Law:

Section:

Section 195, read with section 90, of the Income-tax Act, 1961, read with article 12 of the Double Taxation Avoidance Agreement entered into between India and Sweden/Switzerland - Deduction of tax at source - Payment to non-resident - Applicant entered into agreements in respect of IP Licence and Fee agreement, Trade Mark Licence and Fee agreement with F, a Sweden Company - Applicant further entered into Management Services agreement with FL, a Swiss Company - Applicant sought advance ruling of Authority on question as to whether income receivable by 'F' and 'FL' in form of royalties under agreements in question would be subject to tax in its hands in India only on cash or receipt basis as per provisions of article 12 of DTAA - Whether income receivable by companies 'F' and 'FL' in form of 'royalties' from applicant under agreements in question would be subject to tax in its hands in India in accordance with provisions of Act, and provisions of article 12 of DTAA do not provide to contra - Held, yes - Whether, consequently, applicant is required to withhold tax under section 195(1) from sums payable to abovesaid companies in pursuance of agreements - Held, yes - Whether deduction of tax need not necessarily be at time of making actual remittance of said sums, but it has to be at time of making a mere provision thereof in books of account of applicant - Held, yes FACTS The applicant entered into two agreements in respect of IP licence and fee agreement and trademark licence and fee agreement with 'F' Ltd., a Sweden company. It also entered into agreement with 'FL' Ltd., a Swiss company, for providing various technical services. In response to the invoices for royalties and fees raised by the said companies, the applicant credited amounts to the accounts of the companies in its own accounts for the period from February 2002 to December 2002. No amount was, however, paid to the said companies by the applicant till 31-3-2003. On the assumption that no amount was paid to or received by said companies, the income-tax payable under the Act by those companies was not deducted and made over to the concerned income-tax authorities under section 195(1) by the applicant.…

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