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2015 (4) TMI 724 - AT - Income TaxDisallowance of Payment made to Saba & Co. on account of non deduction of Tax at Source towards legal & professional fees - income not chargeable to tax India - Held that:- We have perused the material on record alongwith the order of the tax authorities below. It is a settled law that the provisions of Sec. 195 of the Income Tax Act will apply only if the payment made to the non-resident has an element of income chargeable to tax in India. If there is a conflict between the provisions of the Income Tax Act and the DTAA entered by India with the other country, the provisions of the DTAA, if beneficial to the Assessee, shall prevail. In this case, it is not disputed that the legal consultancy services has been provided by the non-resident to which Article 14 of the DTAA between India and Portugal are applicable. Article 14 clearly lays down that income derived by a person who is an individual or a firm of individuals (other than a company) who is resident of a Contracting State from the performance in other Contracting State of professional services or other independent activities of similar character shall be taxable only in the first mentioned State. It further states that such income may also be taxed in the other Contracting State under the specific circumstances The non-resident to whom the Assessee has made the payment does not have any fixed base regularly available to him for performing his duty. Even he does not have any permanent establishment. That is not the case of the Revenue. Admittedly, in the present case Saba and Co. is not having any fixed base in India and hence, as the condition of Article 14 is not fulfilled and Saba and Co. which is a resident of Morocco cannot be taxed in India in respect of fees paid by the assessee company for initiating and prosecuting the legal proceedings in the Morocco. - Decided in favour of assessee.
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