MANU/DTCR/0014/2007

Ministry : Ministry of Finance

Department / Board : CBDT

Circular No : 7/2007

Date : 23.10.2007

CBDT specifies procedure regarding refund of tax deducted in respect of payment to non-residents

The Board had issued Circular No. 790 dated 20th April, 2000, laying down the procedure for refund of tax deducted under section 195, in certain situations to the person deducting the tax at source from the payment to the non-resident. Representations have been received in the Board from taxpayers requesting that the said Circular may be amended to take into account situations where genuine claim for refund arises to the person deducting the tax at source from payment to the non-resident and it does not fall in the purview of the said Circular.

2. The cases which are being referred to the Board mainly relate to circumstances where, after the deposit into Government account of the tax deducted at source under section 195,

a) the contract is cancelled and no remittance is made to the non-resident;

b) the remittance is duly made to the non-resident, but the contract is cancelled. In such cases, the remitted amount has been returned to the person responsible for deducting tax at source;

c) the contract is cancelled after partial execution and no remittance is made to the non-resident for the non-executed part;

d) the contract is cancelled after partial execution and remittance related to non-executed part is made to the non-resident. In such cases, the remitted amount has been returned to the person responsible for deducting the tax at source or no remittance is made but tax was deducted and deposited when the amount was credited to the account of the non-resident;

e) there occurs exemption of the remitted amount from tax either by amendment in law or by notification under the provisions of Income-tax Act, 1961;

f) an order is passed under section 154 or 248 or 264 of the Income-tax Act, 1961 reducing the tax deduction liability of a deductor under section 195;

g) there occurs deduction of tax twice from the same income by mistake;

h) there occurs payment of tax on account of grossing up which was not required under the provisions of the Income-tax Act, 1961;

i) there occurs payment of tax at a higher rate under the domes........