TaxTMI 
TaxTMI 
2018 (12) TMI 2029
X X X X Extracts X X X X
X X X X Extracts X X X X
.... that the payments made by the assessee to its associate concerns based in countries apart from Philippines, Mauritius, Indonesia constitute payments for Independent Personal Services instead of "Fees for Technical Services" as defined under Article 12/13 of the respective DTAAs ? 2. Whether on the facts 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 Philippines, Mauritius, Indonesia constitute payments for Independent Personal Services INSTEAD OF "Royalty" as defined under Article 12/13 of the respective DTAAs? 3. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in holding that the services rendered by the associate concerns to the assessee constitute "Independent Personal Services" under DTAAs not appreciating that only those services performed by an independent non-resident alien contractor would constitute - " Independent Personal Services" under DTAA which is not the case here as in this case, the Services were rendered by the Group entities to an Indian entity which were closely working with each other?....
X X X X Extracts X X X X
X X X X Extracts X X X X
....used 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 India and thus, tax was not required to be deducted in terms of section 195 of the Act. The Assessing Officer however, did not accept the submissions of the assessee and instead held that tax was required to be deducted tax at source and on the failure to do disallowed in terms of section 40(a)(i) of the Act. On appeal before CIT (A) the assessee contended that invoking of provisions of section 40(a)(i) was not justified. Assessee further contended that the payments made to various non- resident entities was governed by the provisions of Double Taxation Avoidance Agreement (DTAA) with the respective countries, in terms of which such payments were not income chargeable to tax in India. The ld CIT (A) accepted the contention of the assessee and allowed the appeal and accordingly deleted the disallowance made under section 40(a)(i) of the Act. The ld. CIT(A) while allowing relief to the assessee also followed decision of his predecessor in assessee's group case for A. Y. 2009-10 and ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the aforesaid entities outside India. The stand of the Revenue is that such services are in the nature of 'fee for technical services' and, therefore, tax was liable to be deducted at source in India. Factually speaking, the aforesaid stand of the Revenue is devoid of any support because there is no material to establish that any technical knowledge, skill, etc. has been made available to the assessee so as to consider it as falling within the purview of Article-12 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 no....
X X X X Extracts X X X X
X X X X Extracts X X X X
....m such services was not chargeable to tax in India. Therefore, there was no requirement to deduct tax at source and accordingly the invoking of section 40(a)(i) of the Act has been set-aside by the CIT(Appeals). The aforesaid factual matrix brought out by the CIT(Appeals) has not been assailed by the Revenue before us on the basis of any cogent material and, thus, the same is hereby affirmed. 5.4 The last item remaining is payment made by assessee to KPMG, Malaysia for audit services. It is not in dispute that the said services have been rendered outside India and the same cannot be construed as managerial or technical services so as to be governed by Article-13 of India-Malaysia tax treaty, as contended by the Revenue. Clearly, they are in the nature of independent personal services falling for consideration under Article-14 of Indo-Malaysia tax treaty and, therefore, in the absence of any fixed place of business of the recipient in India, the impugned income is not chargeable to tax in India. Therefore, in such a situation, assessee is not liable for deduction of tax at source in India so as to invoke the provisions of section 40(a)(i) of the Act. The stand of the CIT(Ap....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... direction. 7. Ground No.4 relates to deleting the disallowance under section 40(a)(i) on account of payment made to KPMGI Co-operative, Switzerland. The Assessing Officer disallowed the payment made to KPMGI Co-operative, Switzerland holding that payment is made for use of name, the assessee derives substantial benefit being a part of KPMG group and the payment is towards the acquiring right to use the name of KPMG is in the nature of royalty. The ld. CIT(A) deleted the addition holding that KPMGI Co- operative is a mutual association and its receipts would not constitute income chargeable to tax. 8. We have noted that in assessee's group case in ACIT vs. BSR & Co. in ITA No. 4842 to 4844 & 4556/Mum/2016 dated 04.01.2018 for A.Y. 2011-12 & 2012-13, on similar grounds of appeal, the coordinate bench of Tribunal after relying upon the decision in DCIT vs. KPMG (81 taxmann.com 118) passed the following order: 12. Upon careful consideration we find that identical issue was considered by this tribunal in assessee's own case in ITA No. 2493/Mum/2012 & CO No. 97/Mum/2013 dated 07.04.2017 very elaborately and the conclusion read as under: 19. With the above....