TaxTMI 
TaxTMI 
2018 (8) TMI 1903
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.... Rs..1,00,000/- on an adhoc basis in respect of staff welfare expenses. 3) On the facts and circumstances of the case and in law the Commissioner of Income tax (Appeals) erred in upholding the disallowance of Rs..78,704/- being interest paid on service tax. 4) On the facts and circumstances of the case and in law the Commissioner of Income tax (Appeals) erred in upholding the disallowance of Rs..1,00,000/- on an adhoc basis in respect of miscellaneous expenses. 5) On the facts and circumstances of the case and in law the Commissioner of Income tax (Appeals) erred in upholding the disallowance of Rs..2,00,000/- on an adhoc basis in respect of seminars and conference expenses and meeting expenses." 3. The first ground of appeal is relating to upholding the disallowance made u/s. 40(a)(i) of the Income-Tax Act in respect of the professional fees of Rs..77,22,510/- paid to KPMG LLP, United Kingdom. At the outset, Learned Counsel for the assessee submitted that identical issue arose for the Assessment Years 2004-05, 2007-08 & 2009-10 and the Tribunal by various orders deleted the disallowance u/s. 40(a)(i) of the Act. Ld. Counsel for the assessee invited ou....
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....of Indo-US Double Taxation Avoidance Agreement. It is also an established fact that such non-resident recipients do not have permanent establishment in India and, therefore, in the said background 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 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....
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....cision of the Agra Bench of the Tribunal in the case of PNC construction Co. Ltd., v. DCIT [144 ITD 577] and the decision of the Hon'ble Gujarat High Court in the case of CIT v. Vallbh Glass Works Ltd., [38 taxmann.com 177] in support of his contentions. 9. Ld. DR vehemently supported the orders of the authorities below. 10. We have heard the rival submissions, perused the orders of the authorities below and the case laws relied on. On a perusal of the Assessment Order, we find that adhoc disallowance from the heads staff welfare, miscellaneous expenses, seminars/conference and meetings expenses was made by the Assessing Officer observing that complete vouchers were not furnished other than this observation there is no specific finding by the Assessing Officer that the expenses was not incurred by the assessee for the purpose of business nor the genuineness of the expenses was doubted by him. We also find that there is no specific allegation by the Assessing Officer as to which item or for which expenditure the vouchers were not produced other than a general observation that complete details were not furnished. 11. In the case of PNC construction Co. Ltd., v. DCIT (sup....
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.... noticed that assessee made payment of interest for delay in payment of service tax and this was disallowed by the Assessing Officer observing that the same is penal in nature and not an allowable expenditure which was confirmed by the Ld.CIT(A). Before us, it is contended that such interest payment on delayed remittance of service tax is only compensatory in nature and is supported by the decision of the Delhi Bench. On a perusal of the decisions relied on by the Ld. Counsel for the assessee, we find that the Tribunal held that interest on service tax is compensatory in nature and not penal in nature and is therefore allowable expenditure. On a perusal of the Explanation to Section 37(1) of the Act which says that any expenditure incurred by an assessee for any purpose which is an offense or which is prohibited by law shall not be deemed to have been incurred for the purpose of business or professions and no deduction or allowance shall be made in respect of such expenditure. Here the assessee made payment of interest for the delay in payment of service tax which in our considered view it is not an expenditure incurred for the purpose of any offence or prohibited by law. Thus, res....