Examine in the context of provisions contained in Chapter XVII of the Act and also work out the amount of tax to be deducted by the payer of income…

(I) Section 194D requires deduction of tax at source@10% from insurance commission, where the commission exceeds - 15,000. Reinsurance is different from insurance since there is no direct contractual relationship between the person insured and the re-insurer. In order to attract section 194D, the commission or any other payment covered under the section should be a remuneration or reward for soliciting or procuring the insurance business. The insurance companies do not procure business for the reinsurance company nor does the reinsurer pay commission or other payment for soliciting the business from the insurance companies. Therefore, section 194D has no application. Hence, when profit commission is paid by a reinsurance company to an insurance company, after the expiry of the term of insurance, in respect of cases where there is no claim during the operation of the reinsurance treaty, tax deduction under section 194D is not attracted. (II) Section 194J provides for deduction of tax at source @10% on any remuneration or fees or commission, by whatever name called, paid to a director, which is not in the nature of salary in respect of which tax is deductible at source under section 192. Hence, tax is to be deducted at source under section 194J @10% by Krish Pvt. Ltd. on the commission of 3,10,000 paid to Amrish, a part-time director. The tax deductible under section 194J would be - 31,000, being 10% of 3,10,000.