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Should Payment For Booking Exhibition Space Abroad Suffer TDS?

January 21, 2010 By taxworry Leave a Comment
We are running an educational institution and accordingly we have booked an exhibition floor space in uae as a part to promote our institution . now the question is that the company which is organizing is a foreign company say ( international exhibition llc). it is not having any permanent establishment in iIdia . do we have to make any tds on such space floor booking charges if yes then what is the rate of tds / if any dtaa is applicable or not.
RAJARAM SHENOY, Manglore
In my opinion , you need not deduct tax on payments to foreign company which is organising the exhibition . The reasons are as under

Only income which is taxable under I T Act can suffer withholding tax or TDS. Therefore, it is important to decide whether the payments to a foreign company for exhibition space is taxable under I T Act in India.

Section 5 of the I T Act meaning of  total income in case of Non Resident in following words:


(2) .. the total income of any previous year of a person who is a non-resident includes all income from whatever source derived which


(a) is received or is deemed to be received  in India in such year by or on behalf of such person ; or


(b) accrues or arises or is deemed to accrue or arise to him in India during such year.

The payment by you to foreign company certainly neither received in in India or deemed to receive in India as it will have to be remitted out of India.
Therefore , only point to see whether the payment to non resident company falls with in the scope of “accrue or arise in India or deemed to accrue or arise in India”
Income or profits are said to accrue or arise where the right to receive them comes into existence. Since the exhibition is outside India ,the foreign exhibitor’s right arises outside India as the venue the job for whcih the payment is done is also outside India and  it renders services out side India only.Add to the fact that there is no permanent establishment of the foreign company in India.

Therefore,  the payment is beyond the scope of being assessed in India and as such no tax is required to be deducted , in my opinion.

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