TaxTMI 
TaxTMI 
TaxTMI 
2016 (5) TMI 356
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....enue has raised a solitary issue arising from the action of the CIT(Appeals) in holding that the Assessing Officer was not justified in disallowing a sum of Rs. 1,45,89,345/- by invoking the provisions of section 40(a)(i) of the Act . 2.1 Briefly put, the relevant facts are that the respondent assessee is a firm of Chartered Accountants and during the year under consideration, it was found to have paid a sum of Rs. 1,45,89,345/- to various entities detailed in Para-3 of the assessment order on account of professional fee. On being show-caused as to why the requisite tax was not deducted at source, the assessee firm explained that the payments were made to various non-residents and it is not in the nature of income chargeable to tax in Indi....
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....ssistance in audit, taxation, IT services, professional services in relation to transfer pricing, VAT, etc. Ld. Representative for the assessee has also tabulated the recipient entities country-wise and made reference to the respective clauses in the Double Taxation Avoidance Agreements. In sum and substance, the discussion made by the CIT(Appeals) on each of the payments, in Para 1.3 to 1.3.4 by the CIT(Appeals) has been relied upon. 5. In the above background, we have carefully considered the rival submissions. Pertinently, the issue revolves around the payments made by the assessee to certain non-resident entities for professional services rendered by them outside India. It has been consistently explained by the assessee that the servic....
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....ground the same can, at best, be treated as independent personal services covered by Article-15 of the Indo-US Double Taxation Avoidance Agreement. As a consequence and in the absence of any fixed base in India, such income cannot be held chargeable to tax in India so as to require deduction of tax at source. Therefore, invoking of section 40(a)(i) of the Act to disallow such expenditure is not tenable. 5.1 In so far as payments to KPMG LLP, UK and KPMG USMCG Ltd. UK are concerned, herein also the said entities do not have permanent establishment in India. The CIT(Appeals) has found that such entities are eligible for the benefit of Article -15 of Indo-US Double Taxation Avoidance Agreement dealing with independent personal services and he....
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....)(i) of the Act. 5.3 With regard to the payments to KPMG, Mauritius, KPMG Hazen Hassan, Egypt, KPMG Dubai, UAE and KPMG, Sri Lanka are concerned, the CIT(Appeals) has noticed that the tax treaties with the respective countries do not have any Article defining 'fee for technical services'; and that the services were being rendered in relation to taxation matters. In this back ground, the CIT(Appeals) held that the payments for such services fall within the scope of article 14/15 of the respective treaties dealing with independent personal services and in the absence of any fixed place of business of the recipient in India, income from such services was not chargeable to tax in India. Therefore, there was no requirement to deduct tax....
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.... disallowance is not warranted as the following discussion would show. Ostensibly, the requirement of rendering services in India in order to attract section 9(1)(vii) of the Act was removed by insertion of Explanation by the Finance Act, 2010 with retrospective effect from 1/4/1976. This has been understood by the Revenue to say that inspite of the services having been rendered by the recipients outside India, the same is taxable in India by applying the aforesaid amendment. In our view, such retrospective amendment would be determinative of the tax liability in the hands of the recipients of income. So however, in the present case, what is held against the assessee is the failure to deduct tax at source at the time of payment of such inco....