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2012 (6) TMI 452 - AT - Income TaxDTAA between India and USA - remittance of professional fees to KPMG LLP, USA being treated as 'Royalty' under Article 12 of DTAA - assessee engaged the services of KPMG Dallas to provide consultancy services and conduct negotiations with the potential parties in connection with consultancy to be given to Essar Oil Ltd for sale of its energy business - dis-allowance u/s 40(a)(ia) - Held that:- Impugned services were purely a professional service for consultancy which were rendered outside India and not for supply of scientific, technical, industrial or commercial knowledge or information. Thus, nature of payment do not fall within the meaning of Article 12 and, therefore, there was no liability to deduct TDS and consequently dis-allowance made u/s 40(a)(ia) is uncalled for. Similarly, in the case of payment made to KPMG, Canada were also purely for professional services and reimbursement of expenses, which in any manner does not fall under Article 12. Thus, on such payment also there was no liability to deduct TDS and consequently Section 40(ia) will not be applicable - Decided in favor of assessee. Bad debts - dis-allowance of professional fees and expenses not recoverable from clients claimed as Bad debts on ground of insufficient evidences placed on record - Held that:- After the amendment w.e.f. 1st April, 1989, it is not necessary for assessee to establish that the debt, in fact, has become irrecoverable, it is sufficient that the assessee has written off the bad debts in the account and the same has to be allowed. See T.R.F. Limited Vs. CIT (2010 (2) TMI 211 - SUPREME COURT ) - Deduction allowed - Decided in favor of assessee. Ad-hoc dis-allowance of 10% of sum paid as support service charges and professional fees to KCPL and KPMG u/s 40A(2)(b) - Held that:- In present case, AO has neither inquired 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. Thus, this matter is restored back to the file of the AO for verification and decision accordingly. Dis-allowance u/s 43B - contribution to the EPF - assessee contended allowance of expenditure in view of the second proviso to section 43B - Held that:- Since, in present case, payments have been made before the due date of filing of a return, hence in view of omission of second proviso to Section 43B and the amendment of first proviso by the Finance Act, 2003 being retrospectively effective from 1st April, 1988, dis-allowance is deleted. See CIT Vs. Alom Extrusions Ltd.(2009 (11) TMI 27 (SC)) - Decided in favor of assessee.
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