
1. Name
and address of the beneficiary of the remittance and the name of the foreign
country to which remittance is being
made. |
: |
|
|
|
|
2. Amount
of remittance is foreign currency indicating the proposed date/month and bank
through which remittance is being made. |
: |
|
|
|
|
3. Details
of tax deducted at source, rate at which tax has been deducted and date of deduction. |
: |
|
Foreign Currency |
Indian Currency |
|
|
|
Amount
to be remitted |
..... |
..... |
|
|
|
Tax
deducted at source |
..... |
...... |
|
|
|
Actual
Amount remitted |
..... |
..... |
|
|
|
Rate
at which deducted |
..... |
..... |
|
|
|
Date
of Deduction |
...... |
..... |
|
4. In
case the remittance as indicated in (2) above is net of taxes, whether
tax payable has been grossed up?
If so, computation thereof may be
indicated. |
: |
|
|
|
|
5. If
the remittance is for royalties, fee for technical services, interest,
dividend, etc., the clause of the relevant DTAA under which the remittance is
covered along with reasons and the rate at which tax is required to be
deducted in terms of such clause of
the applicable DTAA. |
: |
|
|
|
|
6. In
case that tax has been deducted at a rate lower than the rate prescribed
under the applicable DTAA, the reasons thereof. |
: |
|
|
|
|
7. In
case remittance is for supply of articles or things (e.g., plant,
machinery, equipment, etc.) or computer software, please indicate :— |
: |
|
|
|
|
i. Whether there is any permanent establishment in India through which
the beneficiary of the remittance is directly or indirectly carrying on such activity
of supply of articles or things? |
|
|
|
|
|
ii. Whether such remittance is attributable to or connected with such
permanent establishment? |
|
|
|
|
|
iii. If so, the amount of income comprised in such remittance which is
liable to tax. |
|
|
|
|
|
iv. If not, the reasons in brief therefor. |
|
|
|
|
|
8. In
case remittance is on account of business income please indicate :— |
: |
|
|
|
|
i. Whether such income is liable to tax in India? |
|
|
|
|
|
ii. If so, the basis for arriving at the rate of deduction of tax. |
|
|
|
|
|
iii. If not, the reasons thereof. |
|
|
|
|
|
9. In
case tax is not deducted at source for any other reason, details thereof. |
: |
|
|
|
(Attach separate sheet duly authenticated wherever necessary)
.........................................................................................
Name, Address and registration numbers
(To be signed and verified by an Accountant as defined in section 288 of
the Income-tax Act).
Procedure for refund of tax deducted at source under section 195
Clarification
one
1.
The Board has received a number of representations for granting approval for refund
of excess deduction or erroneous deduction of tax at source under section 195
of the Income-tax Act. The cases referred to the Board mainly relate to
circumstances where :—
(i) after
the deposit of tax deducted at source under section 195,
(a) the contract is
cancelled and no remittance is required to be made to the foreign collaborator;
(b) the remittance is
duly made to the foreign collaborator, but the contract is cancelled and the
foreign collaborator returns the remitted amount to the person responsible for
deducting tax at source;
(c) the tax deducted
at source is found to be in excess of tax deductible for any other reason;
(ii) the
tax is deducted at source under section 195 and paid in one assessment year and
remittance to the foreign collaborator is made and/or returned to the Indian
company following cancellation of the contract in another assessment year.
In all the cases mentioned above, where either the income does not
accrue to the non-resident or excess tax has been deducted thereby resulting in
a refund being due to the Indian enterprise which deposited the tax, at present
a refund can be issued only if valid claim is made by filing a return.
2. In
the absence of any statutory provision empowering the Assessing Officers to
refund the tax deducted at source to the person who has deducted tax at source,
the Assessing Officers insist on filing of the return by the person in whose
case deduction was made at source. Even adjustments of the excess tax or the
tax erroneously deducted under section 195 is not allowed. This has led to a
lot of hardship as the non-resident in whose case, the deduction has been made
is either not present in the country or has no further dealings with the Indian
enterprise, thus, making it difficult for a return to be filed by the
non-resident.
3.
The matter has been considered by the Board. It has been decided that in the
type of cases referred to above, a refund may be made independent of the
provisions of the Income-tax Act, 1961 to the person responsible for deducting
the tax at source from payments to the non-resident, after taking the prior
approval of the Chief Commissioner concerned.
4.
The excess tax deducted would be the difference between the actual payment made
by the deductor and the tax deducted at source or that deductible. This amount
should be adjusted against the existing tax liability under any of the Direct
Tax Acts. After meeting such liability, the balance amount, if any, should be
refunded to the person responsible for deduction of tax at source.
5.
Where the tax is deducted at source and paid by the branch office of the person
responsible for deduction of tax at source and the quarterly statement/annual
return of tax deduction at source is filed by the branch, each branch office
would be treated as a separate unit independent of the head office. After
meeting any existing tax liability of such a branch, which would normally be in
relation to the deduction of tax at source, the balance amount may be refunded
to the said branch office.
6.
The adjustment of refund against the existing tax liability should be made in
accordance with the present procedure on the subject. A separate refund voucher
to the extent of such liability under each of the direct taxes should be
prepared by the Income-tax Officer in favour of the “Income-tax Department” and
sent to the bank along with the challan of the appropriate type. The amount
adjusted and the balance, if any, refunded would be debitable under the
sub-head “Other refunds” below the minor head “Income-tax on companies” major
head “020 - Corporation Tax” or below the minor head “Income-tax other
than Union Emoluments” major head “021 - Taxes on Incomes other than
Corporation Tax”, depending upon whether the payment was originally credited to
the major head “020 - Corporation Tax” or to the major head “021-Taxes on
Income other than Corporation Tax”.
7.
Since the adjustment/refund of the amount paid in excess would arise in
relation to the deduction of tax at source, the recording of the particulars of
adjustment/refund should be done in the quarterly statement of TDS/annual
return under the signature of the ITO at the end of the statement, i.e.,
below the signature of the person furnishing the statement.—Circular : No.
769, dated 6-8-1998.
Clarification two
1. The Board has issued
Circular No. 769, dated 6-8-1998, laying down procedure for refund of tax
deducted under section 195, in certain situations to the person deducting the
tax at source from the payment to the non-resident. After reconsideration,
Circular No. 769 is revoked with immediate effect and refund to the person
deducting tax at source under section 195 shall be allowed in accordance with
the provisions of this Circular.
2. The Board had received
representations for approving grant of refund to the persons deducting tax at
source under section 195 of the Income-tax Act, 1961. The cases referred to the
Board mainly related to circumstances whereafter the deposit into Government
account of tax deducted at source under section 195,—
(a) the
contract is cancelled and no remittance is made to the non-resident;
(b) the
remittance is duly made to the non-resident, but the contract is cancelled. In
such cases, the remitted amount may have been returned to the person
responsible for deducting tax at source.
In the cases mentioned above,
income does not accrue to the non-resident. The amount deducted as tax under
section 195 and paid to credit of Government, therefore, belongs to the
deductor. At present, a refund is given only, on a claim being made by the
non-resident with whom the transaction was intended.
3. In the type of cases
referred to in sub-paragraph (a) of paragraph 2, the non-resident not
having received any payment would not apply for a refund. For cases covered by sub-paragraph
(b) of paragraph 2, no claim may be made by the non-resident where he
has no further dealings with the resident deductor of tax. This resident
deductor is, therefore, put to genuine hardship as he would not be able to
recover the amount deducted and deposited as tax.
4. The matter has been
considered by the Board. In the type of cases referred to above, where no
income has accrued to the non-resident due to cancellation of contract, the
amount deposited to the credit of Government under section 195 cannot be said
to be ‘tax’. It has been decided that this amount can be refunded, with prior
approval of Chief Commissioner concerned to the person who deducted it from the
payment to the non-resident under section 195.
5. The refund being made to the
person who made the payment under section 195, the Assessing Officer may after
giving intimation to the deductor, adjust it against any existing tax liability
of the deductor under the Income-tax Act, 1961, Wealth-tax Act, 1957 or any
other direct tax law. The balance amount, if any, should be refunded to the
person who made such payment under section 195. A separate refund voucher to
the extent of such liability under each of the direct taxes should be prepared
by the Income-tax Officer or the Assessing Officer in favour of the “Income-tax
Department” and sent to the bank along with the challan of the appropriate
type. The amount adjusted and the balance, if any, refunded would be debitable
under the sub-head “Other refunds” below the minor head “Income-tax on
Companies”—major head “020—Corporation Tax” or below the minor head “Income-tax
other than Union Emoluments” major head “021—Taxes on Incomes other than
Corporation Tax” depending upon whether the payment was originally credited to
the major head “020—Corporation Tax” or to the major head “021—Taxes on Income
other than Corporation Tax”. Since the adjustment/refund of the amount paid
would arise in relation to the deduction of tax at source, the recording of the
particulars of adjustment/refund, should be done in the quarterly statement of
TDS/annual return under the signature of the Income-tax Officer or the
Assessing Officer at the end of the statement, i.e., below the signature
of the person furnishing the statement.
6. Refund to the person making
payment under section 195 is being allowed as income does not accrue to the
non-resident. The amount paid into the Government account in such cases, is no
longer ‘tax’. In view of this, no interest under section 244A is admissible on
refunds to be granted in accordance with this Circular or on the refunds
already granted in accordance with Circular No. 769.
7. A refund in terms of this
Circular should be granted only after obtaining an undertaking that no
certificate under section 203 of the Income-tax Act has been issued to the
non-resident. In cases where such a certificate has been issued, the person
making the refund claim under this Circular should either obtain it or should
indemnify the Income-tax Department from any possible loss on account of any separate
claim of refund for the same amount by the non-resident.
8. The refund as per this
Circular is permitted only in respect of transactions with non-residents, which
have either not materialised or have been cancelled subsequently. It, therefore,
needs to be ensured by the Assessing Officer that they disallow corresponding
transaction amount, if claimed as an expense in the case of person making
refund claim.
9. It is hereby clarified that
refund shall not be issued to the deductor of tax in the cases referred to in
clause (i)(c) of paragraph 1 of Circular 769, dated 6-8-1998.
10. The limitation for making a
claim of refund under this Circular shall be two years from the end of the
financial year in which tax is deducted at source.—Circular : No. 790, dated
20-4-2000.
Non-resident agent operating outside the country - As clarified earlier in
Circular No. 23, dated 23-7-1969 (see under section 5), where the
non-resident agent operates outside the country, no part of his income arises
in India, and since the payment is usually remitted directly abroad, it cannot
be held to have been received by or on behalf of the agent in India. Such
payments were therefore, held to be not taxable in India. This clarification still
prevails, in view of the fact that the relevant sections [section 5(2) and
section 9] have not undergone any change in this regard. No tax is therefore
deductible under section 195 from export commission and other related charges
payable to such a non-resident for services rendered outside India.—Circular
: No. 786, dated 7-2-2000.