TMI Blog2005 (9) TMI 26X X X X Extracts X X X X X X X X Extracts X X X X ..... ber) and Mr. K.D. Singh (Member) Present for the Department Mr. J.A. Salvi Addl. CIT, Panaji Goa Present for the Applicant Mr. Arun Gupta, Advocate RULING (By Mr. Justice Syed Shah Mohammed Quadri) - In this application under section 245Q(1) of the Income-tax Act, 1961 (for short "the Act"), the applicant - M/s Wallace Pharmaceuticals Private Limited - seeks advance rulings of this Authority on the following three questions:- Whether applicant is required to deduct tax at source in respect of the monthly payments (consultancy fees $ 10000) made to consultant whose office and area of operation is situated in U.S.A. [As per agreement dated 1 st March, 2004- Copy of Agreement Attached]. Whether applicant is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndia ; and Explain to PROSPECTS the prevailing laws of India for Trademarks and Patents. All legal and administrative formalities in India, including product registration and EMR filing, on behalf of PENSER and the PROSPECTS will be done by WALLACE to enable them to enter the Indian market; and Identify and procure orders for the import of generic drugs and formulations to be manufactured by WALLACE and exported to United States; and Carry out additional projects and services in the Field, as mutually agreed upon (collectively 'Services'). SERVICES shall include but are not limited to telephone time, on-site consulting at WALLACE or elsewhere, review of written documents and data, and preparation of written documents. It is, f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ious clauses of the agreement of 1 st March, 2004 and argued that services were rendered in India, therefore, the consultancy fee would be a taxable income of PENSER in India and under section 195 of the Act would be applicable for TDS. 6. It will be apt to note that sub-section (2) of Section 5 of the Act provides that subject to the provisions of Act, the total income of any previous year of a person who is a non-resident includes all income from whatever source derived which - is received or is deemed to be received in India in such year by or on behalf of such person ; or accrues or arises or is deemed to accrue or arise to him in India during such year. 7. It is not in controversy that consultancy fee payable under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in India. It is no doubt true that PENSER is a tax resident of USA but its area of operation for providing consultancy services and inter alia , procuring businesses for the applicant it is not limited to USA. It operates internationally. However, the fact remains that the benefit of consultancy services provided by PENSER whether by way of promoting sales or otherwise is utilized in India by the applicant. The sales are effected by the applicant in India albeit with customers outside India. The nature of consultancy services include "identifying certain target pharma and biotech companies in the United States and outside ("PROSPECTS") to market WALLACE's products along with any or all support from WALLACE's product team" as per clause (d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by it. The commission will also be deemed income arising to PENSER in India. Therefore, it is also subject to TDS under section 195 of the Act. Even though there is no specific term in regard to reimbursement of advocate fees as it is part of consultancy services under clause (g) of the agreement, therefore it is subject to deduction of tax at source under section 195 of the Act. 11. In the light of above discussion, we rule on: question (a) that the applicant is required to deduct tax at source in respect of the monthly payments (consultancy fees $ 10000) made to consultant; question (b) that the applicant is required to deduct tax at source in respect of commission payable @ 10% on the orders procured by the consultant to the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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