TaxTMI 
TaxTMI 
2018 (1) TMI 666
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.... KPMG USCMG LLC, USA 12,21,410/- Total 28,24,387/- ITA No. 4843/Mum/2016 Sr. No. Name of non-resident Amount (Rs.) 1 KPMG LLP, USA 6,82,800/- 2 KPMG, Mauritius 1,01,982/- Total 7,84,782/- ITA No. 4844/Mum/2016 Sr. No. Name of non-resident Amount (Rs.) 1 KPMG LLP, USA 3,98,070 2 Manabat Sanagustin & Co., Philippines 12,27,430 Total 16,25,500 ITA No. 4556/Mum/2016 Sr. No. Name of non-resident Amount (Rs.) 1 KPMG LLP, USA 3,51,300 2 KPMG United Kingdom Plc. UK 10,18,416 3 KPMG United Kingdom Plc. UK 4,48,744 4 Manabat Sanagustin & Co., Philippines 4,50,896 Total 22,69,356 3. In these cases, the asseessee is the firm of chartered accountants and during the years under consideration it has paid sums to various entities on account of professional fee. On being show caused as to why the requisite tax was not deducted at source, the asseessee firm explained that the payment was made to various nonresidents and it is not in the nature of income chargeable to tax in India and, thus, tax was n....
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....hould be made available to the assessee and the assessee should be at liberty to use them in its own right. If the service does not result in making available of any such thing, then the same would not fall within the ambit of fees for technical service. These payments also cannot be taxed under Article- 7 as none of them were having any P.E. or fixed base in India and the duration of their visit in India was also for a very less period as has been discussed upon. Therefore, such a payment does not attract the provisions of TDS under section 195. Provisions of section 195(1) uses the expression "chargeable under the provisions of the Act". The payer is bound to deduct tax at source only if the sum paid is assessable to tax in India. The obligation to deduct tax is limited to the appropriate proportion of income which is chargeable under the Act and not otherwise. The Hon'ble Supreme Court in G.E. India Technology Centre Pvt. Ltd.(supra), after analyzing the provisions of section 195 and the decision in Transmission Corporation of KPMG A.P. Ltd. (supra) has given its observation on section 195(1) of the Act. 9. Further, we note that ITAT in assessee's own case on similar issu....
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....d 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 hence, payments are not chargeable to tax in India so as to require deduction of tax at source. The aforesaid findings have not been disputed before us on the basis of any cogent material and, therefore, we hereby affirm the same. Consequently, invoking of section 40(a)(i) in the context of aforesaid payments is also not justified. 5.2 In the context of payments made to KPMG Tax Services Pvt. Ltd., Singapore, KPMG LLP, Singapore and KPMG Tax Advisor, Belgium, the CIT(Appeals) noted that they are companies registered in the respective countries, who have rendered services outside India. Such services related to assistance in audit, taxation, information technology services, conducing background checks, etc. Considering the nature of the services rendered, which is not disputed by the Revenue, in our view, the CIT(Appeals) made no mistake in holding that the payments are not 'fee ....
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....e the provisions of section 40(a)(i) of the Act. The stand of the CIT(Appeals) on this aspect is also affirmed by us on the basis of his findings, which have remained uncontroverted before us by the Revenue. 5.5 Apart therefrom, even if we were to accept, for the sake of argument, that the services by the aforesaid entities are in the nature of technical services and are rendered and utilized in India so as to be taxable in terms of section 9(1)(vii) of the Act, even then the 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 sou....