TMI Blog2019 (1) TMI 692X X X X Extracts X X X X X X X X Extracts X X X X ..... was not chargeable to income tax in their hands and thus the assessee was not liable for deduction of tax at source on such payment under the provisions of section 195 and no disallowance under section 40(a)(i) could be made. Order of the Ld. CIT(A) on the issue in dispute is well reasoned - Decided against revenue Addition to interest paid for delayed deposit of service tax - claim not allowable u/s 37(1) - Held that:- The interest paid on service tax is not penal in nature but compensatory in nature and thus it cannot be disallowed under provisions of section 37(1) of the Act. Further, disallowance of interest for delayed payment of Income-tax has been specifically mentioned under section 40(a)(ii) of the Act, whereas no such interest on service tax has been specified for disallowance. Accordingly, the finding of the Ld. CIT(A) on the issue in dispute is well reasoned - Decided against revenue - ITA No.4143/Del/2015 - - - Dated:- 10-1-2019 - SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI O.P. KANT, ACCOUNTANT MEMBER For The Appellant : Ms. Shaveta Nakra Dutta, Sr.DR For The Respondent : Shri V.K. Bindal, CA And Ms. Sweety Kothari, CA ORDER PER O.P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered by Article 15 Independent Personal Services of respective DTAA and in absence of any fixed base of the recipient in India, income was not chargeable to tax in India and thus no withholding tax was required to deduct on such payments under section 195 of the Act and consequently no disallowance under section 40(a)(i) of the Act was required. The assessee relied on the following decisions to support its claim: 1. Maharashtra State Electricity Board Vs. DCIT (2004) 90 ITD 793 ( Mum). 2. Graphite India Ltd Vs. CIT ( 2003) 86ITR 384 (KOl) 2.1 According to the Assessing Officer, in view of the explanation w.e.f. 01/06/1976 to section 9(i)(vii) of the Act, services rendered by a non-resident ( fee for technical nature ) though having no residence or place of business or business connection in India or rendered outside India shall be deemed to accrue arise in India. The Assessing Officer placed reliance on the decisions of the ITAT Mumbai in the case of Linklaters LLP Vs ITO (ITA No. 5085/Mum/2003 and Ashapura Minichem Ltd (ITA not mentioned by the ld. AO). On the issue of Article 15 of the respective DTAAs invoked by the assessee, the Ld. Assessing Officer observe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. In support of the finding, he relied on number of decisions cited in the impugned order. The Ld. CIT(A) emphasized that provisions of the DTAA being more favourable to the assessee, the assessee has option to choose those provisions rather than provisions of the Act. Accordingly, the Ld. CIT(A) concluded that the assessee was not liable for deducting tax at source under section 195 of the Act in respect of the payments made to nonresidents under reference and deleted the disallowance under section 40(a)(i) of the Act. The Ld. CIT(A) also deleted the addition of ₹ 57,148/- for interest paid in relation to service tax made by the Assessing Officer under section 37(1) of the Act. Aggrieved with the above finding of the Ld. CIT(A), the Revenue is in appeal before the Tribunal 3. The ground number (i) to (iii) of the appeal are related to the issue of disallowance of ₹ 1,41,08,805/- under section 40(a)(i) of the Act. 3.1 Before us, the learned DR relied on the order of the Assessing Officer and submitted that Article 15 of respective DTAAs is applicable in case of individual whereas the payment has been made to various limited liability partnership firms and thu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oyees of M/s Grant Thornton UK LLP came to India. It is categorically submitted that there is no fixed base or office or permanent establishment (PE) of the said UK LLP in India. Therefore, in the absence of a PE / fixed base of the recipient (i.e., M/s Grant Thornton UK LLP) in India and on account of the fact that no one from the said firm had even a single day stay in India, professional fees for rendering services in UK will be taxable only in UK and not in India. 3.4 The Ld. CIT(A) has further analysed the Article 15 of DTAA in respect of USA, Netherland, and France as under: 4.2.4 It must be appreciated that the explanation of the appellant that the impugned professional services were covered under the Article on Independent Personal Services of DTAAs with UK and other countries was rejected by the Assessing Officer on a flimsy ground that the said Article is applicable for professional fees paid to an individual only, whether in his own capacity or as a member of a partnership, and since the recipients of professional fees in this case are Limited Liability Partnership firms (LLPs), the said Article under the relevant DTAAs did not apply in this case. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payment of professional fees made abroad to the parties referred to in the foregoing paras is also covered u/s 195 of the Income-tax Act, 1961... . 4.2.10 Therefore, it cannot be doubted that the impugned professional fees paid are squarely covered by the provisions of Article on Independent Personal Services of the said DTAAs. Furthermore, it has been held in Maharashtra State Electricity Board Vs. Deputy Commissioner of Income Tax (supra) that the provisions of Article 15 being specific provisions for professional services will override the relatively general provisions of Article 13 which apply to broader category of managerial, technical or consultancy services . 4.2.11 In view of the above submissions, the impugned professional fees received by the foreign Grant Thornton LLPs from the appellant is not taxable in India as per Articles on Independent Personal Services of the relevant DTAAs with those countries and, therefore, the same is not liable to tax deduction at source in terms of section 195 of the Act, and accordingly no disallowance of the same can be made u/s 40(a)(i) at all. 3.5 The Ld. DR could not controvert the finding of the Ld. CIT(A) that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3.7 The Ld. CIT(A) in support of his finding, has relied on following decisions: a) Cushman Wakefiled (S) Pte., reported in (2008) 305 ITR 208; b) Sandvik Australia Pty. Ltd. Vs. DDIT (International Taxation), reported in (2013) 141 ITD 598 (Pune); c) CIT Vs. De Beers India Minerals Pvt. Ltd., reported in (2012) 346 ITR 467 (Karn.) d) ISRO Satellite Centre (ISAC), (2008) 307 ITR 59 (AAR) e) Intertek Testing Services India (P) Ltd., reported in Authority for Advance Rulings (2008) 307 ITR 418; f) BhartiAxa General Insurance Co. Ltd., reported in (2010) 326 ITR 477 (AAR); g) Cable Wireless Networks India Pvt. Ltd., reported in (2009) 315 ITR 72; h) Invensys Systems Inc., reported in (2009) 317 ITR 438; i) Guy Carpenter Co. Ltd. Vs. ADIT, reported in (2012) 18 ITR (Trib.) 414 (Del.) j) WNS North America Inc. Vs. ADIT (International Taxation), reported in (2013) 25 ITR (Trib.) 582 (Mum.); and k) Ernst Young Pvt. Ltd., reported in (2010) 323 ITR 184 3.8 Before us, the Learned DR could not establish that any technical knowledge was made available in the process of providing services by the non-resident p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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