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2016 (4) TMI 953 - AT - Income TaxTDS u/s 195 - Disallowance u/s. 40(a)(i) - professional fees paid outside India without deduction of tax at source - existence of PE in India - Held that:- Looking into the nature of services rendered. It is seen that, firstly, none of these services fall in the nature of ‘make-available’ of any technical knowledge, experience, skill, know-how or process. The provisions of Indo-U.S. and U.K. treaties are absolutely clear that in case of fees for technical services, it is essential that technical knowledge, skill, know-how should be made available to the assessee and the assessee should be at liberty to use them in its own right. If the service does not result in making available of any such thing, then the same would not fall within the ambit of fees for technical service. These payments also cannot be taxed under Article 7 as none of them were having any P.E. or fixed base in India and the duration of their visit in India was also for a very less period. Therefore, such a payment does not attract the provisions of TDS under section 195. See KPMG vs JCIT [2013 (11) TMI 188 - ITAT MUMBAI] - Decided in favour of assessee Disallowance made by the AO u/s 40a(i) in respect of professional fee paid to KPMG Huazhen, China - Held that:- No law can create an obligation to deduct tax at source by retrospective operation. Thus, in our considered view, the assessee was not required to deduct tax at source on the said payment. It is further noted by us that KPMG Huazhen is an entity registered in China and it is resident of China as is understood in Indo-China tax Treaty. The admitted facts on record are that services were rendered in China in relation to the review of information securities services and assistance in audit. The assessee has claimed that services in question would fall specifically in article 14 of Indo China Treaty. We have gone through article 14 of the Tax Treaty which provide that income derived by resident of a contracting state in respect of professional services or other activities of an independent character shall be taxable only in that contracting state except when the said resident has a PE or fixed basis or stay exceeding prescribed number of days in the other contracting states. It is noted on the basis of facts brought before us that these professional services have been provided in China by a team consisting of accountants, lawyers and engineers. Thus, we find that these services specifically fall in Article 14, and in absence of their being any PE or any stay of the persons of KPMG China, in India, the payment made by the assessee was not taxable in India and therefore, not liable to deduction of tax at source. - Decided in favour of assessee
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