NI Ltd. is an Indian Company involved in manufacturing and trading in cotton garments under the brand name “COTT”. In order to expand its exports…

CA Final · Direct Tax Laws and International Taxation · MTP · November 2024
NI Ltd. is an Indian Company involved in manufacturing and trading in cotton garments under the brand name “COTT”. In order to expand its exports sale, it launched a massive publicity campaign in overseas market. For the purpose of online advertising, it hired SK Inc., a New York based company which has no permanent establishment in India and paid 10 lakhs for its services in the previous year 2023-24. Discuss the tax and TDS implications of such transaction both in the hands of NI Ltd. and SK Inc.

Suggested Answer and Working Notes:

Equalisation levy of 6% is attracted in respect of the amount of consideration exceeding 1lakh for, inter alia , online advertisement, received or receivable by a non-resident not having permanent establishment in India, from, inter alia , a resident in India who carries on business or profession. In this case, the payment of 10lakhs by NI Ltd., a resident in India (since it is an Indian company) to SK Inc., New York, a non-resident not having PE in India, for online advertisement services would be subject to Equalisation Levy@6%. Such income is, however, exempt under the Income-tax Act, 1961 by virtue of section 10 (50) thereof. NI Ltd. is required to deduct equalisation levy of 60,000 i.e., @6% of 10lakhs from such payment.

Topics: Non-Resident Taxation

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