No withholding taxes on non-residents not having presence in India

The Supreme Court noted that the primary objectives of withholding taxes were to ensure that taxes payable by non residents were secured at the earliest, and to avoid difficulties in collection. It held that Vodafone had no liability to withhold
taxes as the transaction was an “outright sale” of a capital asset outside India between two non-residents with no taxable presence in India. After reviewing cases such as Clark v. Oceanic Contractors, and Eli Lilly, Justice Radhakrishnan further remarked that withholding tax provisions under section 195 of the ITA would apply only in cases where payments are made by a resident to a non-resident. In other words, it has been held that payments between non-residents are not subject to withholding taxes under the ITA.