TaxTMI 
TaxTMI 
2023 (6) TMI 1520
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....r 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. 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 Israel, Philippines, constitute payments for Independent Personal Services instead of "Royalty" as defined under Article 12/13 of the respective DTAAs? 4. 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....
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....f the respondent, at the first instance pointed out that the identical issue had come up for adjudication in assessee's own case before the "I" bench of Mumbai Tribunal (ITAT) in AY 2013-14 and the same was decided in favour of the respondent. Ld. Counsel also pointed out that while deciding the appeal for the AY 2014-15, the Ld. CIT (A) has relied upon the order of the ITAT for AY 2013-14. Ld. Counsel furnished a chart showing the similarity between the payments made during AY 2013-14 and the impugned assessment year. The same is reproduced hereunder: Sr. No. Name of the Payee Amount in INR Description of Services Remarks 1 KPMG Corporate Finance P. Ltd (Singapore) (Company) 1,81,560 Review of regulatory filings Covered in favour of taxpayer by: 1. Tribunal order taxpayers own cases for AY 2013-14 (ITA No. 2549/M/2018) (refer para 7 to 12 on pages 6 to 10 of the case law compilation) 2 KPMG Services Pte Ltd. (Singapore) (Company) 1,77,729 Taxation / Audit Services Covered in favour of taxpayer by: 1. Tribunal order taxpayers own cases for AY 2013-14 (ITA No. 2549/M/2018) (refer para 7 to 12 on pages 6 to 10 of the case law compilati....
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....lar Treaty with Bangladesh) 2. Tribunal order taxpayers own cases for AY 2011-12 (ITA No. 4535/Mum/2016 & ITA No. 4533/M/2016) (refer para 14 on page 24 and refer 5 & 6 pages 17 to 22of the case law compilation) 10 KPMG, Norway 7,44,723 Tax Advisory Services Covered in favour of the taxpayer by: 1. Bajaj Hindustan Limited 2011(47 SOT 74) (Mumbai)(URO) (refer para 14 on page 103 of the case law compilation) 6. on the basis of above chart, the Ld. Counsel submitted that: (a) In the case of payment made to Singapore entities at Sr. No. 1, 2 & 6, payment made to the UK entity at Sr. No. 4 & 5, payment made to France entity at Sr. No. 8 and payment made to the Netherlands entity at Sr. No. 7, the services are in the nature of business profits under Article 7 of the respective tax treaties and are not taxable in India in the absence of permanent establishment of non - residents in India under Article 5 of the said tax treaties since services are not in nature of make available of technical knowledge, experience, skill, know-how or process. (b) In the case of payment made to Israel entity at Sr. No. 3, it was pointed out that the Israel tax treaty is si....
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....ons of the assessee before the Ld. CIT(A) and found that the payments made to non-resident firms mentioned at Sr. No. 1 & 2 (Singapore), 4 & 5 (UK), 6 (Singapore), 7 (Netherlands) and 8 (France) in the table at para 5 above, will not come under Article 12 dealing with 'Fees for Technical Services', rather they fall under Article 7 dealing with 'Business Profits' and there is no Permanent Establishment (PE) in India, and therefore these payments would not be taxable in India. 9. With regard to the remittances for professional fees to Singapore, UK and Netherlands and France entities, the services did not fall within the ambit of 'Fees for Technical Services' / 'Royalties as defined in Article 12/13 of the respective tax treaties in that they do not make available technical knowledge, experience and skill and hence does not attract section 195 of the I.T. Act as the said payments were not in the nature of income chargeable to tax in India. 10. For the above, the appellant relied on decisions of the ITAT, Mumbai, in its own case for A.Y. 2013-14. The Tribunal in I.T. Appeal No. 2549 (Mum) of 2018, A.Y. 2013-14 decided on 15.06.2022, relying upon the d....
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....ssment Year: 2009-10) course of the execution of engagements of assessee firm. The assessee firm did not deduct the tax at source and, therefore, the Assessing Officer invoked the provisions of section 40(a) (i) of the Act and disallowed such expenditure. The details of the entities along with the amounts paid have been culled out by the Assessing Officer in Para3 of the assessment order and the same is not being repeated for the sake of brevity. The payments have been made to 12 different professional entities based in 10 different countries. In so far as the payments that are made to KPMG LLP, USA and KPMG LLP, Canada are concerned, the same has been made on account of professional services rendered in relation to taxation and transfer pricing. Undisputedly, the professional services have been rendered by 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....
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....arned CIT (A) on this issue which has not been controverted before us by the Revenue." 12. In so far payment made to Philippines entity at Sr. No. 9 in the table we note that Philippines tax treaty is similar to Bangladesh tax treaty. There is no article dealing with FTS in both the tax treaties. We are of the view that the payment would be covered under article 15 of the Philippines tax treaty and would not be taxable in India in absence of fixed base of non-resident in India. We observe that this issue is covered by decision of ITAT Mumbai in the case of P.T. Mckinsey Indonesia [2013] 29 taxmann.com 100, which is reproduced below: 8 ............. As far as taxing under the head 'Other Income' is concerned, as held by the penal, we are of the opinion that residuary head is analogous to sections 56-57 of the Act. If a certain receipt cannot be taxed under any other head, only then sections dealing with 'Income from Other Sources' comes into play in domestic taxation matters. Likewise, under the DTAAs if a sum can be taxed under any other Article, provisions of Article 22 will not be applicable. We are of the opinion, in light of the earlier decisions of ....
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........ " 14. As the facts mentioned above for the year under consideration and findings of the ITAT, Mumbai in earlier years in assessee's own case and other cases, as reproduced in the preceding paragraphs are found to be similar, we don't find any perversity in the order of Ld. CIT (A), hence order of the Ld. CIT (A) is sustained and Ground Nos. 1, 2, 3 and 4 raised by the Revenue are dismissed. Ground Nos. 5 & 6 of AY 2014-15: 15. Ground Nos. 5 & 6 are interlinked, hence disposed of by common findings. These grounds pertain to claim of remittance of Rs. 7,09,17,956/- made by the assessee to KPMG International Co-operative, Switzerland without TDS. On this issue, during the assessment proceedings, Ld. AO held as under :- "4.3 on perusal of the sub-license agreement dated 01.01.2007 filed by the assessee; it appears that the payment is essentially for use of KPMG marks which belong to KPMG International Co-operative. In this regard, reference is drawn to clause 4(a) and (b) of the sub-license agreement as under: "4. Use of KPMG Marks a) The Signatory Sublicense acknowledges that the Sub licensor's right to the KPMG Marks derive exclusi....
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....tional Co-operative under the provisions of section 195 of the Income Tax Act, 1961 on the ground that the amount payable to them was chargeable to tax in India under Section 9(1)(vi) of the Income Tax Act, 1961 r/w Article 12 of the DTAA. 4.6 In view of the above discussion, the payments amounting to Rs. 7,09,17,956/- made to KPMG International Co-operative, Switzerland without deduction of tax at source is disallowed u/s. 40(a) (i) of the Income Tax Act, 1961." 16. The Ld. CIT (A) has allowed the relief to the appellant by observing as under: 4.5 On the similar issue, the Hon'ble ITAT, Mumbai in the assessee's own case for AY 2013-14 decided in favour of the assessee whereby it was observed as under: 15. Fact of the matter is, the appellant had paid membership fees of Rs. 7, 09, 17,956/- to KPMG International Co-operative ("KPMGI") without deduction of tax at source. KPMGI is a mutual association of its members firms. It has over 150 members across the globe one of whom is KPMG. KPMG is a partnership firm registered, under the Indian Partnership Act, 1932 pursuant to the approval received from the Secretariat of Industrial Approvals,....
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....n the Principle of Mutuality; therefore, the same is not liable to be taxable in India. At the time of argument, the Ld. Representative of the assessee has also relied upon the decision in the case of DCIT Vs. KPMG (2017) 81 taxmann.com 118 (Mum) dated 07.04.2017 and in the case of ACIT VS. BSR & Company in ITA. No.4842 to 4844 & 4556/M/2016 dated 04.01.2018 etc. Since the issue has squarely been covered by the decision of Hon'ble ITAT in the assessee's own, therefore, finding no justifiable grounds to interfere with the finding of the CIT (A), we decide the issue in favour of the assessee. We confirmed the finding of the CIT (A) on these issues and decide the issue in favour of the assessee against the revenue." 19. In this regard, order of CIT(A) and orders of Mumbai ITAT in assessee's own case for AY 2011-12 and AY 2012-13 held that no disallowance on this front is warranted u/s. 40(a)(i) of the I.T. Act for not withholding tax from membership fees paid to KPMGI Co- operative, Switzerland as the facts mentioned above in the assessee's case for earlier years and year under consideration are similar and therefore following the decision of Mumbai ITAT, we d....
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....ersonal 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? 5. On the facts and in the circumstances of the case and in law, whether the Ld. CIT(A) erred in holding that the KPMG Co-operative, Switzerland, is a mutual association and its receipts would not constitute income chargeable to tax and is not obliged to withhold and any tax without appreciating the facts, thereby deleting the disallowance of Rs.7,89,82,072/- u/s. 40(a)(i). 6. On the facts and in the circumstances of the case and in law, whether the Ld. CIT (A) erred in holding that the payments made by the assessee to KPMG for names, mark and other facilities were in the nature of royalty and chargeable to tax in India. 7. On the facts and circumstances of the case and in law, allowing tax relief in regard to income earned in Japan. The Ld. CIT (A) has not considered the provisions of Article 14A of India-Japan DTAA dealing with Independent Personal Services. As per the provisions of Article 14A the income itself is not taxable, the tax credit in respect thereof is not al....
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.... 1 KPMG LLP (USA) (Firm of Individuals) 48,93,905 + 1,84,24,099 Taxation Services Covered in favour of taxpayer by: 1. Tribunal order taxpayers own case for AY 2013 - 14 (ITA No. 2549/M/2018) (refer para 7 to 12 on pages 6 to 10 of the case law compilation) 2. Bombay High Court order in network member firm's case for AY 2008 - 09 CIT - 16 vs KPMG (ITA No. (690 of 2017) (refer para 9/page 48 of the case law compilation) 2 KPMG Corporate Finance P. Ltd (Singapore) (Company) 3,10,660 Review of regulatory filings Covered in favour of taxpayer by: 1. Tribunal order taxpayers own cases for AY 2013 - 14 (ITA No. 2549/M/2018) (refer para 7 to 12 on pages 6 to 10 of the case law compilation) 3 KPMG LLP (UK) (Firm of Individuals) 2,38,240 Taxation Services Covered in favour of taxpayer by: 1. Tribunal order taxpayers own cases for AY 2013 - 14 (ITA No. 2549/M/2018) (refer para 7 to 12 on pages 6 to 10 of the case law compilation) 4 KPMG LLP (Singapore) (Firm of Individuals) 5,97,241 Audit Services Covered in favour of taxpayer by:1. Tribunal order taxpayers own cases for AY 2013 - 14 (ITA No. 2549/M/2018) (refer par....
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.... AY 2013 - 14 (ITA No. 2549/M/2018) (refer para 7 to 12 on pages 6 to 10 of the case law compilation) (Similar Treaty with Bangladesh) 2. Tribunal order taxpayers own cases for AY 2011 - 12 (ITA No.4535/Mum/2016 & ITA No. 4533/M/2016) (refer para 14 on page 24 and and refer 5 & 6 pages 17 to 22of the case law compilation) (similar payments made to Manabat Sanagustin & Co, Philippines) 22. On the basis of above chart, the Ld. Counsel submitted that: (a) Payments made to entities mentioned at Sr. No. 2, 3, 4, 5 and 11 which are located in Singapore, the UK, France and Philippines entities are identical to the payments made in the AY 2014-15 and hence the arguments and submissions made in the earlier AY 2014-15 will apply in the current year too. (b) In the case of payment made to the USA entity at Sr. No. 1 the services are in the nature of Independent Personal Services under Article 15 of the USA tax treaty and are not taxable in India in the absence of fixed base of non-resident in India since services are not in nature of make available of technical knowledge, experience, skill, know-how or process. (c) In the case of payment made to Indonesia, Saudi ....
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....ismissed with similar observations. Ground No. 7 of AY 2015-16: 25. The facts pertaining to this ground are that the Ld. AO did not grant credit of INR 71, 39,952 being taxes paid in Japan on income earned by the assessee in Japan. The Ld. AO observed that the income earned by the assessee in Japan was not taxable in Japan pursuant to Article 15 of the India- Japan DTAA dealing with Independent Personal Services. He held that since the income itself is not taxable, the tax credit in respect thereof is not allowed. He placed reliance on the decisions of Ershisanye Construction Group India Pvt. Ltd. In ITA No. 756/Kol/2015, Maharashtra State Electricity Board as reported in 90 ITD 793 (Mum) and Chandbourne & Parke LLP (2005) 2 SOT 434 (Mum). 26. Ld. CIT(A) while deciding the matter relied on the decision of Mumbai ITAT in the case of Amarchand & Mangaldas & Suresh A Shroff & Co. in ITA No. 2613/Mum/2019 which is reproduced below :- "To put a question to ourselves, what could possibly be the situations in which views of the source and residence jurisdictions may differ about the applicability of a treaty taxation provision, and yet the residence country could still p....
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....n 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. 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 Israel, Philippines, constitute payments for Independent Personal Services instead of "Royalty" as defined under Article 12/13 of the respective DTAAs? 4. 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? 5. On th....
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....rvices Pte. Ltd. Singapore 13,31,234 8 KPMG Tax Services Ltd. Mauritius 2,58,974 9 KPMG Ireland 1,91,910 10 RG Manabhat& Co. Philippines 3,19,196 11 Rahman Rahman Huq 2,91,676 12 KPMG LLP, USA 1,85,96,072 Total 2,59,36,186 32. Ld. Counsel of the assessee pointed out that the issues in the instant appeal are similar to those in ITA No. 723& 724/Mum/2023 and also came up for adjudication in assessee's own case before the "I" bench of Mumbai Tribunal (ITAT) in AY 2013-14 and the same were decided in favour of the assessee. Ld. Counsel also pointed out that while deciding the appeal for the AY 2016-17, the Ld. CIT (A) has relied upon the order of the ITAT for AY 2013-14. Ld. Counsel furnished a chart showing the similarity between the payments made during AY 2013-14 and the impugned assessment year. The same is reproduced hereunder: Sr. No. Name of the Payee Amount in INR Description of Services Remarks 1 KPMG LLP (USA) (Firm of Individuals) 1,85,96,072 Taxation Services Covered in favour of taxpayer by: 1. Tribunal order in taxpayers own cases for AY 2013 - 14 (ITA No. 2549/M/2018) (re....
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....sia) 9 KPMG (Mauritius) (Firm of Individuals) 2,66,830 Audit services Covered in favour of taxpayer by: 1. Tribunal order in taxpayers own cases for AY 2013 - 14 (ITA No. 2549/M/2018) (refer para 7 to 12 on pages 6 to 10 of the case law compilation) (Similar Treaty with Bangladesh)2. Bombay High Court order in network member firm's case for AY 200-09CIT-16 vs KPMG (ITA No. 690 of 2017) (refer para 9/page 48 of the case law compilation) 3. Tribunal order taxpayers own cases for AY 2011-12 (ITA No.4535/Mum/2016 & ITA No. 4533/M/2016) (refer para 14 on page 24 and refer 5 & 6 pages 17 to 22of the case law compilation) 10 KPMG Tax Services Ltd. (Mauritius) (Company) 2,58,974 Taxation Services Covered in favour of taxpayer by: 1. Tribunal order in taxpayers own cases for AY 2013 - 14 (ITA No. 2549/M/2018) (refer para 7 to 12 on pages 6 to 10 of the case law compilation) (Similar Treaty with Indonesia) 2. Bombay High Court order in network member firm's case for AY 2008-09 CIT - 16 vs KPMG (ITA No. 690 of 2017) (refer para 9/page 48 of the case law compilation) 3. Tribunal order taxpayers own cases for AY 2011-12 (ITA No.4535/Mum/2016 & ITA No. 4533/....
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....it was pointed out that Bangladesh tax treaty which was a subject matter of decision in AY 2013-14 and hence the issue is squarely covered in favour of the assessee. 34. Ground Nos. 1 to 4 relate to deleting the disallowance of professional fees paid to various non-residents. We have noted that these grounds of appeal are identical to the grounds of appeal raised by the Revenue in ITA No. 723/Mum/2023 in AY 2014-15 and ITA No. 724/Mum/2023 in AY 2015-16 which we have already dismissed in the Para No. 14 of this order. Following the principles of consistency, these grounds of appeal are also dismissed with similar observations. Ground Nos. 5 & 6 of AY 2016-17: 35. Ground of 5 and 6 relate to deleting the disallowance of payment to KPMG International Cooperative Switzerland. We have noted that these grounds of appeal are identical to the grounds of appeal raised by the Revenue in ITA No. 723/Mum/2023 in AY 2014-15 which we have already dismissed in the Para No. 17 of this order. Following the principles of consistency, these grounds of appeal are also dismissed with similar observations. Ground No. 7 of AY 2016-17: 36. Ground of 7 relates to non grant of credit of taxe....
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....x without appreciating the facts, thereby deleting the disallowance of Rs.10,79,68,274/-u/s. 40(a)(i). 6. On the facts and in the circumstances of the case and in law, whether the Ld. CIT (A) erred in holding that the payments made by the assessee to KPMG for names, mark and other facilities were in the nature of royalty and chargeable to tax in India. 7. On the facts and circumstances of the case and in law, allowing tax relief in regard to income earned in Japan. The Ld. CIT (A) has not considered the provisions of Article 14A of India-Japan DTAA dealing with Independent Personal Services. As per the provisions of Article 14A the income itself is not taxable, the tax credit in respect thereof is not allowable." Facts of the case AY 2017-18: 38. The assessee is a Limited Liability Partnership firm of Chartered Accountants and filed its return of income for AY 2017-18 electronically on 31.10.2017 declaring a total income of Rs. 93,92,72,310/- Assessee's case was selected for compulsory scrutiny under CASS and statutory notices u/s. 142(1) and 143(2) of the I.T Act were issued. During the course of scrutiny proceedings, the AO made addition to the total i....
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....ndividuals) 7,78,765 Transfer Pricing Service Covered in favour of taxpayer by: 1. Tribunal order taxpayers own cases for AY 2013 - 14 (ITA No. 2549/M/2018) (refer para 7 to 12 on pages 6 to 10 of the case law compilation) 3 KPMG LLP (Singapore) (Firm of Individuals) 17,46,709 Audit Service Covered in favour of taxpayer by: 1. Tribunal order taxpayers own cases for AY 2013-14 (ITA No. 2549/M/2018) (refer para 7 to 12 on pages 6 to 10 of the case law compilation) 4 KPMG Services Pte. Ltd. (Singapore) (Company) 24,25,121 Audit Service, Tax Advisory Services Covered in favour of taxpayer by:1. Tribunal order taxpayers own cases for AY 2013 - 14 (ITA No. 2549/M/2018) (refer para 7 to 12 on pages 6 to 10 of the case law compilation) 5 KPMG (Australia) (Firm of Individuals) 5,67,280 Tax Advisory Services Covered in favour of taxpayer by: 1. Tribunal order taxpayers own cases for AY 2013 - 14 (ITA No. 2549/M/2018) (refer para 7 to 12 on pages 6 to 10 of the case law compilation) 6 Rahman Rahman Huq (Bangladesh) (Firm of Individuals) 13,34,140 Taxation Services Covered in favour of taxpayer by: 1. Tribunal order in taxpay....
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.... to payments made to Hadibroto & Co, a company resident of Indonesia) 2. Covered by case of P.T. Mckinsey Indonesia v/s. Deputy Director of Income Tax (I.T.) -4(1) [2013] 29 taxmann.com 100 (Mumbai-trib) (refer para 8 on pages 98 of the case law compilation) 41. On the basis of above chart, the Ld. Counsel submitted that: (a) Payments made to entities mentioned at Sr. No. 1 (USA), 2 (UK), 3 & 4 (Singapore), 6 (Bangladesh), 7 (Netherland), 8 (Saudi Arabia), 9 (Mauritius-Firm), 10 (Philippines) and 11 (Indonesia) are identical to the payments made in the AY 2014-15, AY 2015-16 & AY 2016-17 and hence the arguments and submissions made in the earlier AY 2014-15, AY 2015- 16 and AY 2016-17 will apply in the current year too. (b) In the case of payment made to Australia entity at Sr. No. 5 it was pointed out that Australia tax treaty was a subject matter of decision in AY 2013-14 and hence the issue is squarely covered in favour of the assessee. 42. Ground Nos. 1 to 4 relate to deleting the disallowance of professional fees paid to various non-residents. We have noted that these grounds of appeal are identical to the grounds of appeal raised by the Revenue in I....