Income Tax Circulars on Section - 195 of Income Tax Act- 1961

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Procedure for refund of tax deducted at source under section 195 Circular No. 769 Dated 6/8/1998 To All Chief Commissioners of Income-tax. Sir, Subject: Procedure for refund of tax deducted at source under section 195. The Board has received a number of representations for granting approval for refund of excess deduction or erroneous deduction of tax at source under section 195 of the Income-tax Act. The cases referred to the Board mainly relate to circumstances where : (i) after the deposit of tax deducted at source under section 195, (a) the contract is cancelled and no remittance is required to be made to the foreign collaborator ; (b) the remittance is duly made to the foreign collaborator, but the contract is cancelled and the foreign collaborator returns the remitted amount to the person responsible for deducting tax at source ; (c) the tax deducted at source is found to be in excess of tax deductible for any other reason ; (ii) the tax is deducted at source under section 195 and paid in one assessment year and remittance to the foreign collaborator is made and/or returned to the Indian company following cancellation of the contract in another assessment year. In all the cases mentioned above, where either the income does not accrue to the non-resident or excess tax has been deducted thereby resulting in a refund being due to the Indian enterprise which deposited the tax, at present a refund can be issued only if a valid claim is made by filing a return. 2. In the absence of any statutory provision empowering the Assessing Officer to refund the tax deducted at source to the person who has deducted tax at source, the Assessing Officers insist on filing of the return by the person in whose case deduction was made at source. Even adjustment of the excess tax or the tax erroneously deducted under section 195 is not allowed. This has led to a lot of hardship as the non-resident in whose case the deduction has been made is either not present in the country or has no further dealings with the Indian enterprise, thus making it difficult for a return to be filed by the non-resident. 3. The matter has been considered by the Board. It has been decided that in the type of cases referred to above, a refund may be made independent of the provisions of the Income-tax Act, 1961, to the person responsible for deducting the tax at source from payments to the non-resident, after taking the prior approval of the Chief Commissioner concerned. 4. The excess tax deducted would be the difference between the actual payment made by the deductor and the tax deducted at source or that deductible. This amount should be adjusted against the existing tax liability under any of the Direct Tax Acts. After meeting such liability, the balance amount, if any, should be refunded to the person responsible for deduction of tax at source. 5. Where the tax is deducted at source and paid by the branch office of the person responsible for deduction of tax at source and the quarterly statement/annual return of tax deduction at source is filed by the branch, each branch office would be treated as a separate unit independent of the head office. After meeting any existing tax liability of such a branch, which would normally be in relation to the deduction of tax at source, the balance amount may be refunded to the said branch office. 6. The adjustment of refund against the existing tax liability should be made in accordance with the present procedure on the subject. A separate refund voucher to the extent of such liability under each of the direct taxes should be prepared by the Income-tax Officer in favour of the "Income-tax Department" and sent to the bank along with the challan of the appropriate type. The amount adjusted and the balance, if any, refunded would be debitable under the sub-head "Other refunds" below the minor head "Income-tax on companies", major head "020—Corporation tax" OR below the minor head "Income-tax other than Union Emoluments", major head "021—Taxes on incomes other than corporation tax", depending upon whether the payment was originally credited to the major head "020—Corporation Tax" or to the major head "021—Taxes on Income other than Corporation Tax". 7. Since the adjustment/refund of the amount paid in excess would arise in relation to the deduction of tax at source, the recording of the particulars of adjustment/refund should be done in the quarterly statement of TDS/annual return under the signature of the Income-tax Officer at the end of the statement, i.e., below the signature of the person furnishing the statement. Yours faithfully (Sd.) Surabhi Sinha Deputy Secretary to the Government of India. [F. No. 500/92/96-FTD]

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Section 195A - Certificate for payment made Net of Tax
Issue of certificate for tax deducted at source in respect of payment made net of tax

Circular : No. 785, dated 24-11-1999.

1. Attention is invited to Boards Circular No. 664, dated 29-9-1993 explaining the provisions of section 203 of Income-tax Act, 1961 under which the person deducting tax under any provision of Chapter XVII of the Income-tax Act, 1961 is required to furnish a certificate to the effect that tax has been deducted and to specify therein, inter alia, the amount deducted and any other particulars that may be prescribed.
2. In a number of cases, the payers of income agree to bear the tax on such income and make payment only net of tax in terms of section195A of the Income-tax Act. it has been brought to the notice of the Board that in such cases, payers, however sometimes refuse to furnish a certificate under section 203 of the Income-tax Act, 1961 on the ground that there is no obligation to furnish such certificate where the tax on the income is required to be borne by them under any agreement.
3. In this context, attention is drawn to section 195A of the Income-tax Act, which provides that where under any agreement/arrangement, the tax chargeable on any income is borne by the payer of the income, then, for the purpose of deduction of tax at source, such income shall be increased to such an amount as would after deduction of tax thereon, be equal to the net amount payable under the agreement.
4. Any sum deducted in accordance with the provisions of Chapter XVII of the Income-tax Act is deemed to be the income of the payee as per section 198 of the Income-tax Act. Further, section 199 of the Act provides that credit for the tax deducted at source and paid to the Central Government shall be given to the person from whose income the deduction was made on the production of certificate furnished under section 203 of the Income-tax Act. Section 203 of the Act requires that every person deducting tax at source shall furnish to the payee a certificate in the prescribed form within the prescribed time.
5. In view of the above, it is clarified that in all cases of deduction of tax at source including those referred to in paras 2 and 3 above, the payer is under legal obligation to furnish a certificate for the tax deducted at source in the prescribed form to the payee within the time prescribed as per section 203 of the Income-tax Act, 1961
Circular : No. 785, dated 24-11-1999.

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Guidelines regarding taxation of income of artists, entertainers, sportsmen, etc., from international/national/ local events Circular: No. 787, dated 10-2-2000. 1. The Board had in the recent past, occasion to examine taxation issues concerning national and international events or shows for entertainment, sports, etc. Such shows are often characterised by substantial incomes being earned by organisers, sponsors, players, athletes and artists during very short periods of time. In many cases, the performers leave the country within a few hours of the show or event. 2. The events or shows normally involve an event manager, artists management or intermediate company. Their receipts may be of the following nature: (i) Sponsorship money; (ii) Gate money; (iii) Advertisement revenue; (iv) Sale of broadcasting or telecasting rights; (v) Rents from hiring out of space, etc.; (vi) Rents from caterers. In turn, the event manager, etc., may inter alia incur expenditure on guarantee money, prize money, rental for premises or equipment payments to labour contractor for decoration, salaries, royalties, fees for technical services, insurance premium for the event, etc. Such receipts and payments may be liable to deduction of tax at source under various provisions of the Income-tax Act, 1961. In the case of residents, the applicability of the provisions of sections 194C, 194J and 194-I and in addition in the case of non-residents, the applicability of section 194E and section 195 should be examined. 3. In the case of non-residents, in addition to the provisions of the Income-tax Act, 1961, the applicability of Double Taxation Avoidance Agreement (DTAA) should be examined. The Income-tax Act, 1961 provides that in case of sportsmen or artists participating in such events or shows, all income accruing or arising or deemed to be accruing or arising, received or deemed to be received in India is taxable in India. Under the DTAAs, usually there is a separate Article on Artists and Sportsmen, which provides for taxation in India of the income from the personal activities of the sportsmen or artists in India. Even where the income from personal activities accrues to another person and not directly to the artists or sportsmen, it is still taxable in India in accordance with this article in the DTAAs. The advertising or sponsorship income, etc., of the sportsman or artists, which is related directly or indirectly to performance or appearance in India would also be covered under the said DATA Article on Artists and Sportsmen. Where, under the same contract or under a separate one, the performance is recorded and royalties are stipulated to be paid, the same would be covered under the Article on Royalties in the DTAA. 4. The income earned by non-resident sportsmen, who are not citizens of India or the income earned by non-resident sports association or institutions is required to be determined in accordance with the provisions of section 115BBA of the Income-tax Act, 1961. In the case of the sportsmen, this would include the income by way of participation in India in any game or sport, from advertisement or contribution to any newspapers, magazines or journal of any articles relating to sport or game in India. The tax should be deducted at source under section 194E from such payments. The provisions of section 115BBA would be applicable to the guarantee money receivable by the non-resident sports association. The payment by way of guarantee money to non-resident sport associations needs to be considered in terms of the Article on Other income or on Income not expressly mentioned of the relevant DTAA. The position of the taxation of such guarantee money under this Article in some of the DTAAs is as under : U.K. Taxable in India, as per article 23.3 U.S.A Taxable in India, as per article 23.3 Japan Taxable in India, as per article 22.3 Australia Taxable in India, as per article XXII(2) New Zealand Taxable in India, as per article 22 Sri Lanka Taxable where the sports association/institutions is resident, as per article 22. France Taxable in India, as per Article 23.3. Similarly, in the case of other countries, the Article on Other income etc. in the relevant DTAAs would be applicable. In cases where such guarantee money is taxable in India under the DTAA, income would be determined in accordance with section 115BBA of the Income-tax Act and the tax deducted at source under section 194E of the Income-tax Act. 5. In connection with the taxability of income of the non-resident artists or performer in India, the facts and circumstances of each event need to be considered. A few situations are illustrated below : (i) If an artist performs in India gratuitously without any consideration, there would be no income and, consequently, no tax. (ii) Where the artists performs in India to promote sale of his records and no consideration is paid for this performance by the record company or anyone else; there will be no tax as he does not receive any income for performance in India. (iii) Any consideration received by artists or performer for the live performance or simultaneous live telecast or broadcast (on radio, television, internet, etc.) in India would qualify as income and, consequently, should be taxable. Even, if separate consideration is received for simultaneous live telecast, etc., of performance, the same shall be taxable in India and is to be treated under the Article on Artists and Sportsmen in the DTAA. (iv) The consideration paid to the artists to acquire the copyrights of performance in India for subsequent sale abroad (of records, CDs, etc.) or the consideration paid to the artist for acquiring the license for broadcast or telecast overseas is not taxable in India due to exclusions provided in section 9(1)(vi) of the Income-tax Act; (v) The consideration paid to the artist to acquire the copyrights of performance in India for subsequent sale in India (as records, CDs, etc.) or the consideration paid to the artist for acquiring the license for broadcast or telecast in India is taxable in India as per sections 9(1)(vi) of the Income-tax Act as royalties. Under the DTAA also, this would fall under the Royalties Article; (vi) The portion of endorsement fees (for launch or promotion of products, etc.) which relates to artists performance in India shall be taxable in India in accordance with the provisions of section 5 of the Income-tax Act. Under the DTAA, this would fall under the Article on Artists and Sportsmen. In view of the above, the contracts of the artists or performers with event managers, sponsors, etc., are of vital importance in deciding the taxability of their income in India. It is, therefore, necessary to obtain and examine the contracts of the artists or performers relating to the event. The apportionment of the income attributable to India would have to be done by the Assessing Officer. The situations cited above are for the purpose of illustrations and do not cover all possible cases. 6. Wherever the participants in such shows or events are not domiciled in India, they may be required to obtain tax clearance certificate (TCC) under section 230 of the Income-tax Act from the competent authority. The Central Government vide its Notification No. SRO 961, dated 25-5-1953 has listed the persons who are exempted from obtaining TCC. The persons who are not domiciled in India are not required to obtain TCC when they spend less than 120 days in India. However, the said Notification also provides that the competent authority, at its discretion, may still require such persons to obtain TCC from the competent authority. The period of stay in India of performers in such international/national events or shows for sports, entertainment, etc., may often be for durations less than one hundred and twenty days. The competent authority should insist on obtaining of TCC by the performers in such shows are events wherever such persons are believed to be having taxable income in India and no tax has been paid or no arrangement for the payment of tax has been made. Circular: No. 787, dated 10-2-2000.

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Procedure for refund of tax deducted at source under section 195 to the person deducting the tax Circular : No. 790, dated 20-4-2000. 1. The Board has issued Circular No. 769, dated 6-8-1998, laying down procedure for refund of tax deducted under section 195, in certain situations to the person deducting the tax at source from the payment to the non-resident. After reconsideration, Circular No. 769 is revoked with immediate effect and refund to the person deducting tax at source under section 195 shall be allowed in accordance with the provisions of this Circular. 2. The Board had received representations for approving grant of refund to the persons deducting tax at source under section 195 of the Income-tax Act, 1961. The cases referred to the Board mainly related to circumstances whereafter the deposit into Government account of tax deducted at source under section 195, (a) the contract is cancelled and no remittance is made to the non-resident; (b) the remittance is duly made to the non-resident, but the contract is cancelled. In such cases, the remitted amount may have been returned to the person responsible for deducting tax at source. In the cases mentioned above, income does not accrue to the non-resident. The amount deducted as tax under section 195 and paid to credit of Government, therefore, belongs to the deductor. At present, a refund is given only, on a claim being made by the non-resident with whom the transaction was intended. 3. In the type of cases referred to in sub-paragraph (a) of paragraph 2, the non-resident not having received any payment would not apply for a refund. For cases covered by sub-paragraph (b) of paragraph 2, no claim may be made by the non-resident where he has no further dealings with the resident deductor of tax. This resident deductor is, therefore, put to genuine hardship as he would not be able to recover the amount deducted and deposited as tax. 4. The matter has been considered by the Board. In the type of cases referred to above, where no income has accrued to the non-resident due to cancellation of contract, the amount deposited to the credit of Government under section 195 cannot be said to be tax. It has been decided that this amount can be refunded, with prior approval of Chief Commissioner concerned to the person who deducted it from the payment to the non-resident under section 195. 5. The refund being made to the person who made the payment under section 195, the Assessing Officer may after giving intimation to the deductor, adjust it against any existing tax liability of the deductor under the Income-tax Act, 1961, Wealth-tax Act, 1957 or any other direct tax law. The balance amount, if any, should be refunded to the person who made such payment under section 195. A separate refund voucher to the extent of such liability under each of the direct taxes should be prepared by the Income-tax Officer or the Assessing Officer in favour of the Income-tax Department and sent to the bank along with the challan of the appropriate type. The amount adjusted and the balance, if any, refunded would be debitable under the sub-head Other refunds below the minor head Income-tax on Companies major head 020Corporation Taxor below the minor head Income-tax other than Union Emoluments major head 021Taxes on Incomes other than Corporation Tax depending upon whether the payment was originally credited to the major head 020Corporation Tax or to the major head 021Taxes on Income other than Corporation Tax. Since the adjustment/refund of the amount paid would arise in relation to the deduction of tax at source, the recording of the particulars of adjustment/refund, should be done in the quarterly statement of TDS/annual return under the signature of the Income-tax Officer or the Assessing Officer at the end of the statement, i.e., below the signature of the person furnishing the statement. 6. Refund to the person making payment under section 195 is being allowed as income does not accrue to the non-resident. The amount paid into the Government account in such cases, is no longer tax. In view of this, no interest under section 244A is admissible on refunds to be granted in accordance with this Circular or on the refunds already granted in accordance with Circular No. 769. 7. A refund in terms of this Circular should be granted only after obtaining an undertaking that no certificate under section 203 of the Income-tax Act has been issued to the non-resident. In cases where such a certificate has been issued, the person making the refund claim under this Circular should either obtain it or should indemnify the Income-tax Department from any possible loss on account of any separate claim of refund for the same amount by the non-resident. 8. The refund as per this Circular is permitted only in respect of transactions with non-residents, which have either not materialised or have been cancelled subsequently. It, therefore, needs to be ensured by the Assessing Officer that they disallow corresponding transaction amount, if claimed as an expense in the case of person making refund claim. 9. It is hereby clarified that refund shall not be issued to the deductor of tax in the cases referred to in clause (i)(c) of paragraph 1 of Circular 769, dated 6-8-1998. 10. The limitation for making a claim of refund under this Circular shall be two years from the end of the financial year in which tax is deducted at source. Circular : No. 790, dated 20-4-2000.

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Taxation of foreign telecasting companies Guidelines for computation of income-tax, etc.


Circular : No. 6/2001, dated 5-3-2001.

1. A number of representations have been received from foreign telecasting companies regarding their taxability and the extent of income that could be said to accrue or arise to them from their operations in India. A consequent issue raised is the method of computation of profits from their Indian operations, especially in the cases of those companies which do not have any branch office in India or are not maintaining country-wise accounts of their operations.

2. The matter has been examined in the Board and the assessment records of some of these companies have also been looked into. Since this is a new area of commercial activity, no uniform basis is being adopted by the Assessing Officers at different stations for computing the income in the absence of country-wise accounts of the foreign telecasting companies. It has, therefore, been decided by the Board to prescribe guidelines for the purpose of proper and efficient management work of the assessment of foreign telecasting companies.


3. It is seen that out of the gross amount of bills raised by a foreign telecasting company, the advertising agent retains commission at 15 per cent or so. Similarly, the Indian agent of the foreign telecasting company retains his service charges at 15 per cent or so of the gross amount. The balance amount of approximately 70 per cent is remitted abroad to the foreign company. So far as the income of Indian advertising agent and the agent of the non-resident telecasting company are concerned, the same is liable to tax as per the accounts maintained by them. As regards the foreign telecasting companies which are not having any branch office or permanent establishment in India, tax has to be deducted and paid at source in accordance with the provisions of section 195 of the Income-tax Act, 1961 by the persons responsible for paying or remitting the amount to them.


4. In the absence of country-wise accounts and keeping in view the substantial capital cost, installation charges and running expenses, etc., in the initial years of operation, it would be fair and reasonable if the taxable income is computed at 10 per cent of the gross receipts (excluding the amount retained by the advertising agent and the Indian agent of the non-resident foreign telecasting company as their commission/charges) meant for remittance abroad. The Assessing Officers shall accordingly compute the income in the cases of the foreign telecasting companies which are not having any branch office or permanent establishment in India or are not maintaining country-wise accounts by adopting a presumptive profit rate of 10 per cent of the gross receipts meant for remittance abroad or the income returned by such companies, whichever is higher and subject the same to tax at the prescribed rate, i.e., 55 per cent at present.


5. It has also been decided that while assessing the income in the aforesaid manner, penalty proceedings may not be initiated in the cases in which taxes due along with the interest are paid voluntarily within 30 days of the date of issue of this circular.

6. It is clarified that these guidelines would be applicable to all pending cases irrespective of the assessment year involved until 31st March, 1998, after which the position with regard to the reasonableness of the rate of profits of such companies will be reviewed.


Circular : No. 742, dated 2-5-1996.

CLARIFICATION 1

The Central Board of Direct Taxes, vide Circular No. 742, dated 2nd May, 1996, issued guidelines for taxation and computation of income of foreign telecasting companies. The guidelines were applicable up to 31st March, 1998. It has been decided to extend the circular beyond 31st March, 1998, and the guidelines issued in the abovementioned circular would be applicable to all pending cases irrespective of the assessment year involved until further orders.


Circular : No. 765, dated 15-4-1998.

Clarification 2

1. The Central Board of Direct Taxes vide Circular No. 742, dated 2-5-1996 had laid down certain guidelines for the computation of profits of FTCs from advertisement payments received by them from India. These guidelines were extended till further orders by Circular No. 765, dated 15-4-1998. The Central Board of Direct Taxes hereby withdraws the above Circular with effect from 31-3-2001.


2. The total income of FTCs from advertisements, hitherto computed on a presumptive basis shall now be determined by the Assessing officers in accordance with the other provisions of the Income-tax Act, 1961 in relation to the assessment year 2002-2003 and subsequent assessment years. In case, accounts for Indian operations are not available, the provisions of rule 10 of the Income-tax Rules, 1962 may be invoked. Where an FTC is a resident of a country with whom India has a Double Taxation Avoidance Agreement (DTAA), its business income (including receipts from advertisement) can be taxed only if it has a Permanent Establishment in India. Therefore, the taxability of an FTC in this regard shall be determined on the facts and circumstances of each case. Taxation of FTCs who are residents of countries with whom India does not have a DTAA, shall be governed by the provisions of section 5, read with section 9 of the Income-tax Act, 1961.


3. It may be reiterated that the guidelines for computation of profits of FTCs in Circular No. 742 and 765 were applicable only to the income stream from advertising. Other kinds of income like subscription charges receivable from cable operators in respect of pay channels and income from the sale or lease of decoders, etc., shall continue to be taxed in accordance with the paragraph 2 above.

Circular : No. 6/2001, dated 5-3-2001.

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Submission of No Objection Certificate in case of remittance to a non-resident


Circular : No. 10/2002, dated 9-10-2002.

1. Section 195 of the Income-tax Act, 1961 provides that any person responsible for paying to a non-resident any sum chargeable under the Act shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by cheque or draft or any other mode, whichever is earlier, deduct income-tax thereon at the rates in force.


2. The Reserve Bank of India have provided in their Office Manual that no remittance shall be allowed unless a No Objection Certificate has been obtained from the Income-tax Department. It has since been decided that henceforth remittances may be allowed by the Reserve Bank of India without insisting upon a No Objection Certificate from the Income-tax Department and on the person making the remittance furnishing an undertaking (in duplicate) addressed to the Assessing Officer accompanied by a certificate from an Accountant (other than an employee) as defined in the Explanation below section 288 of the Income-tax Act, 1961 in the Form annexed to this circular. The person making the remittance shall submit the undertaking along with the said certificate of the Accountant to the Reserve Bank of India, who in turn, shall forward a copy thereof to the Assessing Officer.


3. The contents of this Circular may be brought to the notice of all the officers working in your charge.
Undertaking
To
..............................................................................
(Designation of the Assessing Officer)
..............................................................................
..............................................................................

I/We........................................................................................................................................................... (Name, address & Permanent Account Number)

propose to make a remittance of..................................................................................................
(Amount)

being........................................................................................................................................................... (nature of payment)

to...................................................................................................................................................................

(name and complete address of the person to whom the remittance has been made)

after deducting a sum of Rs........................ being the tax @.............................., which is the appropriate rate of tax deductible at source on the said amount of remittance.
2. A certificate from the accountant as defined in Explanation below section 288 of the Income-tax Act, certifying the nature and amount of income, amount of tax payable and the amount actually paid, is also annexed.
3. In case it is found that the tax actually payable on the amount of remittance made, has either not been paid or has not been paid in full, I/we undertake to pay the said amount of tax along with interest found due in accordance with the provisions of the Income-tax Act.

4. I/We will also be subject to the provisions of penalty and prosecution for the said default as per the Income-tax Act.

5. I/We also undertake to submit the requisite documents, etc., for enabling the Income-tax Department to determine the nature and amount of income and tax, interest, penalty, etc., payable thereon.

(Name and Signature)

Date...............................
Place..............................
(The Undertaking shall be signed by the person authorised to sign the return of income of the person making the payment).
Certificate
I/We have examined the books of accounts of M/s............................................................
.......................................................................................................................................................................

(Name, address and Permanent Account Number of person making the remittance)

for ascertaining the nature of the remittance,
of..................................................................................................................................................................
(amount of remittance)
to...................................................................................................................................................................

(Name and complete address of the person to whom the remittance is being made)

and the rate at which the tax is deductible at source thereon and hereby certify that a sum of Rs........................... has been deducted as tax at the appropriate rate and has been paid to the credit of the Government.

.................................................
Accountant

Place......................
Date.......................
Circular : No. 759, dated 18-11-1997.

Clarification 1

1. Circular No. 759 dated 18-11-1997 was issued by the Board to dispense with the requirement of submission of a No Objection Certificate from income-tax authorities for remittance to a non-resident as required by the Reserve Bank of India (RBI). In paragraph 2 of the said Circular, it was stated that henceforth remittances may be allowed by the RBI without insisting upon a No Objection Certificate from the Income-tax Department provided the person making the remittance furnished an undertaking in duplicate addressed to the Assessing Officer which was accompanied by a certificate from an accountant other than an employee as defined in the Explanation below section 288 of the Income-tax Act, 1961 in the form annexed to the said Circular. The person making the remittance had to submit the undertaking along with the said certificate of the accountant to the RBI, who would, in turn forward a copy thereof to the Assessing Officer.


2. A number of references have been received by the Board stating that RBI had delegated powers to authorised dealers to allow certain types of remittances to non-residents without obtaining approval of RBI. In such cases, RBI cannot forward the undertaking and certificate of the accountant to the Assessing Officer as prescribed in Circular No. 759. The RBI has already issued a Circular - AD (MA series) Circular No. 48, dated 29th November, 1997 (see Annex) to all authorised dealers in foreign exchange directing them to forward a copy of the certificate together with a copy of the undertaking to the office of the Assessing Officer of the Income-tax Department as indicated in the undertaking. In view of the foregoing, it is clarified that Circular No. 759 would also be applicable to remittances made through authorised dealers in Foreign Exchange.


3. In accordance with Circular No. 759, the undertaking to be submitted by the person making the remittance to a non-resident is required to be signed by the person authorised to sign the return of income of the person making the payment. The person authorised to sign a return of income in the case of a company, in accordance with section 140 of the Income-tax Act, 1961 is the Managing Director and each undertaking for each remittance has, therefore, to be signed by the Managing Director. Representations pointing out administrative difficulties experienced by companies have been received. It has, therefore, been decided that the undertaking to be submitted at the time of making a remittance to a non-resident shall be signed by the person authorised to sign a return or a person so authorised by him in writing.


4. It is also clarified that Circular No. 759 will cover those remittances for which RBI had prescribed the production of a No Objection Certificate from the income-tax authorities under its Exchange Control Manual. Further, if an order under section 195(2) has been obtained by a person responsible for deducting tax, the new procedure of filing an undertaking along with a certificate prescribed in Circular No. 759 would not be applicable.


5. The contents of this Circular may be brought to the notice of all the officers working in your charge.

Circular : No. 767, dated 22-5-1998.
Annex

A.D. (M.A. Series) Circular No. 48, dated 29-11-1997, issued
by the Reserve Bank of India.

1. Presently, authorised dealers have been delegated powers to allow certain types of remittances, subject to, among other things, production of NOC/Tax Clearance Certificate from income-tax authorities. Similarly, Reserve Bank also, while approving remittances for certain purposes, has been insisting on NOC/Tax Clearance Certificate from income-tax authorities. This procedure has been revised as notified by the Central Board of Direct Taxes, in their Circular No. 759 [F. No. 500/152/96-FTD] dated 18th November, 1997. In terms of the new procedure, a person making remittance of foreign exchange would not be required to produce NOC/Tax Clearance Certificate from income-tax authorities instead, the applicants have to submit an undertaking, in duplicate, addressed to the Assessing Officer, which should be signed by the person authorised to sign the income-tax returns of the applicant, together with a certificate (in duplicate) from the Accountant (other than the employee of the applicant) as defined in the Explanation below section 288 of the Income-tax Act, 1961 in forms prescribed in the Government Notification. Authorised dealers should, therefore, before allowing the remittance obtain the aforesaid Undertaking accompanied by a certificate from the Accountant for compliance with the income-tax provisions, where necessary.


2. Authorised dealers should, after making the remittance, immediately forward a copy of the certificate together with a copy of Undertaking to the office of Assessing Officer of the Income-tax Department as indicated in the Undertaking. The other copy each of the Undertaking and Certificate should be kept on record for verification by the Internal Auditors of the authorised dealer/Inspecting Officers of the Reserve Bank.


3. Amendments to the Exchange Control Manual will be advised separately. Meanwhile, authorised dealers may bring the contents of this circular to the notice of their concerned constituents.

4. The directions contained in this circular have been issued under section 73(3) of the Foreign Exchange Regulation Act, 1973 (46 of 1973) and any contravention or non-observance thereof is subject to the penalties prescribed under the Act.
Clarification 2

1. Circular No. 759 dated 18-11-1997 was issued by the Central Board of Direct Taxes to dispense with the requirement of a No Objection Certificate from income-tax authorities for remittance to a non-resident as required by the Reserve Bank of India. By the aforesaid circular, remittances were allowed to be made by the RBI without insisting upon a No Objection Certificate from the Department provided the person making the remittance furnished an undertaking in duplicate accompanied by a certificate from an accountant. The format of the application and the certificate has been circulated to the authorised dealers by the Reserve Bank of India through their Circular No. AD (MA Series) Circular No. 48 dated 29-11-1997.


2. However, it has recently been observed that often the certificates have been issued prescribing nil deduction of tax at source in certain cases where tax was liable to be deducted or prescribing deduction of tax at a lower rate than was payable on the basis of the provisions of the Act and the applicable DTAC. The certificate does not provide for necessary details or the reasons for adopting a certain rate for deduction of tax. This results in unnecessary calling of information from the assessees at a later stage and thus gives rise to an avoidable perception of grievance on the part of the tax payer. Therefore, in order to streamline the procedure as well as to ensure the correct deduction of tax at source, the proforma of the undertaking to be given by the remitter and the certificate to be issued by a chartered accountant have been re-considered and new formats are being prescribed which are enclosed as Annexures A and B to this circular. The revised proforma for undertaking as well as the certificate shall to apply in terms of Circular No. 759, dated 18-11-1997 of CBDT. Other requirements of the Circular remain unchanged. It is reiterated that the persons making the remittances shall submit the undertaking and certificate as per Annexures A and B to the Reserve Bank of India/authorised dealer banks, who shall in turn forward the same to the Assessing Officer mentioned in the undertaking.


3. The Reserve Bank of India is being requested to circulate the amended format of the undertaking and the certificate to their authorised dealers.

4. This circular comes into effect with immediate effect.

Annexure A
Form & Application for remittance under section 195
of the Income-tax Act

1.	Name and Address of the Applicant and principal place of business	:
2.	Name and Address of the Assessing Officer having jurisdiction over the remitters	:
3.	Applicants PAN Number	:
4.	Name and address of the beneficiary of the remittance and the country towhich remittance is made	:
5.	Amount and nature of remittance	:
6.	Rate of deduction of tax at source	:
7.	Reference to provision of Act/DTAA under which the rate has been determined	:
8.	Certificate

(i) I/We propose to make the above remittance as per deduction of tax at source indicated above. We have obtained a certificate from M/s. ..... who is an accountant as defined in section 288 of the Income-tax Act, certifying the amount, nature and correctness of deduction of tax at source.
(ii) In case the income-tax authority at any time finds that tax actually deductible on the amount of remittance has either not been paid or not paid in full, I/we undertake to pay the said amount of tax along with interest due.
(iii) I/We shall also be subjected to the provisions of penalty for the said default as per the provisions of Income-tax Act.
(iv) I/We undertake to submit the requisite documents, etc., for enabling the income-tax authorities to determine the nature and amount of income of the beneficiary of the above remittance as well as documents required for determining our liabilities under the Income-tax Act as a person responsible for deduction of tax at source.
(v) The information given above is true to the best of my/our knowledge and belief and no relevant information has been concealed.

..............................................
Name and Signature

[To be signed by a person responsible for signing the return of income (as to provisions of section 139(A) of the Income-tax Act) of the person making the remittance].

Annexure B
Certificate

I/We have examined the agreement (wherever applicable) between M/s. ............................ ..................................................................... and M/s. ........................................................ requiring the
remitters beneficiary
above remittance as well as the relevant documents and books of account required for ascertaining the nature of remittance and for determining the rate of deduction of tax at source as per provisions of section 195. We hereby certify the following :

1.	Name and address of the beneficiary of the remittance and the name of the foreign country to which remittance is being made.	:
2.	Amount of remittance is foreign currency indicating the proposed date/month and bank through which remittance is being made.	:
3.	Details of tax deducted at source, rate at which tax has been deducted and date of deduction.	:	Foreign Currency	Indian Currency
	Amount to be remitted		.....	.....
	Tax deducted at source		.....	......
	Actual Amount remitted		.....	.....
	Rate at which deducted		.....	.....
	Date of Deduction		......	.....
4.	In case the remittance as indicated in (2) above is net of taxes, whether tax payable has been grossed up? If so, computation thereof may be indicated.	:
5.	If the remittance is for royalties, fee for technical services, interest, dividend, etc., the clause of the relevant DTAA under which the remittance is covered along with reasons and the rate at which tax is required to be deducted in terms of such clause of the applicable DTAA.	:
6.	In case that tax has been deducted at a rate lower than the rate prescribed under the applicable DTAA, the reasons thereof.	:
7.	In case remittance is for supply of articles or things (e.g., plant, machinery, equipment, etc.) or computer software, please indicate :	:
	i. Whether there is any permanent establishment in India through which the beneficiary of the remittance is directly or indirectly carrying on such activity of supply of articles or things?
	ii. Whether such remittance is attributable to or connected with such permanent establishment?
	iii .If so, the amount of income comprised in such remittance which is liable to tax.
	iv. If not, the reasons in brief therefor.
8.	In case remittance is on account of business income
	please indicate :	:
	i. Whether such income is liable to tax in India?
	ii. If so, the basis for arriving at the rate of deduction of tax.
	iii. If not, the reasons thereof.
9.	In case tax is not deducted at source for any other reason, details thereof.	:

(Attach separate sheet duly authenticated wherever necessary)

.........................................................................................
Name, Address and registration numbers

(To be signed and verified by an Accountant as defined in section 288 of the Income-tax Act).
Circular : No. 10/2002, dated 9-10-2002.

[BARE ACT]

Remittances to non-residents under section 195 of the Income-tax Act - Remittances of Consular receipts -Clarification reg

Circular No. 9/2009

dated 30-11-2009

Reference is drawn to Circular No. 4/2009 dated 29th June, 2009 prescribing the revised procedure for furnishing information regarding remittances being made to non-residents w.e.f. 1^st July, 2009.
2. As per Article 28 of schedule to section 2 of the Diplomatic Relations (Vienna Convention) Act, 1972, the fees and charges levied by a diplomatic mission in the course of its official duties shall be exempt from all dues and taxes.
3. In view of the above, while remitting consular receipts abroad, diplomatic missions in India will be required to submit only a self certified undertaking in Form No. 15CA to the remitter bank. They are not required to obtain a certificate from an accountant/ certificate of Assessing officer (Form 15CB). The procedure for furnishing information regarding remittances of consular receipts by diplomatic missions in India will be as follows:-
i.The diplomatic mission will access the website to electronically upload the remittance details to the Income-tax Department in Form 15CA (undertaking).
ii. The diplomatic mission will then take a print out of this filled up Form 15CA (which will bear an acknowledgement number generated by the system) and sign it. Form 15CA (undertaking) can be signed by the Head of the mission or by an officer of the mission so authorized by the Head of the mission.
iii. The duly certified Form 15CA (undertaking) will be submitted in duplicate to the Reserve Bank of India/authorized dealer. The Reserve Bank of India/authorized dealer will in turn forward a copy of the undertaking to the Assessing Officer concerned.

[BARE ACT]

Procedure for refund of tax deducted at source under section 195 to the person deducting the tax - section 239 of the Income Tax 1961 - Refunds
CIRCULAR
INCOME TAX ACT

CIRCULAR NO. 7/2007 DATED 23-10-2007.

The Board had issued Circular No. 790 dated 20th April, 2000, laying down the procedure for refund of tax deducted under section 195, in certain situations to the person deducting the tax at source from the payment to the non-resident. Representations have been received in the Board from taxpayers requesting that the said Circular may be amended to take into account situations where genuine claim for refund arises to the person deducting the tax at source from payment to the non-resident and it does not fall in the purview of the said Circular.
2. The cases which are being referred to the Board mainly relate to circumstances where, after the deposit into Government account of the tax deducted at source under section 195,
a) the contract is cancelled and no remittance is made to the non-resident;
b) the remittance is duly made to the non-resident, but the contract is cancelled. In such cases, the remitted amount has been returned to the person responsible for deducting tax at source;
c) the contract is cancelled after partial execution and no remittance is made to the non-resident for the non-executed part;
d) the contract is cancelled after partial execution and remittance related to non-executed part is made to the non-resident. In such cases, the remitted amount has been returned to the person responsible for deducting the tax at source or no remittance is made but tax was deducted and deposited when the amount was credited to the account of the non-resident;
e) there occurs exemption of the remitted amount from tax either by amendment in law or by notification under the provisions of Income-tax Act, 1961;
f) an order is passed under section 154 or 248 or 264 of the Income-tax Act, 1961 reducing the tax deduction liability of a deductor under section 195;
g) there occurs deduction of tax twice from the same income by mistake;
h) there occurs payment of tax on account of grossing up which was not required under the provisions of the Income-tax Act, 1961;
i) there occurs payment of tax at a higher rate under the domestic law while a lower rate is prescribed in the relevant double taxation avoidance treaty entered into by India.
2.1 In the cases mentioned above, income does not either accrue to the non-resident or it accrues but the excess amount in respect of which refund is claimed, is borne by the deductor. The amount deducted as tax under section 195 and paid to the credit of the Government therefore belongs to the deductor. At present, a refund is given only on a claim being made by the non-resident with whom the transaction was intended or in terms of Circular No. 790 dated 20th April, 2000.
3. In the type of cases referred to in sub-paragraph (a) of paragraph 2, the non-resident not having received any payment would not apply for a refund. For cases covered by sub-paragraph (b) to (i) of paragraph 2, no claim may be made by the non-resident where he has no further dealings with the resident deductor of tax or the tax is to be borne by the resident deductor. This resident deductor is therefore put to genuine hardship as he would not be able to recover the amount deducted and deposited as tax.
4. The matter has been considered by the Board. In the type of cases referred to above, where no income has accrued to the non-resident due to cancellation of contract or where income has accrued but no tax is due on that income or tax is due at a lesser rate, the amount deposited to the credit of Government to that extent under section 195, cannot be said to be "tax".
4.1 It has been decided that, this amount can be refunded, with prior approval of the Chief Commissioner of Income-tax or the Director General of Income-tax concerned, to the person who deducted it from the payment to the non-resident, under section 195.
5. Refund to the person making payment under section 195 is being allowed as income does not accrue to the non-resident or if the income is accruing no tax is due or tax is due at a lesser rate. The amount paid into the Government account in such cases to that extent, is no longer "tax". In view of this, no interest under section 244A is admissible on refunds to be granted in accordance with this circular or on the refunds already granted in accordance with Circular No. 769 or Circular No. 790.
6. In case of refund being made to the person who made the payment under section 195, the Assessing Officer may, after giving intimation to the deductor, adjust it against any existing tax liability of the deductor under the Income-tax Act, 1961, Wealth-tax Act, 1957 or any other direct tax law. The balance amount, if any, should be refunded to the person who made such payment under section 195. A separate refund voucher to the extent of such liability under each of the direct taxes should be prepared by the Income-tax Officer or the Assessing Officer in favour of the "Income-tax Department" and sent to the bank along with the challan of the appropriate type. The amount adjusted and the balance, if any, refunded would be debitable under the major head "020-Corporation Tax" or the major head "021-Taxes on incomes other than Corporation tax" depending upon whether the payment was originally credited to the major head "020-Corporation tax" or to the major head "021-Taxes on Income other than Corporation tax".
7. A refund in terms of this circular should be granted only after obtaining an undertaking that no certificate under section 203 of the Income-tax Act has been issued to the non-resident. In cases where such a certificate has been issued, the person making the refund claim under this circular should either obtain it or should indemnify the Income-tax Department from any possible loss on account of any separate claim of refund for the same amount by the non-resident. A refund in terms of this circular should be granted only if the deductee has not filed return of income and the time for filing of return of income has expired.
8. The refund as per this circular is, inter alia, permitted in respect of transactions with non-residents, which have either not materialized or have been cancelled subsequently. It, therefore, needs to be ensured by the Assessing Officer that they disallow corresponding transaction amount, if claimed, as an expense in the case of the person, being the deductor making refund claim. Besides, in all cases, the Assessing Officer should also ensure that in the case of a deductor making the claim of refund, the corresponding disallowance of expense amount representing TDS refunded is made.
9. The limitation for making a claim of refund under this circular shall be two years from the end of the financial year in which tax is deducted at source. However, all cases for claim of refund under items (c) to (i) of paragraph 2 which were pending before the issue of this circular and where the claim for refund was made after the issuance of Circular No. 790 may also be considered.
10. It has been represented to the CBDT that in Circular No. 769 dated 6th August, 1998, there was no time limit for making a claim for refund. A time limit of two years, for making a refund claim, was stipulated vide Circular No. 790 dated 20th April, 2000. Some cases covered by Circular No. 769, which were also covered by Circular No. 790, now listed in item (a) and (b) of paragraph 2 of this Circular, and filed before the issue of Circular No. 790, became time-barred because of the specification of time limit in Circular No. 790. It is hereby clarified that such cases may also be considered for refund.
11. This Circular is issued in supersession of the Circular No.790/2000 dated 20th April, 2000.
12. The contents of this Circular may be brought to the notice of all officers in your region.

[BARE ACT]

Remittances to non-residents under section 195 of the Income-tax Act-matters connected thereto

CIRCULAR No. 4/2009

Dated: June 29, 2009

Subject:- Remittances to non-residents under section 195 of the Income-tax Act matters connected thereto- reg.
Section 195 of the Income-tax Act, 1961 mandates deduction of income tax from payments made or credit given to non-residents at the rates in force. The Reserve Bank of India has also mandated that except in the case of certain personal remittances which have been specifically exempted, no remittance shall be made to a non-resident unless a no objection certificate has been obtained from the Income Tax Department. This was modified to allow such remittances without insisting on a no objection certificate from the Income Tax Department, if the person making the remittance furnishes an undertaking (addressed to the Assessing Officer) accompanied by a certificate from an Accountant in a specified format. The certificate and undertaking are to be submitted (in duplicate) to the Reserve Bank of India / authorised dealers who in turn are required to forward a copy to the Assessing Officer concerned. The purpose of the undertaking and the certificate is to collect taxes at the stage when the remittance is made as it may not be possible to recover the tax at a later stage from non-residents.
2. There has been a substantial increase in foreign remittances, making the manual handling and tracking of certificates difficult. To monitor and track transactions in a timely manner, section 195 was amended vide Finance Act, 2008 to allow CBDT to prescribe rules for electronic filing of the undertaking. The format of the undertaking (Form 15CA) which is to be filed electronically and the format of the certificate of the Accountant (Form 15CB) have been notified vide Rule 37BB of the Income-tax Rules, 1962.
3. The revised procedure for furnishing information regarding remittances being made to non-residents w.e.f. 1 July, 2009 is as follows:-
(i) The person making the payment (remitter) will obtain a certificate from an accountant (other than employee) in Form 15CB.
(ii) The remitter will then access the website to electronically upload the remittance details to the Department in Form 15CA (undertaking). The information to be furnished in Form 15CA is to be filled using the information contained in Form 15CB (certificate).
* An 'accountant" means a chartered accountant within the meaning of the Chartered Accountants Act, 1949 (38 of 1949), and includes, in relation to any State, any person who by virtue of the provisions of sub-section (2) of section 226 of the Companies Act, 1956 (1 of 1956), is entitled to be appointed to act as an auditor of companies registered in that State.
(iii) The remitter will then take a print out of this filled up Form 15CA (which will bear an acknowledgement number generated by the system) and sign it. Form 15CA (undertaking) can be signed by the person authorised to sign the return of income of the remitter or a person so authorised by him in writing.
(iv) The duly signed Form 15CA (undertaking) and Form 15CB (certificate), will be submitted in duplicate to the Reserve Bank of India / authorized dealer. The Reserve Bank of India / authorized dealer will in turn forward a copy the certificate and undertaking to the Assessing Officer concerned.
(v) A remitter who has obtained a certificate from the Assessing Officer regard the rate at or amount on which the tax is to be deducted is not required to obtain a certificate from the Accountant in Form 15CB. However, he is required to furnish information in Form 15CA (undertaking) and submit it along with a copy of the certificate from the Assessing Officer as per the procedure mentioned from Sl.No.(i) to (iv) above.
(vi) A flow chart regarding filing of Form 15CA and Form 15CB is enclosed at Annexure-A.
4. The Directorate General of Income-tax (Systems) (www.incometaxindia.gov.in) shall specify the procedures, formats and standards for running of the scheme as well as instructions for filling up Forms 15CA and 15CB. These forms shall be available for upload and printout at www.tin-nsdl.com
5. The Reserve Bank of India is being requested to circulate the revised procedure among all authorised dealers.

F.No. 142/19/ 2007
(Anand Kumar Kedia)
Secretary,
Central & Board of Direct Taxes.

Annexure - A
Flow chart of filing undertaking form u/s 195 of I T Act 1961

Remitter

Obtains certificate of Accountant (Form 15CB) This form is available at the website www.tin-nsdl.com

Accesses the above website

Electronically uploads the remittance details in Form 15CA

Takes printout of filled undertaking form (15CA) with system generated acknowledgement number.

Printout of the undertaking form (15CA) is signed

Submits the signed paper undertaking form to the RBI/Authorized dealer along with certificate of an Accountant in duplicate

RBI/Authorized dealer remits the Amount

A copy of undertaking (Form 15CA) & certificate of Accountant (Form 15CB) forwarded to Assessing Officer