Section 194J l Fees for professional or
technical services

1161. Clarification regarding payments to persons resident in India by foreign companies or foreign law firms that have no presence in India

1. Representations have been received from some law and accountancy firms that are receiving fees for professional services from foreign companies or foreign law and accountancy firms saying that the latter find it very difficult to comply with the requirement of tax deduction at source under section 194J of the Income-tax Act and its payment to Central Government in the prescribed manner and within the prescribed time in the absence of any agent or business connection or permanent establishment in India. They have, therefore, requested that the provisions of section 194J of the Act may not be made applicable to the fees for professional services paid by foreign companies or foreign law and accountancy firms to persons resident in India.

2. After carefully considering the practical difficulties involved, it is felt that, any fees paid through regular banking channels to any chartered accountant, lawyer, advocate or solicitor who is resident in India by the non-residents who do not have any agent or business connection or permanent establishment in India may not be subject to the provisions of tax deduction at source under section 194J of the Income-tax Act.

3. However, foreign companies or foreign law and accountancy firms are required to send a quarterly statement, indicating the name and address of the person to whom the payments are made, to the Deputy Secretary, Foreign Tax Division, CBDT, Department of Revenue, Ministry of Finance, New Delhi. The first quarterly statement would be from the quarter ending 31st December, 1995.

Circular : No. 726, dated 18-10-1995.

1162. Discontinuance of requirement of sending quarterly statements in case of payments by foreign companies and law firms to residents in India

1. Attention is invited to Board’s Circular No. 726 dated 18-10-95 (F. No. 133/80/95-TPL) wherein, inter alia, it was stated that the foreign companies and the foreign law and accountancy firms that have no presence in India should send a quarterly statement to the Deputy Secretary, Foreign Tax Division, CBDT regarding the payments made to the Indian residents for professional service.

2. The Board has since reconsidered the matter. As the details of payments made to the Indian residents can easily be verified or collected wherever required, it has been decided to discontinue with immediate effect the requirement of sending the above quarterly statements.

Circular : No. 766, dated 24-4-1998.