Latest Expert Exchange Queries
sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
 
 
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Service Tax | Sales Tax | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Indirect Tax | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing
 
 
 
 
Popular Search: ACCOUNTING STANDARD :: list of goods taxed at 4% :: empanelment :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: cpt :: TDS :: TAX RATES - GOODS TAXABLE @ 4% :: VAT Audit :: due date for vat payment :: articles on VAT and GST in India :: Central Excise rule to resale the machines to a new company :: ACCOUNTING STANDARDS :: form 3cd :: ARTICLES ON INPUT TAX CREDIT IN VAT :: VAT RATES
 
 
« Direct Tax »
 Hopeful of meeting direct tax collection target for this financial year: CBDT
 Bengaluru tops in income tax probes after demonetisation
 Income Tax department rejects black money disclosures of over Rs 2 lakh crore
 CBDT urges people to protect bank accounts from 'unscrupulous elements'
 No change in gold seizure norms in proposed I-T Law amendments
 Direct tax collection will get a long-term boost, Franklin Templeton says
 I-T Act amendments upset calculations of cash hoarders
 Claim tax benefit on costs incurred to evict tenants
 The Integrated Goods And Services Tax Act, 2016
 Here’s what Income Tax Department did leading up to demonetisation
 I-T department asks IDS declarants to pay tax by November 30

CBDT clarifies on scope of disallowance
February, 20th 2015

The Central Board of Direct Taxes (CBDT) has clarified on the scope of disallowance on payments made to non-residents on which tax ought to have been withheld.

It has now issued a clarificatory circular, which will help bring certainty in the law so as to avoid potential litigation, say tax experts.

The CBDT circular basically seeks to link two independent sections of the income tax law—one relating to TDS on payments to non-residents (Section 195) and the other related to disallowance of expenditure (Section 40(i)(a)).

So far, the assessing officer tended to look at these two provisions independently, leading to situations where an officer took revenue based approach and disallowed entire amount paid to non-residents, said tax experts.

The latest CBDT circular clarifies the definition of ‘other sum chargeable’ to tax under Section 40(a)(i).

This is done in order to bring certainty in the law in order to avoid any potential litigation, Partho Dasgupta, Partner-Direct Tax, BDO India LLP told Business Line.

This section (40(i)(a)) has been aligned with another Section 195 which deals with withholding of tax for any payment to non-resident, he said.

Doubts had been expressed as to whether the term ‘other sum chargeable’ refers the whole sum being remitted or only the portion representing the sum chargeable to income-tax under relevant provisions of the Act.

Aseem Chawla, Partner, MPC Legal, a law firm, said the latest CBDT circular reaffirms the legal position that all payments to non residents need not be sum chargeable to tax under the income tax law.

“This should assist in determining the payment obligations to non-residents under section 195”, Chawla said.

Now that the CBDT has issued such a circular, Dasgupta felt it would be advisable to file an application with the tax authorities for determining whether the sum is chargeable to tax or not in India.

This should be based on an earlier instruction by the CBDT whereby only such amounts which is chargeable to tax in India is subject to withholding instead of the entire sum payable to non-residents.

Sunil Shah, Partner, Deloitte Haskins & Sells LLP, said the CBDT has rationalized the provisions for disallowance of payments to non-residents where tax has not been withheld.

“In cases where the payment is chargeable to tax in the hands of the non-resident on a net income basis (due to deduction for expenses), it is only the net amount that will be the subject matter of disallowance. The entire payment will not be disallowed”, Shah said.

 
 
Home | About Us | Terms and Conditions | Contact Us
Copyright 2016 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Integrated Software Solutions Integrated Software Development Integrated Software Services Integrated Software Solutions India Integrated Softw

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions