TaxTMI 
TaxTMI 
2023 (8) TMI 1685
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....in the circumstances of the case and in law, whether the Ld. CIT(A) was justified in deleting the disallowance of Rs. 19,18,003/- u/s. 40(a)(i) being professional fees paid outside India without deduction of tax at source; 2. On the facts and circumstances of the case and in law, whether the Ld. CIT(A) was justified in directing to delete the disallowance of Rs. 72,93,039/- made by the Assessing Officer (AO) u/s 40(a)(ia) of the Income Tax Act in respect of payment made to KPMGI Co-operative, Switzerland (henceforth, KPMGI for the sake of brevity/without appreciating that the said receipts in the hands of KPMGI are taxable in India as Royalty Income and as such the tax is required to be deducted on this payment u/s 195 of the IT Act, 1961. 3. On the facts and circumstances of the case and in law, whether the Ld. CIT(A) was justified in holding that KPMGI is a mutual association of the assessee concern and hence its receipts would not be taxable in India without appreciating that the concept of mutuality within concerns operating on multi-national forum is non-existing either under Income-tax Act or under respective Double Taxation Avoidance Agreements (DTAA) and h....
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....he rival submissions and material placed on record, we observe from the computation of tax effect submitted by the Ld. AR of the assessee that tax effect in these appeals is Rs.. 28,46,212/- and 21,18,087/- in ITA. No. 360 & 362/Mum/2017 respectively, which is less than Rs.. 50 Lakhs and therefore the appeals of the revenue are not maintainable on account of low tax effect in view of the CBDT Circular No. 17/2019 dated 08.08.2019. Accordingly, these appeals are dismissed. 7. In the result, both the appeals filed by the Revenue are dismissed. ITA. No. 361/MUM/2017 (A.Y. 2012-13) 8. Revenue has raised following grounds in its appeal: - "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. 2,50,08,400/- u/s 40(a) being professional fees paid outside India without deduction of tax at source. 2. On the facts and circumstances of the case and in law, whether the Ld. CIT(A) was justified in directing to delete, the disallowance of Rs. 5,49,13,305/- made by the Assessing Officer (AO) u/s 40(a)(a) of the Income Tax Act in respect of payment made to KPMGI Co-operative, Switzerland ....
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....& 4536/Mum/2016 dated 05.12.2018. d. ACIT v. M/s. BSR & Co. in ITA. No. 1917/Mum/2013 dated 06.05.2016. e. DCIT v. M/s. KPMG in ITA. No. 2493/Mum/2012 dated 07.04.2017. 10. Ld. AR brought to our notice relevant Paras and copies of the orders are placed on record. 11. On the other hand, Ld. DR relied on the orders of Ld CIT(A) and the Assessing Officer. 12. Considered the rival submissions and material placed on record, we observe that similar issue was considered and adjudicated by the Coordinate Bench in assessee's own case in ITA. No. 723/Mum/2023 for the A.Y. 2014-15. We observe that the Tribunal while adjudicating the issue followed the decision in assessee's own case for the A.Y. 2013-14 in ITA. No. 2549/Mum/2018 dated 15.06.2022 and decided the issue in favour of the assessee. While holding so the Coordinate Bench held as under: - "4. During the year under consideration, the assessee has made payments of Rs. 68, 76,243/- as professional fees to various non-residents without deduction of tax at source as under :- Sr. No. Name of the non-resident Amount 1 KPMG Corporate Finance Pte. Ltd (Singapore) 1,81,560 2 K....
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....e case law compilation) 5 KPMG LLP (UK) (Firm of Individuals) 17,87,793 Transfer pricing 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 KPMG LLP (Singapore) (Firm of Individuals) 11,53,124 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 compilation) 7 KPMG Meijburg& Co Special Services BV. (Netherlands) (Company) 9,74,589 Taxation Services Covered in favour of taxpayer by: 1. Tribunal order in taxpayer's own cases for AY 2013-14 (refer para 7 to 12 on pages 6 to 10 of the case law compilation) - (Similar treaty with Singapore and UK) 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) (Similar to payments made to KPMG Accountants NV a company resident of Netherlands) 8 KPMG S.A. (France) (Company) 1,61,807 Audit Services Covered in favour ....
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....d would not be taxable in India in absence of fixed base of non-resident in India. The payment would not be covered under article 23 dealing with other income. Ld. Counsel of the assessee placed reliance on the decision of ITAT Mumbai in the case of P.T. McKinsey Indonesia [2013] 29 taxmann.com 100, placed in the case law compilation at page number 94 d. In the case of payment made to Norway entity at Sr. No. 10 it is submitted that the professional fees are paid for services utilised for the purpose of earning income from a source outside India and hence, are not taxable in India pursuant to the provisions of Section 9(1) (vii) (b) of the IT Act. Ld. Counsel explained that the professional fees have been paid by the assessee, an India tax resident to KPMG Norway, a nonresident for earning income from a source outside India i.e. from an overseas client. Ld. Counsel of the assessee placed reliance on the decision of ITAT Mumbai in the case of Bajaj Hindustan Limited [2011] 13 taxmann.com 13 placed in the case law compilation at page number 99. 7. Ground Nos. 1, 2, 3 and 4 are interlinked, hence disposed of by common finding. We have heard both the parties and have ....
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.... aforesaid services have been rightly held to be outside the purview of Article-12 and/or Article-13 of the respective tax treaties, and instead such income falls within the scope of Article-7 thereof i.e. in the nature of 'business profits'. It has also (Assessment Year : 2009-10) not been disputed that such entities do not have a permanent establishment in India, therefore, such incomes are not chargeable to tax in India so as to require deduction of tax at source. On this aspect also, we affirm the stand of the CIT (Appeals) that such payments are not liable for disallowance under section 40(a) (i) of the Act. 5. In so far as payments to KPMG LLP, UK and KPMG USMCG Ltd. UK are concerned, herein also the said entities do not have permanent establishment in India. The CIT (Appeals) has found that such entities are eligible for the benefit of Article-15 of Indo-US Double Taxation Avoidance Agreement dealing with independent personal services and hence, payments are not chargeable to tax in India so as to require deduction of tax at source. The aforesaid findings have not been disputed before us on the basis of any cogent material and, therefore, we hereby affirm th....
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....e. 11. In so far as payment made to Israel entity mentioned at Sr. No. 3 in the table, we note that the Israel tax treaty is similar to the Ireland tax treaty. We are of the view that the services cannot be construed as managerial or technical services so as to be governed by article 13 of the Israel tax treaty dealing with FTS. As pointed by the Ld. Counsel of the assessee, since there is a specific article 15 on Independent Personal services in Israel tax treaty, this specific article will override the general article pertaining to FTS and these would not be taxable in India in absence of Fixed base of non-resident in India. We observe that this issue is covered by the decision of ITAT in assessee's own case for AY 2008-09 in ITA No. 2843/Mum/2014 which is reproduced below :- "4.8 In respect of the payment made by the assessee to KPMG, Ireland 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 Ireland DTAA as contended by Revenue. In our view, they are clearly in the nature of independent personal serv....
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.... 9(1)(vii) of the Act. We further note that this issue is covered by the decision of ITAT Mumbai in the case of Bajaj Hindustan Limited [2011] 13 taxmann.com 13 reproduced below :- "14 ......... As far as the second exception mentioned in Sec.9 (1) (vii) clause (b) is concerned viz., "for the purposes of earning any income from any source outside India." the undisputed facts are that the Assessee wanted to acquire sugar mills/distillery plants in Brazil and for that purpose also wanted to set up a subsidiary company. In fact, the Assessee had set up a subsidiary company on 8.8.2006 in Brazil. Thus the Assessee was contemplating to create a source for earning income outside India. It is no doubt true that the source of income had not come into existence. But there is nothing in Sec. 9 (1) (vii) clause (b) of the Act, to show that the source of income should have come into existence so as to except the payment of fees for technical services. The expression used is "for the purpose of earning any income from any source outside India". There is nothing in the language of Sec.9 (1)(vii) clause (b) of the Act, which would go to show that the same is restricted to only to an exis....
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....t 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 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 in....
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....r: Sr. No Name of the Payee Amount in INR Description of Services Remarks 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 o....
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....ered 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. 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 ManabatSanagustin& Co, Philippines) 21. 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, ....
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.... 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 2015-16: 24. 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). 25. 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....
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....n of tax at source? 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 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....
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....pecial Services BV Netherlands 4,84,637 5 KPMG Phoomchai Audit Ltd. Thailand 5,58,828 6 KPMG, Mauritius 2,66,830 7 KPMG Services 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 RahmanHuq 2,91,676 12 KPMG LLP, USA 1,85,96,072 Total 2,59,36,186 31. 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)....
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..... 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) 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 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/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....
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....f P.T. Mckinsey Indonesia [2013] 29 taxmann.com 100, placed in the case law compilation at page number 94. (c) In the case of payment made to Bangladesh entity at Sr. No. 5 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. 33. 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: 34. 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.....
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....e 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.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: 37. 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. ....
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.... 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 LLP (UK) (Firm of Individuals) 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 - ....
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....1 KPMG Advisory (Indonesia) (Company) 37,510 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) (Similar 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) 40. 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 201516 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 sq....
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....in the table will not come under Article 12 dealing with 'Fees for Technical Services', rather they fall under Article 15 dealing with 'Independent Personal Service' and further, as these payments were made outside India and there is no Permanent Establishment (PE) in India, the payment would not be taxable in India. 8. With regard to the remittances for professional fees to Sweden, Singapore, UK, USA and Australia 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 did not make available technical knowledge, experience and skill hence did 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. 9. For the above, the appellant relied on decisions of the ITAT, Mumbai, in its own case for AYs. 2008-09, 2009-10, 2010-11, 2011-12 and 2012-13. The Tribunal in I.T. Appeal No. 1917(Mum) of 2013, A.Y. 2009-10 decided on 06.05.2016, in assessee's own case held as under: "In the context of payments made to KPMG Tax Services Pvt. Ltd., Singapore, KPMG L....
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....) 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 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 ....
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....erial and, thus, the same is hereby affirmed With respect to the payment made by the assessee to Siddharta Siddharta and Widjaja, Indonesia for rendering of audit services, it is seen by the learned CIT(A) that the India-Indonesia DTAA does not have any Article defining FTS and that the services were rendered in respect of audit and taxation matters. In these factual circumstances the learned CIT(A) was of the view that since the payment made by the assessee for such services fall within the scope of Article-14 of the India- Indonesia DTAA dealing with independent personal services and in the absence of any PE of the recipient in India, income from such services is not exigible to tax in India, there was no requirement to deduct tax at source on the said payment and accordingly deleted the disallowance under section 40(a)(ia) of the Act as not sustainable. In this factual matrix, we are of the considered view that the assessee is not liable to deduct tax at source on the aforesaid non-resident entity in Indonesia for the provisions of section 40(a) (i) of the Act to be evoked. We, therefore, uphold the finding of the learned CIT(A) on this issue which has not been controverted befo....
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.... this issue which has not been controverted before us by the Revenue." 12. As the facts mentioned above for the year under consideration and findings of the ITAT, Mumbai in earlier years in assessee's own case 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 & 4 raised by Revenue are dismissed." 14. On similar facts, the Coordinate Bench in ITA. No. 1917/Mum/2013 dated 06.02.2016 in respect of payment made to KPMG LLP (Canada) (firm of Individuals) and KPMG (Malaysia (Firm of Individuals) considered the issue and decided as under: - 4. At the time of hearing, Ld. Representative for the assessee has furnished a fact sheet, which brings out the nature of services rendered by each of the recipients of income. Primarily, it is revealed that professional services have been rendered by such entities for assistance in audit, taxation, IT services, professional services in relation to transfer pricing, VAT, etc. Ld. Representative for the assessee has also tabulated the recipient entities country- wise and made reference to the respective clauses in the Double Tax....
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....not tenable. 5.1 In so far as payments to KPMG LLP, UK and KPMG USMCG Ltd. UK are concerned, herein also the said entities do not have permanent establishment in India. The CIT(Appeals) has found that such entities are eligible for the benefit of Article -15 of Indo-US Double Taxation Avoidance Agreement dealing with independent personal services and hence, payments are not chargeable to tax in India so as to require deduction of tax at source. The aforesaid findings have not been disputed before us on the basis of any cogent material and, therefore, we hereby affirm the same. Consequently, invoking of section 40(a)(i) in the context of aforesaid payments is also not justified. 5.2 In the context of payments made to KPMG Tax Services Pvt. Ltd., Singapore, KPMG LLP, Singapore and KPMG Tax Advisor, Belgium, the CIT(Appeals) noted that they are companies registered in the respective countries, who have rendered services outside India. Such services related to assistance in audit, taxation, information technology services, conducing background checks, etc. Considering the nature of the services rendered, which is not disputed by the Revenue, in our view, the CIT(Appea....
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.... 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(Appeals) on this aspect is also affirmed by us on the basis of his findings, which have remained uncontroverted before us by the Revenue. 15. In respect of payment made to KPMG USCMG LLC (USA)-Company, on similar facts, the Coordinate Bench in ITA. No. 4533 & 4534/Mum/2016 dated 05.12.2018 considered the issue and decided as under: - "5. We have considered the submission of ld. representative of the parties as referred above and the decision of Tribunal in assessee's group case for A.Y. 2008-09 & 2009-10. We have seen that on similar ground of appeal, Tribunal in assessee's group case in ACIT vs. BSR & Co. in ITA No. 1917/Mum/2013 for Assessment Year 2009-10 passed the following order: 4. At the time of hearing, Ld. Representative for the assessee has furnished a fact sheet, which brings out the nature of services rendered by each of the recipients of income. Primarily, it is revealed that professional services have been rendered by such entities for assistance in audit, taxation, IT services, professional services in r....
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...., such income cannot be held chargeable to tax in India so as to require deduction of tax at source. Therefore, invoking of section 40(a)(i) of the Act to disallow such expenditure is not tenable. 5.1 In so far as payments to KPMG LLP, UK and KPMG USMCG Ltd. UK are concerned, herein also the said entities do not have permanent establishment in India. The CIT(Appeals) has found that such entities are eligible for the benefit of Article-15 of Indo-US Double Taxation Avoidance Agreement dealing with independent personal services and hence, payments are not chargeable to tax in India so as to require deduction of tax at source. The aforesaid findings have not been disputed before us on the basis of any cogent material and, therefore, we hereby affirm the same. Consequently, invoking of section 40(a)(i) in the context of aforesaid payments is also not justified. 5.2 In the context of payments made to KPMG Tax Services Pvt. Ltd., Singapore, KPMG LLP, Singapore and KPMG Tax Advisor, Belgium, the CIT(Appeals) noted that they are companies registered in the respective countries, who have rendered services outside India. Such services related to assistance in audit, taxatio....
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....fore, 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(Appeals) on this aspect is also affirmed by us on the basis of his findings, which have remained uncontroverted before us by the Revenue. 5.5 Apart therefrom, even if we were to accept, for the sake of argument, that the services by the aforesaid entities are in the nature of technical services and are rendered and utilized in India so as to be taxable in terms of section 9(1)(vii) of the Act, even then the disallowance is not warranted as the following discussion would show. Ostensibly, the requirement of rendering services in India in order to attract section 9(1)(vii) of the Act was removed by insertion of Explanation by the Finance Act, 2010 with retrospective effect from 1/4/1976. This has been understood by the Revenue to say that inspite of the services having been rendered by the recipients outside India, the same is taxable in India by applying the aforesai....
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....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 discussion we may conclude that in the case in hand, there is a complete identity between the contributors and participators; the actions of the participators and contributors are in furtherance of the mandate of the association. There seems be no element of profit by the contributors from a fund made by them, which could only be expended or returned to themselves. Based on these conditions. and respectfully relying on the case laws as the Hon'ble Apex Court and various High Courts laid down that the case of the ITA Nos. 4842 to 4844 & 455 6/Mum/2016 Asst. CIT vs. M/s. BSR and Company assessee falls within the four corner of the ambit of the 'Principle of Mutuality'. Thus, we do not find any reason or ground to interfere in the order passed by learned Commissioner (Appeals) hence the appeal filed by the revenue is dismissed. 9. Consi....
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....se acknowledges that the Sub licensor's right to the KPMG Marks derive exclusively from the Sub licensor's rights under the Membership Agreement and that the sublicense to the KPMG Marks granted pursuant to this Section 4 is derivative there from and subject to the terms and conditions of such Membership Agreement. The Signatory Sublicense further acknowledges that the right of KPMG International to license the KPMG Marks is subject to the terms of the Component License Agreement and the Signatory Sub licensee agrees that it shall not take any action that contravenes the terms of the Component License Agreement. b) Upon the terms and conditions hereinafter set forth, the Sub licensor hereby grants to the Signatory Sub licensee, and the Signatory Sub licensee hereby accepts, the non- exclusive rights, license and privilege to use the KPMG Marks in connection with its marketing and providing of services permitted to be provided by the Signatory Sub licensee in accordance with the provisions of this Agreement, the Statues and the Policies and Regulations, and on products related to such services. Such grant shall include the right and license to issue engagement repor....
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....rom the Secretariat of Industrial Approvals, Government of India. KPMG and KPMGI have entered into a Membership Agreement. KPMG, KPMGI and the Appellant have entered into a sub-license agreement. The rights and obligations of KPMG, the member and the Appellant, the sublicensee are the same. Thus, effectively, the Appellant is a member of KPMGI. The objectives of the KPMGI relate to the development, co-ordination, support, promotion and facilitation of the operations/ services of the KPMG Member Firms to its clients in various ways. KPMGI does not make any profits on its activities and does not 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 shares amongst member firms based on their budgeted revenues and collected in advance/ instalments and adjusted year-on-year for any shortfall/ excess recovery for the eventual benefit of members. 16. We have given due consideration to the findings of the AO, submission of the assessee and relevant agreement filed by the assessee between assessee and KPMGI Cooperative, Switzerland. 17. Keeping in view the agreeme....