TaxTMI 
TaxTMI 
2012 (12) TMI 1264
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....onsideration, the following payments were made by the assessee to the non-residents towards professional charges for services rendered and reimbursement of expenses. a) KPMG Fides, Zurich -Professional fees and reimbursement of expenses Rs. 17,16,508 b) KPMG UK, -Professional fees and reimbursement of expenses Rs.11,07,171 c) KPMG, LLP, USA -Professional fees Rs.2,55,794 d) KPMG Management Consulting, N.V. The Netherlands -Professional fees and reimbursement of expenses Rs.3,08,417 e) Peat Marwick Suthee Ltd. Thailand -Reimbursement of expenses Rs. 72,068 f) KPMG International, The Netherlands -Reimbursement of expenses Rs.6,23,600 g) KPMG Peat Marwick Management Consultants Pte. Ltd., Singapore -reimbursement of expenses Rs.43,546 4. According to the AO, the above payments made by the assessee to the non-residents, were in the nature of royalties u/s 9(1)(vi) of the Act, as well as under the relevant articles dealing with the royalties under the respective treaties taxable in India and since the assessee had failed to deduct tax from the said amounts, the same were liable to be disallowed u/s 40(a)(i). Accordingly, ....
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....hargeable to tax. The appellant has relied on the following decisions in support of its claim. a) Rolls Royce India Ltd. vs ITO - [1988] 25 ITD 136 (TM). b) Assistant Commissioner of Income Tax vs Hindustan Marketing and Advertising Co, Ltd. [1994] 49 TTJ96. c) CIT West Bengal vs Dunpol Rubber Co. Ltd. [1983] 142 ITR 493 (Cal) d) Raymond Ltd. vs Deputy Commissioner of Income tax [2003] 86 ITD 791. Accordingly there was no requirement of tax deduction at source from the remittance. Payments made to KPMG LLP, UAS The appellant has placed on record two invoices raised by KPMG LLP, USA, note on services rendered and two declarations dated 12 March 1999 and 14 July 1999 given by KPMG LLP, USA. The services were rendered outside India. KPMG LLP, USA is a firm of individuals. The scope of engagement was rendering professional services in connection with IPO of HCL Technologies Ltd. Pursuant to the provisions of Article 15 of the Indo-US DTAA, the income from the services is not taxable in India. Accordingly there was no requirement of tax deduction at source from the remittance. Payments made to KPMG....
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....s recovered the said amount from KPMG, a partnership firm registered in India in the same year and has credited the amount to Professional Income. The appellant has placed on record a confirmation from KPMG that it has made the said payment to the appellant. The appellant has argued that this amount has appeared both on the debit and credit side of its Profit and Loss Account and hence, no deduction has been claimed by it. Consequently the question of deduction of tax at source and disallowance u/s 40(a)(i) of the Act does not arise. Payment made to KPMG Peat Marwick Management Consultants Pte. Ltd., Singapore. The appellant has argued that this payment is towards miscellaneous expenses and is not in the nature of income. The appellant has not placed on record evidence in support of its claim. In the absence of adequate evidence, the disallowance in upheld. To sum up, the following payments totalling to Rs. 40,83,558 ● Swiss francs 54,909.20 (Rs.17,16,508) made to KPMG Fides. Zurich; ● UKP 16,260.40 (Rs.11,07,171) made to KPMG UK; ● USD 6,050 (Rs.2,55,794) made to KPMG LLP, USA; χ....
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....uire application of high level office skills besides technical and industry knowledge. For rendering such consultancy a significant number of such overseas companies are based in USA. The assessee engaged the services of KPMG Dallas, which is a firm of individual and resident of USA, which had the skill and technical knowledge relating to energy division based industry and technical parameters in giving such consultations and conduct negotiations with the potential parties. It was in lieu of this, that a professional fee of USD 46,248 which in terms of INR come to Rs.20,89,906/-, was paid. The second payment was made to KPMG consulting LP Canada for rendering professional services for the Essar Oil Limited for retail oil marketing and other related services. The payment towards fee was made at USD 30,678/- which in terms of INR is 13,37,229/-, which also included reimbursement of expenses in the nature of transportation, lodging, meals and other expenses. The Assessing Officer has given categorically finding that so far as the Article 15 of DTAA is concerned, the same does not apply to KPMG USA as it does not have any PE or business based in India and the services were not re....
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....allowance made by AO u/s 40(a)(i) to the extent of Rs.40,83,558. 9. As regards the remaining disallowance of Rs.43,546 in respect of payment made to KPMG Peat Marwick Management Consultants Pte. Ltd., Singapore, it is observed that the same was confirmed by the Ld.CIT(A) on the ground that the claim of the assessee of having made the said payments towards reimbursement of expenses was not supported by any evidence. Since nothing has been brought on record on behalf of assessee to rebut or controvert this finding of the Ld.CIT(A), we find no justifiable reasons to interfere with the impugned order of the Ld.CIT(A) on this issue. Ground No. 1 of the assessee's appeal as well as that of the Revenue's appeal is accordingly dismissed. 10. Ground No.2 of the Revenue's appeal and Ground No.4 of the assessee's appeal involve a common issue relating to disallowances of Rs.7,48,267 made by the AO on account of repairs and maintenance expenses which has been sustained by the Ld.CIT(A) to the extent of Rs.75,000/- 11. During the year under consideration, the assessee had claimed Repairs and Maintenance Expenses of Rs.7,48,267, which were stated to be paid to the office....
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....of the total amount paid by the assessee to KPMG. 15. The matter was carried before the Ld.CIT(A) and documentary evidence showing basis of levying the charges of KPMG as well as confirmation from KPMG that the same rates were charged to non- related party was filed by the assessee before the Ld.CIT(A). Taking into consideration the said documents filed by the assessee as well as other submissions made on this issue, the Ld.CIT(A) held that the provisions of section 40A(2)(b) could not be applied to the amount of reimbursement of cost of Rs.2,71,20,000. As regards the amount of Rs.2,40,24,000 paid by the assessee to KPMG for services rendered, the Ld.CIT(A) held relying on his appellate order for Assessment Year 2001-02 that the same only to the extent of 10% could be considered as unreasonable and excessive for the purposes of disallowance u/s 40A(2)(b). Accordingly, he directed the AO to restrict disallowance of 20% u/s 40A(2)(b) of Rs.2,40,24,000 and allowed part relief to the assessee on this issue. 16. We have considered the rival issue and also perused the material on record. It is observed that a similar issue has been set aside by the Tribunal to the AO in assessee....
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....nt made to any relative parties are for legitimate needs of the business or profession. It is then the Assessing Officer has to prove from the material placed on record that such a payment on which expenditure is incurred is excessive or unreasonable and is not for the legitimate needs of the business or profession, or any kind of benefit is derived to the assessee. Here in this case, the Assessing Officer has neither enquired nor brought anything on record to show that the payment is excessive as compared to unrelated parties or it was not for the legitimate needs of the business or profession of the assessee. The same does not seem to have been doubted. It is also not borne out from the finding of the Assessing Officer as well as the CIT(A), as to what was the basis for disallowance of 10%, whether there was any some kind of material or some comparable payments to other parties. In absence of such material on record, we are unable to sustain the view taken by the Assessing Officer as well as the CIT(A) that disallowance of 10% should be made on ad hoc basis. Under these facts and circumstances of the case, we find that it would be proper that matter is restored back to the Assess....
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.... the Tribunal in assessee's own case for Assessment Years 2001-02 to 2002-03 vide its common order dated 8th June, 2012 (supra) wherein, it was held relying on the decision of Hon'ble Supreme Court in the case of TRF Ltd. 323 ITR 397 that after the amendment made in section 36(1)(vii) with effect from 1st April, 1989, it is not necessary for the assessee to establish that the concerned debts in fact have become irrecoverable and it is sufficient if the said debts are written off as irrecoverable in the account of assessee. Respectfully following the said judicial pronouncement, we delete the disallowance made by the AO and confirmed the Ld. CIT(A) on account of Bad-Debts and allow ground No.2 of the assessee's appeal. 22. The issue involved in Ground No. 3 of the assessee's appeal relates to the disallowance of Rs.13,750 made by the AO and confirmed by the Ld. CIT(A) on account of club membership fees. 23. During the year under consideration, a sum of Rs.13,750 paid by the assessee company to Oberoi Grand, Kolkata for the membership of Shri Naresh Malhotra, its employee was claim as expenditure. According to the AO, the said expenditure was the personal expend....