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2021 (12) TMI 1354 - AT - Income TaxDisallowance u/s 40A(2) - payment to related party - Addition made as Ms. Anjali Lall does not possess the required qualification to undertake the job of interior decoration repair and maintenance and secondly the payment is unreasonable and excessive - HELD THAT - Expression the Assessing Officer is of the opinion that such expenditure is excessive or unreasonable having regard to the fair market value of the goods services or facilities as used in section 40A(2) of the Act makes it abundantly clear that the opinion of the Assessing Officer cannot be formed in vacuum and without any cogent evidence. It is the Assessing Officer who has to establish on record that the payment made to the related party is unreasonable and excessive having regard to the market value of the goods services or facilities for which payment is made. In the facts of the present case admittedly except stating that the related party is not technically qualified to undertake the work and the payment made is unreasonable and excessive the Assessing Officer has not brought any material on record to demonstrate that the payment made is excessive and unreasonable having regard to the market value of the services for which such payment was made. Thus the disallowance made under section 40A(2) without being back by cogent evidence and purely on conjectures and surmises cannot be sustained. Accordingly we delete the disallowance made - Decided in favour of assessee. TDS u/s 195 - disallowance u/s 40(a)(i) - failure to withhold tax at source on payment made to various persons/entities outside India towards professional/technical fee - HELD THAT - Payments made to non-resident attorneys cannot be regarded as FTS under section 9(1)(vii) of the Act. Further a conjoint reading of section 40(a)(i) and 40(a)(ia) brings out a clear distinction between FTS and fees for professional services. Though section 40(a)(ia) encompasses both FTS and fees for professional services however section 40(a)(i) is applicable only in case of failure to deduct tax on payments made for FTS. As rightly submitted by learned counsel for the assessee this could be for the reason that payment of legal/professional fee to a non-resident does not accrue or arise in India or is not deemed to accrue or arise in India as per section 5 and section 9 of the Act. It is relevant to observe in the case of NQA Quality Systems Registrar Ltd. Vs. DCIT 2004 (12) TMI 323 - ITAT DELHI-F the coordinate Bench has held that professional services are a category distinct from technical services. Thus we hold that the payments made to non-resident attorneys being not in the nature of FTS there was no obligation on the assessee to deduct tax at source. Payments made to foreign attorneys are not chargeable to tax under the provisions of the Act in terms of section 195 of the Act. Therefore the assessee was not required to withhold tax on the payments made. Accordingly we delete the disallowance made under section 40(a)(i) of the Act. - Decided in favour of assessee.
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