In terms of article 8 of India Germany DTAA, assessee was not required to deduct tax at source on freight payments made to German carrier in respect of export of goods, - However, payments to Indian agents of German carrier otherwise than on account of airfreight payable to their principal are open to deduction at source under section 194C
• The assessee exported goods through a foreign carrier located in Germany. The freight payments were made to said carrier through its agents located in India.
• The question came up for consideration was whether assessee was liable to deduct tax at source while making payments of freight charges.
• Section 195 specifically excludes the liability to deduct tax at source when payment is made to a foreign company which is not chargeable to tax in India. Evidently, major part of the amount in question was paid to the foreign company. There exists agreement between the Govt. of the Republic of India and the Govt. of the Federal Republic of Germany for the avoidance of double taxation.
• In terms of article 8 of DTAA the payments are as such not chargeable to tax. The assessee, therefore, had no obligation to deduct any tax.
• However, payments made to the resident agents otherwise than on account of airfreight payable to there principal are open to deduction at source under section 194C.