TaxTMI 
TaxTMI 
2024 (8) TMI 1074
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....dhesh Chaugule, Shri C.S. Amamtja And Shri Shailesh Nayampalli For the Respondent/Department : Shri Ajay Kumar Sharma ORDER PER BENCH: 1. This is a batch of cross-appeals and cross objections pertaining to Assessment Years 2012-2013 to 2017-2018. The facts, common to all the cross appeals and cross objections are as under. 1.1. The Assessee is engaged in providing business advisory, taxation and audit related services. In the return of income filed for the relevant assessment year(s), the Assessee claimed deduction for professional fee expenses debited to the Profit & Loss Account. The case of the Assessee was selected for regular scrutiny. During the assessment proceedings the Assessing Officer noted that the Assessee has failed to deduct tax on professional fee paid to various non-residents. According to the Assessing Officer, the professional fee paid to various non-residents was liable to tax in India in the hands of such non-residents in terms of the provisions of the Act read with the applicable articles of the corresponding Double Taxation Avoidance Agreement (for short 'DTAA') between India and the country of tax resident of the search non-resident(s) as (....
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....) by, inter alia, placing reliance on the order passed by the first appellate authority in appeals preferred by the Assessee for the Assessment Years 2009-2010 & 2010-11, and 2011-12. 1.3. Now, both, the Revenue and the Assessee are before us in appeal/cross-objection. 1.4. We note that there is a delay of around 55 days in filing the Cross Objections. We have considered the rival submission on the application seeking condonation of aforesaid delay. It was submitted on behalf of the Assessee that filing of cross objections was necessitated on account of the judgment of the Hon'ble Supreme Court in the case of Assessing Officer (International Taxation) Vs. Nestle SA: [2024] 296 Taxman 580 (SC)/[2023] 458 ITR 756 (SC)[19-10-2023] wherein it was held that the benefit of Most Favoured Nation Clause (Most Favoured Nation (MFN) clause is contained in various Indian tax treaties with countries that are members of the Organisation for Economic Cooperation and Development (OECD). This clause provides for lower of rate of taxation at source on dividends, interest, royalties or fees for technical services as the case may be, or restriction of scope of royalty/fee for technical services ....
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....see against the Assessment Order, dated 29/03/2016, passed by the Assistant Commissioner of Income Tax -16(2), Mumbai under Section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as 'the Act'). 2.1. The Revenue has raised the following grounds of appeal in ITA No. 2273/Mum/2023: "1. On the facts and in the circumstances of the case and in law, whether the Ld. CIT(A) was justified in deleting the disallowance of Rs. 11,21,42,029/- under Section 40(a)(i) being professional fees paid outside India without deduction of tax at source. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in holding that the payment made by the assessee to its associate concerns based in countries apart from Israel, Philippines constitute payments for Independent Personal service instead of Fees for Technical Services" as defined under Article 12/13 of the respective DTAAs. 3. On the fact and in the circumstances of the case and in law, the Ld. CIT(A) has erred in holding that the payments made by the assessee to its associate concerns based in Israel, Philippines constitute payments for Independent Personal Services instead o....
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....ices continues to be non-taxable in India.." 2.3. The Assessee has raised the following grounds of appeal in ITA No. 2410/Mum/2023 "Ground No. 1 Commissioner of Income Tax (Appeals) remanding issue to the Assessing Officer is bad in law 1. On facts and circumstances of the case and in law, the CIT(A) erred in directing the AO to verify the Appellant's arguments in respect of disallowances under Section 40(a)(i) of the Income Tax Act, 1961 [the Act'] amounting to Rs. 8,55,053 and decide the issue. Such findings of the CIT(A) are in violation of the provisions of section 251 of the Act, accordingly the said findings are bad in law and ought to be quashed. Ground No. 2 Issues are covered by the Hon'ble ITAT orders in respect of Member Firm of the Appellant 2. On the facts and circumstances of the case and in law, AO/CIT(A) erred in not appreciating that the said disallowances u/s 40(a)(i) of the Act, are covered by the Hon'ble ITAT orders in respect of Member firm of the Appellant. Accordingly, the said disallowances be deleted." 3. We have heard the both the sides and perused the material on record including the written submission....
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....abat Sanagustin & Co. CPAs Philippines Firm 59,15,576/- 1 22. Mr. Philip Baker Q.C, UK Individual 4,07,375/- 1 23. Rahman Rahman Huq, Bangladesh Firm 1,48,076/- 2 24. Simon Mort Reports Limited, UK Company 7,03,300/- 2 Total 11,21,42,029/- 6. The Assessing Officer denied deduction for the entire amount of INR 11,21,42,029/- holding that the Assessee was under obligation to withhold tax from professional fee paid to non-resident under Section 195 of the Act as the same were chargeable to tax in India in terms of Section 9(1)(vii) of the Act read with either Article 12 or Article 22/23 of the corresponding DTAAs as FTS or Other Income, respectively. Since the Assessee had failed to deduct tax from the same in terms of Section 195 of the Act, the Assessing Officer made disallowance of INR 11,21,42,029/- invoking provisions contained in Section 40(a)(i) of the Act. 7. In appeal before the CIT(A), by placing reliance upon the judgments/decision including those in the case of the Assessee and its member concerns, it was contended on behalf of the Assessee that disallowance under Section 40(a)(....
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....g whether the aforesaid non-resident parties had a fixed base or physical in India since it was contended on behalf of the Assessee that the professional fee paid/payable to the aforesaid 2 non-resident parties was not liable to tax in India as IPS in terms of Article 14/15 of the DTAA between India and country of tax residence of such non-residents in absence of a fixed base/physical presence in India. Thus, out of the aggregate disallowance of INR.11,21,42,029/- made by the Assessing Officer under Section 40(a)(ia) of the Act, the CIT(A) deleted the disallowance of INR 11,12,86,976/- (INR.9,72,62,585 - INR.4,07,375 + INR.5,68,486 - INR.4,47,678 + INR.1,07,97,957 + INR.35,13,001 - INR.8,55,053). 9. Now, both, the Assessee as well as the Revenue are in appeal against before the Tribunal against the above order passed by the CIT(A). 9.1. The Revenue is aggrieved by the deletion of disallowance made by the Assessing Officer under Section 40(a)(i) of the Act. While the Assessee has challenged, by way of cross-appeal, the directions issued by the CIT(A) to the Assessing Officer in respect of the professional fee of INR 8,55,053/- consisting of INR 4,47,678/- and INR 4,07,375/- pa....
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....ervice providers have a fixed base or physical presence in India to satisfy the requirements of Article 14/15 of the applicable DTAA dealing with IPS. 11. The contentions of the Revenue can be summarized as under: (a) The professional fee for services paid/payable to the non-resident parties is liable to tax in India as FTS per the provisions of the Act. (b) The services provided by the non-residents satisfy the requirement of Make Available Clause and therefore, the same are in the nature of FTS liable to tax in India in terms of Article 12/13 of the applicable DTAA in the hands of such non-residents. In view of the judgment of the Hon'ble Supreme Court in the case of Assessing Officer (International Taxation) Vs. Nestle SA: [2023] 458 ITR 756 (SC) the benefit of 'Make Available Clause' was not available in respect of DTAAs having MFN Clause in absence of a separate notification having been issued by the Government of India in respect of the applicable DTAA. FTS Clause being specific clause shall prevail over other general clauses dealing with Book Profits (Article 7) or Independent Personal Services (Article 14/15). (c) Article 14/1....
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....erms of Article 14/15 of the applicable DTAA in absence of a fixed base and/or physical presence of such non-resident in India. The expression 'resident of contracting state' is wide enough to include in its ambit all resident persons whether individual or company. (e) Where the payments have been made by the Assessee to non-residents for the purpose of earning income from a source outside India, such payments were not liable to tax in India in terms of Section 9(1)(vii)(b) of the Act. 13. Before dealing with the specific contentions raised by both the sides, we deem it appropriate to refer to the relevant legal background common to all the contentions. 13.1. Section 40(a)(i) of the Act, inter alia, provides that while computing the income chargeable under the head 'Profits and Gains of Business or Profession', deduction shall not be allowed for royalty, fees for technical services or other sum chargeable under the Act paid/payable outside India in case of a default committed by the Assessee in withholding tax from the same. 13.2. Section 195 of the Act, inter alia, casts obligation on person responsible for making payment to a non-resident to withhold tax from am....
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....h Business Profits, FTS, IPS and Other Income. To bring out the interplay between different clauses and to address some the broad contentions raised by both the sides, we deem it appropriate to consider the model clauses contained in OECD Model Tax Convention (Organisation for Economic Co-operation and Development (OECD) Model Convention with respect to Taxes on Income and on Capital Model) [for short 'OECD MTC'] and United Nation Model Tax Convention [for short 'UN MTC'] and related commentaries (even though the DTAAs may have clauses which depart from model tax conventions). 13.7. Article 7 of OECD Model Tax Convention, 1998 [for Short 'MTC98'] deals with allocation of taxing rights between source state and resident state with respect of Business Profits. Article 7(1) of MTC98 reads as under: "1. The profits of an enterprise of a Contracting State shall be taxable only in that State unless the enterprise carries on business in the other Contracting State through a permanent establishment situated therein. If the enterprise carries on business as aforesaid, the profits of the enterprise may be taxed in the other State but only so much of them as is attributable to that....
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....ss profits. The relevant extract of the aforesaid decision of the Tribunal reads as under: "9. To understand the scope of these treaty provisions, which are broadly in pari materia with the provisions of Article 21 of UN Model Convention, we find guidance from the OECD Model Convention Commentary which states that "The Article covers income of a class not expressly dealt with in the preceding articles (e.g. an alimony or a lottery income) as well as income from sources not expressly referred to therein (e.g. a rent paid by a resident of a Contracting State for the use of immovable property situated in a third State). The Article covers income arising in third States as well as income from a Contracting State". In other words, an income is of such a nature as, on satisfaction of conditions specified in the related provision, could be taxed under any of these specific treaty provisions, cannot be covered by this residuary clause. Take for example, income earned by a resident of a contracting state by carrying on business in the other contracting state. When, for example, article 5 provides that the income of resident of a contracting state, from carrying on business in the o....
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....les (i.e. article 6 to 21) of the treaty. The income earned by these entities was in the regular course of their business, and there is no dispute about this fundamental aspect. There cannot also be dispute about the fact that in the event of these entities satisfying the conditions regarding existence of permanent establishment in India, the amounts so received by these entities would have been taxable as business income. The income in question is thus clearly dealt with by article 7 read with article 5 and the reason why it has not been taxed is that the entities concerned did not have permanent establishments in India. Clearly, therefore, the income in question is covered by the provisions of the Indo Thai tax treaty but is not taxable on the facts of the case before us as the recipients did not have a PE in India. Once we come to the conclusion that the income embedded in the payments in question is of such a nature which is covered by articles 6 to 21 of the treaty but is not taxable in India as the condition precedent for the taxability under the related article is not satisfied, it is an inevitable corollary of this finding that article 22 cannot be pressed into service in r....
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.... 10. In view of the above discussions, in our considered view, even though the remittances in question are in the nature of fees for technical services in the hands of Thai entities, the income embedded in these remittances is not taxable in India in the hands of these entities, in terms of the provisions of Indo Thai tax treaty. The plea of the Assessing Officer, for invoking the domestic law provisions in respect of fees for technical services, as the Indo Thai tax treaty does not specifically deal with the same, already stands negated by Hon'ble jurisdictional High Court in the case of Bangkok Glass Industries (supra), in the context of Indo Thai tax treaty itself. It is only elementary that under article 90(2) where the Government has entered into a tax treaty with any tax jurisdiction, in relation to the assessee to whom such treaty applies, "the provisions of this (i.e. Income Tax) Act shall apply to the extent they are more beneficial to that assessee". While on this issue, we may also take note of the landmark Special Bench decision in the case of Motorola Inc. vs. Dy. CIT [(2005) 96 TTJ (Del)(SB) 1] wherein the Tribunal had, inter alia, observed that "DTAA is only an a....
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....on 'resident of contracting state' used in Article 14 of MTC98. It was submitted the Learned Authorised Representative for the Assessee that expression 'resident of contracting state' has been defined in Article 4 of MTC98 to include 'any person' and the term 'person' has been defined in Article 3(1)(a) of MTC 98 to include an individual, company or any other body corporate. Thus, it was contended on behalf of the Assessee that benefit of IPS clause contained in Article 14 was available to resident be it individual, company or body corporate. On the other hand, it was submitted by the Learned Departmental Representative that the expression 'resident of contracting state' has also been used in Article 15 of MTC98 dealing with Dependent Personal Services. However, it is settled position that the benefit Article 15 dealing with dependent personal services can be availed only by individuals. 13.12. We note that Article 14 as contained in MTC98 read as under: "Article 14: Independent Personal Services 1. Income derived by a resident of a Contracting State in respect of professional services or other activities of an independent character shall be taxable only in tha....
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....ticle 14 of the OECD Model Tax Convention', the relevant extract of which reads as under: "III. WHICH ENTITIES FALL WITHIN ARTICLE 14? "13. The personal scope of application of Article 14 is also unclear. The main issue is whether the Article applies to individuals only or whether it is also applicable to legal persons. Another issue is to what extent it applies to partnerships. 14. It has sometimes been argued that the use of the pronoun "his", in paragraph 1 of Article 14, indicates that the Article was intended to apply to individuals only. The Committee, however, found the argument to be far from convincing as paragraph 1 of Article 4, which clearly applies to both individuals and legal persons, also uses the pronoun "his" when referring to the various criteria for full liability to tax. 15. Whilst the Commentary on Article 14 does not directly deal with this issue, the Commentary on the United Nations Model notes that the Experts Group generally agreed that a payment for services made to an individual would fall under Article 14 whilst "payments made to an enterprise in respect of the furnishing by that enterprise of the activities of employ....
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....s. In that case, either the partners who are legal persons would be covered by Article 7 whilst the partners who are individuals would be covered by Article 14 or, alternatively, Article 14 would not apply to any partner of a partnership where at least one partner were a legal person. Neither approach would be satisfactory." (Emphasis Supplied) 13.15. In the UN MTC Commentary, 2021 took note of the above fact that Article 14 stands deleted from the OECD Model Convention with effect from 29/04/2000 in the following manner: "1. Paragraph 1(a) and paragraph 2 of Article 14 of the United Nations Model Tax Convention reproduce the essential provisions of Article 14 of the 1997 version of the OECD Model Tax Convention. The whole of Article 14 and the Commentary thereon were deleted from the OECD Model Tax Convention on 29 April 2000. Paragraph 1(b) allows the country of source to tax income from independent personal services in one additional situation not covered by paragraph 1 of Article 14 of the 1997 OECD Model Tax Convention: while the former OECD Model Tax Convention allowed the source country to tax income from independent personal services only if the income was attri....
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....or business profits and rest in fact on the same principles as those of Article 7. The provisions of Article 7 and the Commentary thereon could therefore be used as guidance for interpreting and applying Article 14. Thus the principles laid down in Article 7 for instance as regards allocation of profits between head office and permanent establishment could be applied also in apportioning income between the State of residence of a person performing independent personal services and the State where such services are performed from a fixed base. Equally, expenses incurred for the purposes of a fixed base, including executive and general expenses, should be allowed as deductions in determining the income attributable to a fixed base in the same way as such expenses incurred for the purposes of a permanent establishment [...]. Also in other respects Article 7 and the Commentary thereon could be of assistance for the interpretation of Article 14, e.g. in determining whether computer software payments should be classified as commercial income within Article 7 or 14 or as royalties within Article 12. 4. Even if Articles 7 and 14 are based on the same principles, it was thought tha....
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....ices or other independent activities of a similar character shall be taxable only in that State except in the following circumstances when such income may also be taxed in the other Contracting State :..." UK "15(1.) Income derived by an individual, whether in his own capacity or as a member of a partnership, who is a resident of a Contracting State in respect of professional services or other independent activities of a similar character may be taxed in that State. Such income may also be taxed in the other Contracting State if such services are performed in that other State and if..." France "15(1) Income derived by an individual or a partnership of individuals who is a resident of a Contracting State from the performance of professional services or other independent activities of a similar character shall be taxable only in that Contracting State except in the following circumstances when such income may also be taxed in the other Contracting State :..." USA "15(1) Income derived by a person who is an individual or firm of individuals (other than a company) who is a resident of a Contracting State from the performance in the ....
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....t of contracting state' used in Article 14/15. In our considered view, the latter approach should be adopted to determine the scope/ambit of Article 14/15 of the applicable DTAA. 13.22. Having said as above, we find that from the perspective of the Revenue, whether the payments to non-residents fall within the ambit of Article 14/15 dealing with income from IPS or Article 7 dealing with Business Profits, would not make any difference. In either case the provisions of Article 22 on Other Income would not get triggered. Further, since the Revenue has not set up a case that the non-resident payee had a Permanent Establishment or Fixed Base/physical presence in India, the payments to non-residents, whether covered by Article 7 and/or 14/15 of the applicable DTAA, would not be liable to tax in India. We have already concluded that even in case of DTAAs without FTS Article, there would be no change in the above position as the payments to non-residents would continue to fall within the ambit of Article 7 or Article 14/15, as the case may be, and shall not be liable to tax in India for identical reasons. We have also concluded that in case the countries having FTS Article with Make Ava....
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.... [applicable to non-resident party at Sl.No.19]; (g) Sri Lanka (Applicable India-Sri Lanka DTAA [Repealed by Notificaiton No.23/2014 [F.NO.503/8/2005-FTD-II]/SO 956(E), DATED 28-3-2014]) [applicable to non-resident party at Sl.No.20]; (h) Philippines [applicable to non-resident party at Sl.No. 21]; (i) Bangladesh [applicable to non-resident party at Sl.No. 23] 15.2. In absence of fixed base/physical presence of tax residents of the above countries in India, professional fee paid/payable to such non-residents would not be liable to tax in India in terms of Article 14/15 of the applicable DTAA. There is nothing on record to persuade us to take a different view. Thus, the Assessee would not under obligation to withhold tax from the payments under consideration. Therefore, we concur with the conclusion drawn by the CIT(A) that the disallowance made by the Assessing Officer under Section 40(a)(i) of the Act in respect of the professional fee paid/payable to tax residents of aforesaid countries should be deleted. 16. Singapore 16.1. The professional fee paid/payable to tax residents of Singapore are listed at Sl. No. 10 and 15 of Table in paragraph 5 a....
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....red by individual Article 15 of India-UK DTAA would apply; whereas when the professional services are rendered by an enterprise the provisions contained in Article 5 read with Article 7 of the India- UK DTAA would be attracted. The relevant extract of the decision of the Tribunal reads as under: "106. We are in considered agreement with this analysis in the UN Model Convention Commentary. We are thus of the considered view that, in a situation like the one that we are in seisin of, i.e., in which specific provisions for professional services or independent personal services or included services exist under article 15, when services are rendered by the enterprise, article 5(2)(k) will come into play, and when services are rendered by an individual, article 15 will find application. Therefore, while we agree with the learned counsel that article 15 will not be applicable on the facts of the present case, this finding does not really come to the rescue of the assessee since, as we have already held, the assessee did have a PE in India under article 5(2)(k) of the India-UK tax treaty, and, accordingly, profits attributable to the PE are taxable under article 7 of the India-UK ....
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....refore, the provisions contained in Article 23 of India-UK DTAA dealing with 'Other Income' would also not come into play. 17.6. In view of the above, we do not find merit in the contention advanced on behalf of the Revenue and concur with the conclusion drawn by the CIT(A) that the professional fee paid/payable to tax resident of UK was not liable to tax in India and therefore, Assessee was not required to withhold tax from the payments made to tax residents of UK reflected at Sl.No. 9, 11, 18, & 24 of Table in paragraph 5 above. There is nothing on record to persuade us to take a different view. Accordingly we do not find any infirmity in the order passed by the CIT(A) deleting the disallowance made under Section 40(a)(i) of the Act by the Assessing Officer in respect of the aforesaid professional fee paid/payable to tax residents of UK. 17.7. As regards the professional fee at Sl. No. 22 is concerned we note that the CIT(A) has remitted the issue to the file of Assessing Officer for adjudication after verification. Being aggrieved the Assessee in appeal before us. The contention of the Assessee before the Tribunal was that the CIT(A) does not have the power to remand the i....
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....dual or firm of individuals such as a company would be governed by provisions contained in Article 7 of the India-USA DTAA (unless the same fall within the definition of term 'Fee for Included Services' as contained in Article 12(4) of the India-USA DTAA). We have noted in paragraph 10 above that it has been held in the case of the Assessee that services of identical nature provided by tax residents of USA do not qualify as 'Fee for Included Services' since the same do not make available any technical knowledge, skill, experience etc to the Assessee. Therefore, in the aforesaid fact situation income from IPS falling outside the ambit of Article 15 would continue to be governed by Article 5 read with Article 7 of India-USA DTAA and the same shall not be liable to tax in India in terms of Article 7(1) of the India-USA DTAA in case of absence of a PE in India. Similarly, in case of individual or firm of individual, income from IPS would be liable to tax in India only in case the requirement of fixed base or physical presence stated in Article 15 are satisfied. In the present case the Revenue has not set up a case that the tax-resident of USA have a fixed base or physical presence in I....
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....ns contained in Article 5 of the India-Tanzania DTAA. In the represent case, it has been contended by the Assessee that the tax resident of Tanzania did not have a PE in India during the relevant previous year. The contention of the Revenue is that this aspect requires verification. In view of the aforesaid, we deem it appropriate to restore the issue back to the file of the CIT(A). Accordingly, we direct the CIT(A) to adjudicate the issue afresh after calling for a remand report from the Assessing Officer in this regard, in case the CIT(A) so desires. It is clarified that the Assessee would be granted a reasonable opportunity of being heard as per law. All right and contentions of the Assessee are left open. 20. Nigeria & Poland 20.1. The professional fee paid/payable to tax resident of Nigeria and Poland are listed at Sl. No.5 and 7 of Table in paragraph 5 above, respectively. 20.2. On perusal of material on record we find that it was contended by the Assessee that professional services availed by the Assessee from tax resident of Nigeria (i.e KPMG Advisory Services LLP, Nigeria) and Poland (i.e. KPMG Audht Sp. ZOO LLP, Poland) were in the nature of Income Tax Advisory/A....
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....PMG member firms to its clients in various ways. It was stated that KPMGI neither makes any profits on its activities nor does it have any commercial purpose. All members contribute to their share of costs incurred by KPMGI in providing support to the member firms. The total costs are shared amongst member firms based on their budgeted revenues and collected in advance/installments and adjusted year-on-year for any shortfall/excess recovery for the eventual benefit of members. The Assessee had entered into a Membership Agreement to this effect with KPMGI. 22.2. During the relevant previous year the Assessee made remittances to KPMGI towards reimbursed its share of costs (including costs of subscriptions to databases) and expenses without withholding tax on the same. In response to query raised by the Assessing Officer during the course of assessment proceeding it was submitted by the Assessee that KPMGI is a mutual association of which the Appellant is a member. It was contended that KPMGI is a mutual association, and therefore, the contributions received by it from its members are not subject to tax and consequently, the Appellant was not required to withhold tax from its contr....
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....article 5 of the Double Taxation Avoidance Agreement. b The learned AO considered the membership agreement dated 1/1/2007 and thereafter he held that the payment made by the assessee is primarily for the use of name as the assessee derives substantial benefits by being part of the KPMG group and using that name. Therefore, the payment is towards acquiring the right to use the name of KPMG which is certainly in the nature of royalty under article 12 of the agreement. Accordingly, this income is chargeable to tax in India and assessee should have deducted tax at source. Accordingly the above sum is disallowable for non-deduction of tax at source under section 40 (a) (i) of the act. c The learned CIT - A noted that the issue is squarely covered in favour of the assessee by the decision of the coordinate bench in assessee's own case for assessment year 2001 - 02 vide order dated 7 April 2017 and further the orders of the learned CIT - A for subsequent years following that order of ITAT. It covered the issue. He referred to the decision of the coordinate bench in assessee's own case for assessment year 2001 - 02 in para number 5.15 and 5.16 wherein it has been held tha....
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....5,658/- claimed as deduction by the Assessee. The aforesaid disallowance amounting to INR 14,31,415/- was deleted by the CIT(A) and therefore, the Revenue is in appeal before the Tribunal. 23.2. We have considered the rival submission and perused the material on record including the details of advertisement and publicity expenses as stated in statement of facts filed before the CIT(A). 23.3. We note that the CIT(A) has deleted the disallowance by following the decision of his predecessor in appeal for the Assessment Year 2011-12 [Order No. IT-140/14-15, dated 02/01/2017] wherein, in turn, reliance was placed on the decision of the Hon'ble Supreme Court in the case of Sassoon J David & Company Pvt. Ltd Vs. CIT : 118 ITR 261. In the aforesaid judgment it was held, inter alia, that the fact that somebody other than the assessee has also benefited by the expenditure incurred should not come in the way of an expenditure being allowed by way of deduction under section 10(2)(xv) of the Act if it otherwise satisfies the tests laid down by law. The aforesaid judgment supports the contention of the Assessee that even if it is presumed that some benefit accrued to person other than the ....
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....a licensee of the products, was entitled to claim them as business expenditure though in the ultimate analysis they might have enhanced the brand of the overseas owner. No doubt, if the arrangements were terminated, the brand presence of the overseas owner of the articles/IPR would have subsisted. But that would nevertheless subsist in any event on the theory of trans-national reputation of the IPR owner. In the circumstances, disallowing a certain proportion on an entirely artificial and notional basis from the expense otherwise deductible, in our opinion, was not justified. The question of law is answered against the revenue. For the above reasons, the appeal fails. It is accordingly dismissed." (Emphasis Supplied) 23.5. In view of the above, we do not find any infirmity in the order passed by the CIT(A) deleting the disallowance of INR 14,31,415/-, being ad-hoc disallowance of 25% of advertisement expenses 57,25,658/-. Accordingly, Ground No. 7 raised by the Revenue is dismissed. Assessment Year 2012-13 24. Next we will take up appeal/cross-appeal/cross-objection pertaining to Assessment Year 2013-14 arising from order, dated 09/05/2023, passed by the CIT(A) partly allo....
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....ate Human Capital, UK Company 9,62,820 2 4 Frank De Bats, Netherlands 33,541 2&& 5 International Bureau of Fiscal Documentation, Netherlands Non-profit 13,78,104 2&& 6 KPMG AB, Sweden Company 26,06,983 2 7 KPMG Abogados S.L., Spain Company 15,81,750 2 8 KPMG Al Fozan & AI Sadhan, Saudi Arabia Firm 6,88,863 2* 9 KPMG Asesores S.L, Spain Company 41,87,807 10 KPMG Consultores, S. A.Guatemala Company 1,00,639 5 11 KPMG Ford Rhodes, Thornton & Co, Sri Lanka Firm 20,14,698 1* 12 KPMG Hadibroto, Indonesia Company 6,26,547 2* 13 KPMG Hamzem Hassan Accountants & Consultants, Egypt/UAR Firm 72,585 1* 14 KPMG IFRG Ltd., UK Company 9,90,249 2 15 KPMG International Corporate Tax Services Ltd., Mauritius Company 12,64,358 2* 16 KPMG IT Advisory /Netherlands Company 13,13,413 2 17 KPMG LLP, Canada Firm 29,64,167 1 18 KPMG LLP, Singapore Firm 7,04,137 2 19 KPMG LLP, UK LLP 54,63,186 2 20 KPMG Mauritius Firm 1,31,709 1* 21....
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....contracting state' 28.1. On perusal of Article 14/15 of the DTAA entered by India with the following countries (Please refer to Table in paragraph 26 for details), we find that the scope of IPS Article contained in the applicable DTAA covers income derived by 'resident of a contacting state' from IPS: (a) Netherlands [applicable to non-resident parties at Sl.No.4, 5, 16 & 21]; (b) Sweden [applicable to non-resident party at Sl.No.6]; (c) Spain [applicable to non-resident parties at Sl.No.7 & 9]; (d) Sri Lanka (Applicable India-Sri Lanka DTAA [Repealed by Notification No.23/2014 [F.NO.503/8/2005-FTD-II]/SO 956(E), DATED 28-3-2014]) [applicable to non-resident party at Sl.No.11]; (e) Indonesia (Applicable India-Indonesia DTAA [Repealed by Notification No. S.O. 1144(E) [NO. 17/2016 (F.NO. 503/4/2005-FTD-II], DATED 16-3-2016]) [applicable to non-resident parties at Sl.No.12 & 31]; (f) UAR [applicable to non-resident party at Sl.No.13]; (g) Mauritius [applicable to non-resident parties at Sl.No.15, 20, & 25], (h) Malta (Applicable India-Malta DTAA [Repealed by Notification No.34/2014 [F. NO. 504/06/2003-FTD-I], D....
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....The professional fee paid/payable to tax residents of USA, is listed at Sl. No. 2, 29, 34, 35, 36 & 40 of Table in paragraph 26 above. 30.2. In paragraph 18 to 18.4 above, we have concluded that in absence of fixed base/physical presence in India the income from IPS would not be liable to tax in India in terms of Article 15 of India-USA DTAA in the hands a firm of individuals of tax resident of USA. Similarly, in case of company, being tax resident of USA, having income from IPS not covered by Article 15 and therefore, falling within the ambit of Article 7 of India-USA DTAA, the income from IPS shall not be liable to tax in India in terms of Article 7(1) of the India-USA DTAA in absence of a PE in India. In the present case the Revenue has not set up a case that the tax residents of USA has a PE or fixed base/physical presence in India, and therefore, the professional fee paid/payable to tax residents under consideration would not be liable to tax in India either under Article 15 or under Article 7 of India-USA DTAA. Accordingly, we do not find any infirmity in the order passed by the CIT(A) deleting the disallowance made by the Assessing Officer under Section 40(a)(i) of the Ac....
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....the provisions of Article 7(7) of the India-Saudi Arabia DTAA shall not be attracted and the professional services provided by the tax-resident of Saudi Arabia to the Assessee would be characterized as profits falling within the ambit of Article 7 of the DTAA. In case the tax resident of Saudi Arabia does not have a PE in India, such profits would not be liable to tax in India. The Revenue has failed to set up a case that the tax resident of Saudi Arabia had a Permanent Establishment in India during the relevant previous year. As a result, we concur with the conclusion reached by the CIT(A) that the Assessee was not required to withhold tax from the payments made to tax residents of Saudi Arabia reflected at Sl. No. 8 of Table in paragraph 26 above and therefore, disallowance made by the Assessing Officer in respect of the aforesaid payments under Section 40(a)(i) of the Act should be deleted. 33. Canada 33.1. The professional fee paid/payable to tax residents of Canada are listed at Sl. No. 17 of Table in paragraph 26 above. 33.2. On perusal of Article 14 of the India-Canada DTAA it can be seen that the benefit of the said article is available to an individual and firm of....
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....s available to an individual and firm of individuals. Thus, the income from professional services derived by an enterprise carried on by a firm of individual in India shall be governed by the provisions contained in Article 14 of the India-Australia DTAA. The Revenue has failed to set up a case that tax resident of Australia has a fixed base or physical presence in India in terms of Article 14(1)(a) and 14(1)(b) of the India-Australia DTAA, respectively, and therefore, such income would not be liable to tax in India. As a result, the Assessee would not be required to withhold tax from the payments made to tax residents of Australia reflected at Sl. No. 38 of Table in paragraph 26 above. Therefore, we concur with the conclusion drawn by the CIT(A), that the disallowance made by the Assessing Officer in respect of payments made to tax residents of France by invoking provisions of Section 40(a)(i) of the Act cannot be sustained. Ground No. 1 & 2 raised by the Assessee - Remand to Assessing Officer 36. As regards the professional fee at Sl. No. 1, 3, 10, 28, and 41 of Table in paragraph 26 above are concerned, we note that the CIT(A) has remitted the issue to the file of Assessin....
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....f INR 20,84,662/- made by the Assessing Officer at the rate of 25% of the aggregate advertising and publicity expenses of INR 83,38,649/- claimed as deduction by the Assessee during the relevant previous year. 39.1. In view of paragraph 23 to 23.5 above, we do not find any infirmity in the order passed by the CIT(A) and therefore, Ground No. 7 raised by the Revenue are dismissed. Assessment Year 2014-15 40. Next, we will take up appeal/cross-appeal/cross-objection pertaining to Assessment Year 2014-15 arising from order, dated 09/05/2023, passed by the CIT(A) partly allowing the appeal of the Assessee against the Assessment Order, dated 30/12/2016, passed by the Assistant Commissioner of Income Tax -16(2), Mumbai under Section 143(3) of the Act. 40.1. For the Assessment Year 2014-15 the Revenue has raised 7 grounds of appeal in ITA No. 2274/Mum/2023. Ground No. 1 to 4 pertain to disallowance made under Section 40(a)(i) of the Act in relation to professional fees paid/payable to non-residents; Ground No. 5 & 6 pertain to disallowance made under Section 40(a)(i) of the Act in relation to remittances made to KPMG Cooperative, Switzerland and Ground No. 7 pertain to ad-hoc ....
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....47/- 2 13 KPMG Abogados S.L. (Spain) Company 13,25,724/- 2 14 KPMG AB (Sweden) Company 12,12,063/- 2 15 KPMG New Caledonia Firm 11,16,295/- 16 KPMG Tax Services Ltd. (Mauritius) Company 8,42,180/- 2 17 KPMG Advisory AE (Greece) Company 6,87,849/- 2 18 Simon Mort Reports Limited Company 5,98,430/- 2 19 First Advantage LNS Screening Solutions Inc, USA Company 5,43,747/- 2 20 KPMG S.A (France) Company 3,25,660/- 2 21 KPMG Hadibroto(Indonesia) Company 3,07,250/- 2 22 KPMG Sri Lanka Firm 2,76,291/- 1 23 KPMG Tax and Advisory Kazaksthan) Company 1,29,841/- 2 24 KPMG Phoomchai Tax Ltd. (Thailand) Company 1,21,711/- 2 25 KPMG IFRG Ltd (UK) Company 1,15,538/- 2 26 KPMG Tax Advisers CVBA, Belgium Company 63,038/- 2 27 KPMG, Malta Firm 59,174/- 1 28 KPMG Safi Al Mutawa & Partners (Kuwait) Firm 43,062/- 3 29 KPMG Tax, Qatar Company 25,091/- 3 30 Exchange Fluctuation loss in respect of amounts debited in A.Y.2013-14 - ....
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....ion No.88/2015 [F.NO.503/5/2005-FTD-II] / SO 3244(E), DATED 1-12-2015) [applicable to non-resident party at Sl.No.24] (l) Malta (Applicable India-Malta DTAA [Repealed by Notificaiton No.34/2014 [F. NO. 504/06/2003-FTD-I], DATED 5-8-2014) [applicable to non-resident party at Sl.No.27]; 44.2. In absence of fixed base/physical presence of tax residents of the above countries in India, professional fee paid/payable to such non-residents would not be liable to tax in India in terms of Article 14/15 of the applicable DTAA. There is nothing on record to persuade us to take a different view. Thus, the Assessee would not under obligation to withhold tax from the payments under consideration. Therefore, we concur with the conclusion drawn by the CIT(A) that the disallowance made by the Assessing Officer under Section 40(a)(i) of the Act in respect of the professional fee paid/payable to tax residents of aforesaid countries cannot be sustained. 45. United Kingdom (UK) 45.1. The professional fee paid/payable to tax residents of UK are listed at Sl. No. 1, 6, 8, 18 & 25 of Table in paragraph 42 above. 45.2. In paragraph 17 to 17.7 above, we concur with the conclusion drawn ....
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....e the issue afresh after verification of relevant facts and taking into consideration the submission of the Assessee. The Assessee would be at liberty to furnish such documents/details at the Assessee may deem fit to support its contentions. 48. United Stated of America (USA) 48.1. The professional fee paid/payable to tax residents of USA are listed at Sl. No. 19 of Table in paragraph 42 above. 48.2. In paragraph 18 to 18.4 above, we concur with the conclusion drawn by the CIT(A) that the Assessee was not required to withhold tax from the payments made to tax resident of USA reflected at Sl.No.19 of Table in paragraph 42 above. Accordingly we do not find any infirmity in the order passed by the CIT(A) deleting the disallowance made by the Assessing Officer in respect of payments made to tax resident USA invoking provisions of Section 40(a)(i) of the Act. 49. France 49.1. The professional fee paid/payable to company being tax residents of France are listed at Sl. No. 20 of Table in paragraph 42 above. 49.2. On perusal of Article 15 of the India-France DTAA it becomes clear that the benefit of the said article is available to an individual and firm of individuals. T....
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....eration for technical, managerial or consultancy services. In our view, the services provided by the tax-resident of Belgium to the Assessee would fall within the ambit of Article 13 of the DTAA and therefore, the tax withholding provisions contained in Section 195 of the Act would be attracted. Since the Assessee had failed to comply with tax withholding requirements contained in Section 195 of the Act, deduction claimed by the Assessee in respect of professional fee paid/payable to tax resident of Belgium has been correctly disallowed by the Assessing Officer by invoking provisions contained in Section 40(a)(i) of the Act. To this extent we uphold the contention of the Revenue and overturn the decision of CIT(A) reinstating disallowance made by the Assessing Officer under Section 40(a)(i) of the Act in respect of professional fee listed at Sl. No. 26 of Table in paragraph 42 above. 51. Kuwait 51.1. The professional fee paid/payable to a firm of individuals, being tax residents of Kuwait, are listed at Sl. No. 28 of Table in paragraph 42 above. 51.2. On perusal of Article 15 of the India-Kuwait DTAA it becomes clear that the benefit of the said article is available to an ....
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....o support its contentions. All rights and contentions of the Assessee are left open. The Assessee shall be granted reasonable opportunity of being heard. 52. Qatar 52.1. The amount paid/payable to a firm of individuals, being tax residents of Qutar, are listed at Sl. No. 29 of Table in paragraph 42 above. 52.2. It was contended on behalf of the Assessee that payment under consideration are in the nature of reimbursement of business visa expenses cost incurred by tax residents of Qatar on behalf of employees of the Assessee and therefore, is not chargeable to tax under the provisions of the Act and the provisions of India- Qatar DTAA. We find merit in the aforesaid contention of the Assessee. Since the payments do not have an element of income/profit the question of chargeability of the same to tax in India does not arise. Even otherwise, the said payments can, at best, be classified as business profits which are not liable to tax in the hands of tax residents of Qatar in the absence of PE in India. The Revenue has not set-up a case that the tax resident of Qatar has a PE in India. Therefore, we decline to interfere with the order passed by the CIT(A) in this regard and con....
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....leted by the CIT(A). 56.1. In view of paragraph 22 to 22.6, above, we do not find any reason to interfere with the order passed by the CIT(A) on this issue. There is nothing on record to persuade us to take a view different from the view so taken by the Tribunal while deciding the above appeal for the Assessment Years 2018-19. Accordingly, Ground No. 5 & 6 raised by the Revenue are dismissed. Ground No. 7 raised by the Revenue 57. Ground No. 7 raised by the Revenue is directed against the order of CIT(A) deleting the ad-hoc disallowance of INR 13,99,147/- made by the Assessing Officer at the rate of 25% of the aggregate advertising and publicity expenses of INR 55,96,587/- claimed as deduction by the Assessee during the relevant previous year. 57.1. In view of paragraph 23 to 23.5 above, we do not find any infirmity in the order passed by the CIT(A) and therefore, Ground No. 7 raised by the Revenue are dismissed. Assessment Year 2015-16 58. Next we would take up appeal/cross-appeal/cross-objection pertaining to Assessment Year 2015-16 arising from order, dated 09/05/2023, passed by the CIT(A) partly allowing the appeal of the Assessee against the Assessment Order,....
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...., USA Company 10,030 2 5 Houthoff Buruma, Netherlands Company 2,84,602 2 6 Idasan Singapore Pte Ltd, Singapore Company 19,32,917 2 7 International Screening Solutions, Inc, USA Company 46,62,262 2 8 KPMG AB, Sweden Company 13,75,351 2 9 KPMG Accountants N.V., Netherlands Company 32,03,968 2 10 KPMG Advisors AE, Greece Company 6,02,491 2 11 KPMG Advisory Indonesia Company 5,37,426 2 12 KPMG Advisory N.V., Netherlands Company 33,17,899 2 13 KPMG Al Fozan & Partners, Saudi Arabia Firm 8,89,608 1 14 KPMG ASESORES S.L., Spain Company 2,12,250 2 15 KPMG International Cooperative, Switzerland - - - 16 KPMG LLP UK LLP 71,26,762 2 17 KPMG LLP, USA Firm 5,82,59,016 1 18 KPMG Meijburg & Co Special Services B.V., Netherlands Company 18,12,425 2 19 KPMG Meijburg & Co. B.V., Netherlands Company 4,89,144 2 20 KPMG Phoomchai Tax Ltd, Thailand Company 2,99,081 2 21 KPMG S.A., France Company 46,44,032 2 22 KPMG Safi Al Mutawa & Partne....
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....ope of IPS Article contained in the applicable DTAA covers income derived by 'resident of a contacting state' from IPS: (a) Singapore [applicable to non-resident parties at Sl.No. 6, & 23]; (b) Philippines [applicable to non-resident party at Sl. No. 31 & 32]; (c) Netherlands [applicable to non-resident parties at Sl. No. 5 9, 12, 18 & 19]; (d) Indonesia (Applicable India-Indonesia DTAA [Repealed by Notificaiton No. S.O. 1144(E) [NO. 17/2016 (F.NO. 503/4/2005-FTD-II], DATED 16-3-2016]) [applicable to non-resident parties at Sl.No.11 & 24]; (e) Bangladesh[applicable to non-resident party at Sl.No.33]; (f) Spain [applicable to non-resident party at Sl.No.14 & 25]; (g) Sweden [applicable to non-resident party at Sl.No. 8]; (h) Mauritius [applicable to non-resident party at Sl.No.16]; (i) Thailand (Applicable India-Thailand DTAA [Repealed by Notification No.88/2015 [F.NO.503/5/2005-FTD-II] / SO 3244(E), DATED 1-12-2015) [applicable to non-resident party at Sl.No.20] (j) Ireland [applicable to non-resident party at Sl.No.29]; 62.2. In absence of fixed base/physical presence of tax residents of t....
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....above. Accordingly we do not find any infirmity in the order passed by the CIT(A) deleting the disallowance made under Section 40(a)(i) of the Act in respect of the aforesaid professional fee payment to tax resident of Canada. 64. United Kingdom (UK) 64.1. The professional fee paid/payable to tax residents of United Kingdom, being LLP/company, are listed at Sl. No. 3, 16, 27 & 34 of Table in paragraph 60 above. 64.2. In view of paragraph 17 to 17.7 above, we concur with the conclusion drawn by the CIT(A) that the Assessee was not required to withhold tax from the payments made to tax residents of UK reflected at Sl.No. 3, 16, 27 & 34 of Table in paragraph 60. There is nothing on record to persuade us to take a different view. Accordingly, we do not find any infirmity in the order passed by the CIT(A) deleting the disallowance made under Section 40(a)(i) of the Act in respect of the aforesaid payments. 65. United Stated of America (USA) 65.1. The professional fee paid/payable to tax residents of USA, being a firm of individual or company, are listed at Sl. No. 4, 7, 17 & 35 of Table in paragraph 60 above. 65.2. In view of paragraph 18 to 18.4 above, we concur with ....
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....tax in India. The Revenue has failed to set up a case that the tax resident of Saudi Arabia had a Permanent Establishment in India during the relevant previous year. Therefore, we concur with the conclusion drawn by the CIT(A) that the disallowance made under Section 40(a)(i) of the Act in respect of payments made to a firm of individuals, being tax residents of Saudi Arabia, at Sl.No.13 of Table in paragraph 60 above cannot be sustained. Therefore, we decline to interfere with the order passed by the CIT(A) in this regard. 68. France 68.1 The professional fee paid/payable to company being tax residents of France are listed at Sl. No. 21 of Table in paragraph 60 above. 68.2 In view of reasoning given in paragraph 49 to 49.2 above, we hold that in the present case the services provided by a company being tax-resident of France to the Assessee would fall within the ambit of Article 13 of the DTAA and therefore, the tax withholding provisions contained in Section 195 of the Act would be attracted. Since the Assessee had failed to comply with tax withholding requirements contained in Section 195 of the Act, deduction claimed by the Assessee in respect of professional fee paid/....
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....ficer 71. As regards the professional fee aggregating to INR 68,04,160/- [at Sl. No. 1, 30 & 36 of Table at Paragraph 60 Above] the CIT(A) has remitted the issue to the file of Assessing Officer for adjudication after verification. Adopting the reasoning given in paragraph 36 above, we set aside the order passed by the CIT(A) to this extent and direct the CIT(A) to adjudicate the issue/grounds raised by the Assessee after calling for a remand report from the Assessing Officer. Since we have restored the issue back to the file of CIT(A), all rights and contentions of the Assessee are left open. Assessee shall be granted a reasonable opportunity of being heard. 72. Foreign Exchange Fluctuation 72.1. We note that the Assessing Officer had disallowed loss in account of foreign exchange fluctuation of INR 2,52,313/- which was deleted by the CIT(A) as being consequential in nature. The aforesaid amount is included in amount of INR 13,18,09731/- specified in Ground No. 1 raised by the Revenue. As per the chart furnished by the Assessee that the foreign exchange fluctuation loss pertains to professional fee paid/payable to tax residents of UK, Sweden, Indonesia and Bangladesh. Sin....
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....n-residents; Ground No. 5 & 6 pertain to disallowance made under Section 40(a)(i) of the Act in relation to remittances made to KPMG Cooperative, Switzerland and Ground No. 7 pertain to ad-hoc disallowance at the rate of 25% of the total advertisement and publicity expenses made by the Assessing Officer. 75.2 The Assessee has raised cross objections [CO No.128/Mum/2023] in the above appeal preferred by the Revenue in relation to professional fee paid/payable to tax residents of Sweden and Spain setting up a claim that the aforesaid professional fee is not liable to tax in India in terms of Article 14/15 of the applicable DTAA and therefore, tax withholding provisions contained in Section 195 of the Act and consequently, the provisions contained in Section 40(a)(i) of the Act are not attracted in relation to the same. 75.3 The Assessee has raised the 2 grounds of appeal in ITA No. 2413/Mum/2023 challenging the direction given by CIT(A) to verify arguments made by the Assessee in respect of disallowance made by the Assessing Officer under Section 40(a)(i) of the of the Act in respect of aggregate professional fee of INR 56,60,499/-. 76. Both the sides adopted the arguments m....
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....gladesh Firm 1,152,942/- 2 Total 13,69,99,679/- Ground No. 1 to 4 raised by the Revenue; Cross Objection No. 1 raised by the Assessee; 78. Ground No. 1 to 4 are directed against the order of CIT(A) deleting/setting aside the disallowance made by the Assessing Officer under Section 40(a)(i) of the Act in respect of professional fee aggregating to INR 13,69,99,679/-. By way of cross-objections, the Assessee is supporting order of CIT(A) deleting the disallowance made under Section 40(a)(i) of the Act on the ground that provisions of Section 195 of the Act and consequently the provisions contained in Section 40(a)(i) of the Act do not get triggered since the professional fee paid/payable to tax residents of Sweden & Spain [at Sl. No 6 and 5 & 20, respectively, of Table in paragraph 77 above] are not liable to tax in India in terms of Article 14/15 of the corresponding DTAAs since the same are in the nature of income from IPS which cannot be brought to tax in India in absence of fixed base/physical presence of tax resident of Sweden/Spain in India. 79. United Kingdom (UK) 85.1 The professional fee paid/payable to a company, be....
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....n drawn by the CIT(A) that the disallowance made by the Assessing Officer under Section 40(a)(i) of the Act in respect of the professional fee paid/payable to tax residents of aforesaid countries cannot be sustained. 81. United Stated of America (USA) 81.1. The professional fee paid/payable to tax residents of USA are listed at Sl. No. 3 & 13 of Table in paragraph 77 above. 81.2. In view of paragraph 18 to 18.4 above, we concur with the conclusion drawn by the CIT(A) that the Assessee was not required to withhold tax from the payments made to tax resident of USA reflected at Sl.No. 3 & 13 of Table in paragraph 77 above. Accordingly we do not find any infirmity in the order passed by the CIT(A) deleting the disallowance made by the Assessing Officer in respect of payments made to tax resident USA invoking provisions of Section 40(a)(i) of the Act cannot be sustained. 82. Australia 82.1. The professional fee paid/payable to firm of individuals being tax residents of Australia are listed at Sl. No. 11 of Table in paragraph 77 above. 82.2. Payments made to tax resident of Australia, being a firm of individuals, is not liable to tax in India in the present case in view....
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....ter verification of facts prevailing during the relevant previous year. The Assessee would be at liberty to furnish such documents/details at the Assessee may deem fit to support its contentions. All rights and contentions of the Assessee are left open. The Assessee shall be granted reasonable opportunity of being heard. Ground No. 1 & 2 raised by the Assessee - Remand to Assessing Officer 85. As regards the professional fee aggregating to INR 56,60,499/- [at Sl. No. 4, 5, 7, 10, 21 & 23 of Table at Paragraph 77 Above] the CIT(A) has remitted the issue to the file of Assessing Officer for adjudication after verification. Adopting the reasoning given in paragraph 36 above, we set aside the order passed by the CIT(A) to this extent and direct the CIT(A) to adjudicate the issue/grounds raised by the Assessee after calling for a remand report from the Assessing Officer. Since we have restored the issue back to the file of CIT(A), all rights and contentions of the Assessee are left open. It is clarified that the Assessee shall be granted a reasonable opportunity of being heard. 86. In view of the above, Ground No. 1 to 4 raised by the Revenue are partly allowed; Cross Objection....
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....above appeal preferred by the Revenue in relation to professional fee paid/payable to tax residents of Sweden and Spain setting up a claim that the aforesaid professional fee is not liable to tax in India in terms of Article 14/15 of the applicable DTAA and therefore, tax withholding provisions contained in Section 195 of the Act and consequently, the provisions contained in Section 40(a)(i) of the Act are not attracted in relation to the same. 89.4 The Assessee has raised the 2 grounds of appeal in ITA No. 2277/Mum/2023 challenging the direction given by CIT(A) to verify averments/submission made by the Assessee in respect of disallowance made by the Assessing Officer under Section 40(a)(i) of the of the Act in respect of aggregate professional fee of INR 39,87,237/-. 90. Both the sides had adopted the arguments made in relation to issues raised in appeal for the preceding assessment years. Accordingly, keeping in view our reasoning/findings/adjudication in relation to appeal/cross-appeal/cross objection pertaining to preceding assessment years, we proceed to adjudicate the above issues raised pertaining to Assessment Year 2017-18. 91. For the Assessment Year 2017-18, the....
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....66,600 2 32 KPMG Meijburg& Co, Netherlands Company 3,59,158 2 Total 18,05,48,835 Ground No. 1 to 4 raised by the Revenue; Cross Objection No. 1 raised by the Assessee; 92. Ground No. 1 to 4 raised by the Revenue are directed against the order of CIT(A) deleting/setting aside the disallowance made by the Assessing Officer under Section 40(a)(i) of the Act in respect of professional fee aggregating to INR 18,05,48,835/-. By way of cross-objections, the Assessee is supporting order of CIT(A) deleting the disallowance made under Section 40(a)(i) of the Act on the ground that provisions of Section 195 of the Act and consequently the provisions contained in Section 40(a)(i) of the Act do not get triggered since the professional fee paid/payable to tax residents of Sweden & Spain [at Sl. No 2 and 3 & 6, respectively, of Table in paragraph 91 above] are not liable to tax in India in terms of Article 14/15 of the corresponding DTAAs since the same are in the nature of income from IPS which cannot be brought to tax in India in absence of fixed base/physical presence of tax resident of Sweden/Spain in India. 93. Article 14/15 o....
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....e Assessing Officer in respect of payments made to tax resident of USA invoking provisions of Section 40(a)(i) of the Act 95. Saudi Arabia 95.1. The professional fee paid/payable to firm of individuals, being tax residents of Saudi Arabia, are listed at Sl. No. 10 of Table in paragraph 91 above. 95.2. Adopting the reasoning given in paragraph 32.1 to 32.2, we hold that the professional services provided by a firm of individuals, being the tax-resident of Saudi Arabia, to the Assessee would be characterized as profits falling within the ambit of Article 7 of the DTAA. In case the tax resident of Saudi Arabia does not have a PE in India, such profits would not be liable to tax in India. The Revenue has failed to set up a case that the tax resident of Saudi Arabia had a Permanent Establishment in India during the relevant previous year. Therefore, we concur with the conclusion drawn by the CIT(A) that the disallowance made under Section 40(a)(i) of the Act in respect of payments made to a firm of individuals, being tax residents of Saudi Arabia, at Sl.No.10 of Table in paragraph 91 above cannot be sustained. Therefore, we decline to interfere with the order passed by the CIT(....
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....nothing on record to persuade us to take a different view. As a result, the Assessee would not be required to withhold tax from the payments made to tax residents Thailand reflected at Sl. No. 23 of Table in paragraph 91 above. Therefore, we concur with the conclusion drawn by the CIT(A) that the disallowance made by the Assessing Officer under Section 40(a)(i) of the Act in respect of payments made to tax residents of Thailand cannot be sustained. 99. France 99.1. The professional fee paid/payable to company being tax residents of France are listed at Sl. No. 20 of Table in paragraph 91 above. 99.2. In view of reasoning given in paragraph 49 to 49.2 above, we hold that in the present case the services provided by a company being tax-resident of France to the Assessee would fall within the ambit of Article 13 of the DTAA and therefore, the tax withholding provisions contained in Section 195 of the Act would be attracted. Since the Assessee had failed to comply with tax withholding requirements contained in Section 195 of the Act, deduction claimed by the Assessee in respect of professional fee paid/payable to tax resident of France has been correctly disallowed by the Asse....