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2018 (8) TMI 1903 - AT - Income TaxTDS u/s 195 - disallowance made u/s. 40(a)(i) - professional fees paid to KPMG LLP, United Kingdom - HELD THAT:- As could be seen from the above the Tribunal considered the payment made to KPMG LLP, UK and KPMG USMCG Ltd. UK and the liability to deduct TDS on such payment and the Tribunal held that the said entities do not have permanent establishment in India and Ld.CIT(A) found that such entities are eligible for the benefit of Article-15 of the Indo-US Double Taxation Avoidance Agreement dealing with independent personal services and therefore payments are not chargeable to tax in India so as to require the assessee to deduct TDS on the professional charges paid to the above entities. Facts being identical respectfully following the said decision we allow the Ground No.1 of the assessee. Adhoc disallowance on the expenses towards staff welfare, seminars/conferences and meetings expenses and miscellaneous expenses - complete vouchers were not furnished other than this observation - HELD THAT:- In the absence of any specific defects pointed out by the Assessing Officer in making adhoc disallowance other than general observation that complete vouchers were not furnished, we hold that there should not be any disallowance on adhoc basis, thus we direct the Assessing Officer to delete the adhoc disallowance made towards staff welfare, miscellaneous expenses, seminar/conference and meetings expenses Disallowance interest paid on service tax observing that the same is penal in nature and not an allowable expenditure - HELD THAT:- On a perusal of the decisions relied on the assessee, we find that the Tribunal held that interest on service tax is compensatory in nature and not penal in nature and is therefore allowable expenditure. On a perusal of the Explanation to Section 37(1) of the Act which says that any expenditure incurred by an assessee for any purpose which is an offense or which is prohibited by law shall not be deemed to have been incurred for the purpose of business or professions and no deduction or allowance shall be made in respect of such expenditure. Here the assessee made payment of interest for the delay in payment of service tax which in our considered view it is not an expenditure incurred for the purpose of any offence or prohibited by law. Thus, Assessing Officer to delete the disallowance made towards interest for delay in payment of service tax. Ground No. 3 is allowed.
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