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2017 (2) TMI 797 - AT - Income TaxTDS u/s 195 - Disallowance under section 40(a)(i) - ‘subscription fees’ paid to DTT Swiss Verein for non-deduction of tax at source - DTAA - Held that:- Prerequisite condition for going through the procedure of 195 is that, income should be first held to be chargeable to tax in India. The assessee, as noted above, has made out its case in a very elaborate manner as to why the payment made to DTT Switzerland is not liable for tax in India. However, both the authorities have not properly adjudicated these aspects. Therefore, in the interest of justice, we are of the opinion that this matter should go back to the file of the Assessing Officer who shall decide, firstly, whether the payment of subscription fee to DTT is liable to tax in India under the provisions of the Act or not; and secondly, he should also to examine whether it is in the nature of reimbursement of expenses. If it is found that the payment made to DTT Switzerland is in the nature of reimbursement of expenses, then assessee cannot be held to be liable for deducting TDS. With this direction, the matter is restored back to the file of the Assessing Officer and accordingly, ground No.1 is treated as party allowed for statistical purposes. disallowance of payment of ‘professional fees’ - non deduction of tds - Held that:- CIT (A) has reckoned the payment as “fees for technical services” without elaborating or elucidating the nature of payment. So far as the benefit under India-New Zealand DTAA, the payment of professional fee is not taxable under Article 14, which deals with “Independent personal services”. The language of Article 14 is similar to the language of India-Canada DTAA which has been reproduced hereinabove. Here also DTT New Zealand neither has any fixed base/ PE nor had any of its employees/professionals stayed in India for the period exceeding 183 days in any consecutive twelve months period. Accordingly, under the DTAA the “professional fee” paid to DTT is not taxable in India. However, Article 12(4) of India-New Zealand DTAA dealing with “fees for technical services” imbibes same definition as has been given under the Income Tax Act. Our finding given on the issue of FTS under Section 9 (1) (vii) will apply mutatis mutandis here also. Therefore, in view of our finding given therein, the said payment cannot be held to be taxable in India either under Section 9 (1) (vii) or under Section 9 (1) (i). Accordingly, disallowance made by the AO u/s 40(a) (i) is directed to be deleted. Interest u/s 244A - Held that:- As it has been pointed out by the learned Sr. Counsel that for one month i.e. September, 2003 the rate of interest was two third percent instead of half percent in terms of Rule 119A. The AO has not correctly worked out the interest in accordance the said Rule. Accordingly, the AO is directed to examine the working of the interest and rate of interest and grant correct interest in accordance with the Law. Disallowance of payment of professional fees made to DTT Australia - Held that:- T he payment of professional fee to DTT Australia is held not to be taxable u/s 9(1)(i) or 9(1)(vii) or in terms of Article 12(4) of DTAA, which has ‘make available clause’ and is similar to India Canada DTAA. Thus, the disallowance made by the AO and as confirmed by the CIT (A) is directed to be deleted. Disallowance of ‘Satyanarayan puja’ expenses - Held that:- Satyanarayan puja’ is done at the business premises for the larger interest of the professional and employees of the assessee firm. It was more in the nature of goodwill gesture and keeping good relationship and environment amongst the colleagues. If any expenditure which is incurred for the general benefit of the professionals and employees, the same cannot be held to be incurred for non-business purposes. Thus the puja expenses have been allowed for business purposes. - Decided in favour of assessee Disallowance of entertainment expenses - Held that:- We find that there is no reason to tinker with the disallowance upheld by the learned CIT (A), because the assessee could not furnish any details to controvert the finding. The disallowance as confirmed by the learned CIT (A) appears to be reasonable because personal nature expenditure cannot be ruled out in the entertainment expenses in absence of details. - Decided against assessee
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