Ubclick Inc., a non-resident company (incorporated in Country Y) is engaged in the manufacturing of paints and has factories across the world…

CA Final · Direct Tax Laws and International Taxation · PYQS · May 2025
Ubclick Inc., a non-resident company (incorporated in Country Y) is engaged in the manufacturing of paints and has factories across the world including India. The factory in India produces paints and sells in the Indian market as well as worldwide since past 10 years. Its turnover for the last 3 years in India was F.Y. 2021-22200 crores, F.Y. 2022-23490 crores and F.Y. 2023-24540 crores. On 1.5.2024, it bought raw materials from Colours Private Ltd., a domestic company for 1 crore. Colours Private Ltd.'s turnover for the F.Y. 2021-22 was 5 crores, F.Y. 2022-23 was 8 crores and F.Y. 2023-24 was 9 crores. India does not have a DTAA with Country Y. Discuss the TDS/ TCS implications of this transaction.

Suggested Answer and Working Notes:

Ubclick Inc., a non-resident company has to deduct tax at source under section 194Q @0.1% on 50 lakhs being the sum exceeding 50lakhs on purchase of raw material of 1crore from Colours Private Ltd. since its turnover exceeds 10crores during the P.Y. 2023-24 and purchase of raw material from Colours Private Ltd. is effectively connected with its factory, being a permanent establishment in India. Tax to be deducted = 50,00,000 x 0.1% = 5,000

Topics: Deduction, Collection and Recovery of Tax

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