Section 195 of the Income Tax Act

Income-tax Act, 2025: s.393

Section 195 of the Income-tax Act, 1961 corresponds to section 393 (Tax to be deducted at source) of the Income-tax Act, 2025.

Read section 393 of the 2025 Act

Correspondence checked against the ICAI tabular mapping of the two Acts and the BharatTax.co section commentary.

The decision most relied on for Section 195 is Engineering Analysis Centre of Excellence (P) Ltd. v. CIT (432 ITR 471), cited in 914 of the 2,836 judgments on BharatTax that turn on this section.

Leading authorities on Section 195

Engineering Analysis Centre of Excellence (P) Ltd. v. CIT
432 ITR 471 · 2021 · Supreme Court
914
citing judgments

Payments for the supply or use of computer software, where there is no transfer of copyright but only a right to use the copyrighted product, are generally considered business profits and not 'royalty' or 'fees for technical services' under the Income Tax Act, 1961 or relevant DTAAs. This principle also applies to transponder fees, which are not taxable as royalty.

Bharat Earth Movers v. CIT
245 ITR 428 · 2000 · Supreme Court
901
citing judgments

A business liability that has definitely arisen in an accounting year is deductible even if it needs to be quantified and discharged later, as long as its incurring is certain and can be reasonably estimated.

GE India Technology Centre Pvt. Ltd. v. CIT
327 ITR 456 · 2010 · Supreme Court
663
citing judgments

Tax must be deducted at source from payments made to a non-resident under Section 195 only if such payment is chargeable to tax in India. The Assessing Officer bears the onus to establish that the payments made are indeed chargeable to tax under the Income Tax Act.

Apollo Tyres Ltd. v. CIT
255 ITR 273 · 2002 · Supreme Court
657
citing judgments

For the purpose of computing book profits under Section 115J, arrears of depreciation, including those arising from assets working extra shifts, are a necessary charge on profits if debited to the profit and loss account and are allowable as such.

CIT v. Samsung Electronics Ltd.
345 ITR 494 · 2012 · High Court
461
citing judgments

Payments by Indian residents to non-resident foreign software suppliers for software are considered royalty, constituting income deemed to accrue in India under section 9(1)(v), thereby requiring tax deduction at source under section 195.

Allied Motors (P) Ltd. v. CIT
224 ITR 677 · 1997 · Supreme Court
398
citing judgments

Amendments to the Income-tax Act that are curative, clarificatory, or beneficial in nature apply retrospectively from the date the original statutory provision was introduced, even if not explicitly stated.

Ishikawajima Harima Heavy Industries Ltd. v. DIT
288 ITR 408 · 2007 · Supreme Court
394
citing judgments

Income from offshore supply of goods and services is not taxable in India if the entire transaction, including transfer of ownership and payments, occurs outside India.

CIT v. De Beers India Minerals (P.) Ltd.
346 ITR 467 · 2012 · High Court
371
citing judgments

For fees for technical or consultancy services to 'make available' technical knowledge or know-how under a DTAA, the service must transmit such knowledge, allowing the recipient to derive an enduring benefit and utilize it independently in the future.

Asia Satellite Telecommunications Co. Ltd. v. DIT
332 ITR 340 · 2011 · High Court
359
citing judgments

Payments for the use of equipment, such as satellite transponders, do not constitute 'royalty' under Section 9(1)(vi) of the Income-tax Act, 1961, or under applicable tax treaties, especially when there is no transfer of the right to use a process or underlying technology.

DIT v. New Skies Satellite BV
382 ITR 114 · 2016 · High Court
325
citing judgments

An amendment to the Income Tax Act, such as the Finance Act, 2012 amendment to Section 9(1)(vi) defining royalty, does not automatically override or alter the definition of 'royalty' as provided in a Double Taxation Avoidance Agreement (DTAA) unless the DTAA itself is bilaterally amended. The definition of royalty in a DTAA remains unaffected by unilateral changes to domestic law.

Judgments on Section 195

Adient India Private Limited, Pune vs. Deputy Commissioner of Income Tax, Pune

In the result, the appeal of the assessee is allowed as indicated above

ITA 688/PUN/2017[2006-07]Status: DisposedITAT Pune04 Jul 2019AY 2006-07

Bench: Shri D. Karunakara Rao, Am & Shri Vikas Awasthy, Jm आयकर अपील सं. / Ita No.688/Pun/2017 िनधा"रण वष" / Assessment Year : 2006-07 Adient India Private Limited, Plot No.1, S.No.235 & 245 Hinjewadi, Taluka: Mulshi, Pune-411057. .......अपीलाथ" / Appellant Pan : Aaact6342D बनाम / V/S. Dcit, Circle-14, ……""यथ" / Respondent Pune. Assessee By : Shri Pinkesh Jain Revenue By : Smt. Shabana Parveen सुनवाई क" तारीख / Date Of Hearing : 13.06.2019 घोषणा क" तारीख / Date Of Pronouncement : 04.07.2019 आदेश / Order Per D. Karunakara Rao, Am: This Appeal Is Filed By The Assessee Against The Order Of The Cit(A)- 7, Pune Dated 18.11.2016 For The Assessment Year 2006-07. 2. The Grounds Raised By The Assessee Are As Under :- The Learned Cit(A) Erred In Disallowing Reimbursement Of Salary “1. Costs To The Extent Of Rs. 69,12,276 Under Section 40(A)(I) Of The Act For Non-Deduction Of Tax At Source. The Learned Cit(A) Erred In Not Appreciating That The Appellant 2. Was Issued Nil Withholding Tax Certificates For Similar Payments & Therefore, The Reimbursement Of Rs. 69,12,276, Being Of The Same Nature, Ought To Have Been Not Disallowed Under Section 40(A)(I) Of The Act. 3. Without Prejudice To The Above, The Learned Cit(A) Further Erred In Not Appreciating That Reimbursement Of Salary Costs Paid To Johnson Controls Automotive Pte. Ltd, Singapore Is Not Chargeable To Tax In India & Therefore, There Is No Liability Of The Appellant To Deduct Tax Under Section 195 Of The Act.

For Appellant: Shri Pinkesh JainFor Respondent: Smt. Shabana Parveen
Section 195Section 263Section 40