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No TDS on salary to non-resident employees
AIT News Network

NEW DELHI. Authority for Advance Rulings(Income-Tax) vide a recent ruling AIT-2006-249-AAR has ruled that the salary paid by the Company registered in India to non-resident employees for rendering services outside India shall not be taxable in India if the same has been offered for tax in the UK in pursuance of the DTAA.

T H E F A C T S:

The applicant company registered in India under the Companies Act 1956 and itself a resident in India within the meaning of section 6 of the Act, it raised certain issues relating to the tax liability of some of its non-resident employees lent to group companies abroad. The applicant sought advance ruling of the Authority on the following questions :

(i) Whether in the facts and circumstances of the case and in law, salary income received in India by Mr.Manish Gupta from British Gas India Private Limited for rendering services outside India is taxable in India?

(ii) Whether in the facts and circumstances of the case and in law, British Gas India Private Limited is required to withhold taxes on salary paid in India to Mr.Nipun Pradhan and Mr.Manish Gupta for rendering services outside India?

The applicant stated that it is a part of BG Group, a leading international energy company which deals in all kinds of natural gases. India is one of BG Group’s six core geographic areas of operation. The applicant is responsible for managing and developing upstream and downstream interest of the Group in this country. The applicant lent some of its employees to BG Group entities outside India.

T H E R U L I N G:

(i) The salary paid by the applicant to Mr.Manish Gupta shall not be taxable in India, if the same has been offered for tax in the U.K. in pursuance of the DTAA.,

(ii) The applicant shall not deduct tax at source from salary paid to Mr.Nipun Pradhan and Mr.Manish Gupta in India, provided it is satisfied from the details and particulars furnished under section 191(2) that taxes have been paid on such payments in the U.K.

( Click here for full text of Ruling AIT-2006-249-AAR )