The ripple effect of the Vodafone tax case judgment has started showing up. Exporters are up in arms against certain tax norms.
The Federation of Indian Export Organisations (FIEO) has questioned the very basis of imposition of TDS (tax deduction at source) for payment with regard to overseas transactions.
It has questioned the applicability of Section 195 of the Income-tax Act under which exporters are asked to pay TDS on payments made for foreign agency commissions, royalties and offshore professional services. “With this landmark judgment (Vodafone), the applicability of Section 195 on payments made in the course of exports as foreign agency commissions /royalties /offshore and professional services would require to be revisited/reconsidered,'' FIEO President M. Rafeeque Ahmed said in a statement here.
“There is no permanent establishment/ territorial nexus and the situs (place) of service provided is outside the jurisdiction of tax authorities,” he said.
Lauding the apex court's judgment, the FIEO chief said payments made in the course of exports as foreign agency commissions, royalties, offshore and professional services might find a logical settlement. “There has been a plethora of litigation with regard to these payments,” he said. “The anomaly is in interpretation rather than in law which, we hope, will be clarified by the Central Board of Direct Taxes (CBDT) given the historic judgment,'' Mr. Ahmed said.
Essar is also likely to seek refund of $883 million, the amount deducted as withholding tax related to 22 per cent stake sale by its Mauritius entities in Vodafone Essar, from the I-T department.
