TaxTMI 
TaxTMI 
TaxTMI 
2021 (2) TMI 68
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....he payment, produce original bills and produce copy of the agreement. The assessee was also asked to establish that the expenditure was incurred wholly and exclusively for the purpose of business and also to indicate if any tax was deducted at source. It was the submission of the assessee that the assessee firm is a part of global organization of professional service firms and the member firms are located all over the world and engaged in rendering professional services under the local laws of a particular country in the field of accounting, auditing, insolvency law, management consulting, taxation etc. It was further submitted before the Assessing Officer that Deloittee Touche Tohmatsu (DTT) charges subscription fees to Deloitte Hasking & Sells, Mumbai and this firm in turn charges the member firms (including the assessee) the share of DTT subscription by way of debit notes. It was submitted that the subscription charges were charged on the basis of proportion of revenue earned by the assessee firm to the total revenue of the Deloitte Firms in India. However, the Assessing Officer was of the view that the subscription fee was not wholly and exclusively for the purpose of the busin....
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....2 of the assessee's appeal pertained to the disallowance of subscription fees. It was submitted that this issue is covered in favour of the assessee by the order of this Tribunal in assessee's case for Assessment Year 2009-10 in ITA No.2927/Del/2013 vide order dated 23.10.2018. The Ld. Authorized Representative explained the necessity of paying the subscription fees and further explained how the subscription fees is collected from the members/companies by Deloitte Haskins & Sells, Mumbai. The Ld. counsel for the assessee further submitted that in the case of DTT, the subscription fees received from the members have been taxed as its income. The Ld. counsel for the assessee further drew our attention to the decision of the co-ordinate bench in the case of Deloitte Haskins and Sells, Mumbai in ITA No. 5096/Mum/2011 vide order dated 30.11.2016 wherein an identical issue arose for consideration before the bench where the subscription fees paid by Deloitte Haskins and Sells, Mumbai to DTT was disallowed u/s 40A (ia) of the Act. It was submitted by the Ld. counsel for the assessee that disallowance was directed to be deleted. The Ld. counsel for the assessee further relied upon the decis....
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....petition and granted stay against the proceedings before the Chief Judicial Magistrate, Meerut observing that on perusal of the complaint it is noticed that willful incorrect reporting is not alleged and, therefore, no offence is made out. The Hon'ble High Court stayed further proceedings on the ground that in absence of charge of willful/erroneous reporting there does not appear to be an offence under section 227 of the Companies Act, 1956. The Ld. AR submitted that the assessee firm had appointed M/s. Dua & Associates for defending the above criminal proceeding against Mr. Deepak Roy who had signed the audit report issued by the assessee firm and accordingly paid Rs. 17,41,389/- as professional fees and deducted applicable TDS there from. It was submitted that expenditure incurred for defending criminal proceedings against the partner of the firm for his actions as partner is not his personal expenditure. Mr. Deepak Roy had signed the Audit Report as a partner of the firm and, therefore, to save the reputation and goodwill of the firm, expenditure was incurred by the assessee and, therefore, the aforesaid expenditure was incurred wholly and exclusively for the purpose of professi....
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.... a company registered in USA. According to the Assessing Officer, it cannot be claimed as business expenditure. In our understanding of law, such observation of the Assessing Officer does not hold any water, because under the Companies Act, a company can be incorporated under any other law also. The Assessing Officer has further mentioned that in the partnership deed, there is no clause relating to payment of DTT. We fail to understand the necessity of such clause in the partnership deed. 13. The Assessing Officer further observed that DHS Mumbai has paid to DTT after deducting tax at source u/s 194J of the Act which means that TDS has been deducted for fees for profession or technical services. The Assessing Officer was of the opinion that on the one hand DHS Mumbai is making payment as fees for profession or technical services and, on the other hand, the assessee is claiming the same as subscription fees. As mentioned elsewhere, in the case of DHS Mumbai in assessment years 2003-04, 2004-05 and 2005-06, payment made to DTJ-was disallowed u/s 40A(ia) of the Act. Thereafter, DHS Mumbai started deducting tax at source to avoid unnecessary litigation. But this has nothing to do wit....
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....nues and such other f actors, if any, as Delotte Haskins and Sells IT A No.: 5096/Mum/2011 ITA No.: 5097/Mum/2011 ITA No.: 5094/Mum/2011 may be determined by the Board of Directors and approved by the Member Firms. and Article 12 deals with dissolution, which reads as under:- 12.1 By Resolution a dissolution of the Verein shall occur if a resolution to that effect is, adopted by the Member Finns. 12.2 Distributions. Upon dissolution of the Verein, any liquidation proceeds shall be applied in the following order: * payment or discharge of all liabilities of the Verein, including any unpaid principal of and accrued interest on any loans and advances made by the Member Firms to the Verein; and * payment of any remaining balance to each Member Finn in the proportion that its allocated , contributions to budgeted operating expenses of the Verein bear to the total budgeted operating expenses of the Verein for the then current Fiscal Year, less any unpaid portion of the Member Finn's contribution outstanding on the date of dissolution" From the reading of above Articles, it is seen that the association constitutes of Member firms which are engaged in rendering of professiona....
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.... the claim of the assessee that payment was its share of subscription allocated to various Indian entities of a common global network on the basis of the revenue by OHS, Mumbai, of which the assessee is a member. The total subscription is paid by OHS, Mumbai after deduction of tax at source (TDS) to DTT towards utilization of common knowledge systems, common information technology systems and better access for clients of uniform and high quality services by the Indian members of the network. The assessee's contribution/share of Rs. 48,95,212/- comprised it share of Rs. 31,86,534/- for the relevant previous year and differential share of Rs. 17,08,679/- paid for the earlier years being the difference between the contribution payable on the basis of the revenue and contribution already paid earlier for those years and was claimed in line with the cash system of accounting followed by the assessee. The assessee produced debit notes issued by DHS, Mumbai as supporting evidence. The assessee has to pay subscription fees through Delloite, Haskins and Sells, Mumbai (DHS, Mumbai) for this purpose to DTT. However, as DHS Mumbai makes the payment after deducting TOS and the assessee only rei....
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....ata in the case of CIT vs. Ernst & Young (P.) Ltd. [2014] 49 taxmann.com386 (Kolkata-Trib.) upheld the same principle on the identical issue under consideration, wherein it was held as follows: "The two concerns, namely, EY&S LLP and Ernst and Young U.K. LLP, were set up by member firms of Ernst and Young for providing resources to obtain best methodologies at a lower cost which in the present days of globalization is imperative for any professional firm. Development of such methods by any one concern would have been cost prohibitive apart from lacking uniformity and mutual compatibility. Accordingly, arrangement was arrived at for such services to be developed in a pool by the said two concerns to which the member firms would have access to it and reimbursing their respective shares of cost incurred therefor. Such reimbursement was agreed on the basis of respective turnover of the member firms. These facts are not denied by the revenue and these are reimbursement of expenses. Once these are reimbursement of expenses, the assessee is not liable to deduct TDS u/s 195. Accordingly, the order of the Commissioner (Appeals) is to be confirmed." Therefore, we note that the said amoun....