Tekken Ltd., an Indian company engaged in the manufacturing and trading of video games under the brand name "TIMETODIE", undertook a large-scale…

Chapter VIII of the Finance Act, 2016, "Equalisation Levy", provides for an equalisation levy of 6% of the amount of consideration for specified services received or receivable by a non-resident not having permanent establishment in India, from a resident in India who carries out business or profession, or from a non-resident having permanent establishment in India. "Specified Service" means (1) online advertisement; (2) any provision for digital advertising space or any other facility or service for the purpose of online advertisement and (3) any other service as may be notified by the Central Government. However, equalisation levy shall not be levied- where the non-resident providing the specified services has a permanent establishment in India and the specified service is effectively connected with such permanent establishment.the aggregate amount of consideration for specified service received or receivable during the previous year does not exceed 1lakh.where the payment for specified service is not for the purposes of carrying out business or profession In the present case, equalisation levy @6% is chargeable on the amount of 20,00,000 received by Moonland Inc., a non-resident not having a PE in India from Tekken Ltd., an Indian company. Accordingly, Tekken Ltd. is required to deduct equalisation levy of 1,20,000 i.e., @6% of 20lakhs, being the amount paid towards online advertisement services provided by Moonland Inc., a non-resident having no permanent establishment in India. Non-deduction of equalisation levy would attract disallowance under section 40(a)(ib) of 100% of the amount paid while computing business income.