TDS on Kind for Non Residents
Where a non-resident company earns income from leasing its fishing vessels to an Indian company, being remunerated at 85 per cent. of the earnings from the catch of the fish with the right accruing on the catch of the fish, the issue whether there would be liability for tax deduction at source was decided in Kanchanganga Sea Foods Ltd. v. CIT [2004] 265 ITR 644 (AP). The High Court had little difficulty in holding that section 195 would cover such income in kind, if it arises in India and that such income was chargeable to Indian tax. The High Court did not accept the argument that the transaction was the other way round inferring that the assessee was earning 15 per cent. of the value of the fish catch by the non-resident in the high seas beyond 12 nautical miles from the seashore, so that no income could accrue in India following the decision in Performing Right Society Ltd. v. CIT [1977] 106 ITR 11 (SC). It was argued on behalf of the Revenue that there was liability, because there was receipt of income in India, which itself attracts liability even as held in P. V. Raghava Reddi v. CIT [1962] 44 ITR 720 (SC). The High Court, however, did not consider it necessary to discuss these two decisions probably because it was not necessary to consider them, since the income could be treated as having accrued in India, notwithstanding the catch in the high seas, because the other steps in respect of the agreement were in Indian soil, so that the income accrued in India. This decision in Kanchanganga Sea Foods Ltd.'s case is the subject matter of special leave at the instance of the assessee, which has since been granted [2003] 264 ITR (St.) 139.
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