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2016 (5) TMI 356 - ITAT MUMBAI

2016 (5) TMI 356 - ITAT MUMBAI - TMI - Disallowance invoking the provisions of section 40(a)(i) - Indo-US Double Taxation Avoidance Agreement - ‘fee for technical services’ - Held that:- There is no material to establish that any technical knowledge, skill, etc. has been made available to the assessee so as to consider it as falling within the purview of Article-12 of Indo-US Double Taxation Avoidance Agreement. It is also an established fact that such non-resident recipients do not have permane .....

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ts made to KPMG Tax Services Pvt. Ltd., Singapore, KPMG LLP, Singapore and KPMG Tax Advisor, Belgium, CIT(Appeals) made no mistake in holding that the payments are not 'fee for technical services'. The aforesaid services have been rightly held to be outside the purview of Article-12 and/or Article-13 of the respective tax treaties, and instead such income falls within the scope of Article-7 thereof i.e. in the nature of ‘business profits’. It has also not been disputed that such entities do not .....

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14/15 of the respective treaties dealing with independent personal services and in the absence of any fixed place of business of the recipient in India, income from such services was not chargeable to tax in India. Therefore, there was no requirement to deduct tax at source and accordingly the invoking of section 40(a)(i) of the Act has been set-aside by the CIT(Appeals). The aforesaid factual matrix brought out by the CIT(Appeals) has not been assailed by the Revenue before us on the basis of a .....

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treaty and, therefore, in the absence of any fixed place of business of the recipient in India, the impugned income is not chargeable to tax in India. Therefore, in such a situation, assessee is not liable for deduction of tax at source - Decided in favour of assessee - ITA No. 1917/MUM/2013 - Dated:- 6-5-2016 - Shri G. S. Pannu, Accountant Member And Shri Pawan Singh, Judicial Member For the Appellant : Shri Vaibhav Jain For the Respondent : Shri Harsh Kapadia/ Paras Savla/Viraj Mehta ORDER Pe .....

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₹ 1,45,89,345/- by invoking the provisions of section 40(a)(i) of the Act . 2.1 Briefly put, the relevant facts are that the respondent assessee is a firm of Chartered Accountants and during the year under consideration, it was found to have paid a sum of ₹ 1,45,89,345/- to various entities detailed in Para-3 of the assessment order on account of professional fee. On being show-caused as to why the requisite tax was not deducted at source, the assessee firm explained that the payment .....

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varied submissions contending that invoking of provisions of section 40(a)(i) was not justified. Assessee contended that the payments made to various nonresident entities was governed by the provisions of Double Taxation Avoidance Agreement (DTAA) with the respective countries, in terms of which such payments were not income chargeable to tax in India. The CIT(Appeals) has since upheld the stand of the assessee and did not find any merit in the stand of the Assessing Officer and accordingly, he .....

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ome. Primarily, it is revealed that professional services have been rendered by such entities for assistance in audit, taxation, IT services, professional services in relation to transfer pricing, VAT, etc. Ld. Representative for the assessee has also tabulated the recipient entities country-wise and made reference to the respective clauses in the Double Taxation Avoidance Agreements. In sum and substance, the discussion made by the CIT(Appeals) on each of the payments, in Para 1.3 to 1.3.4 by t .....

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and, therefore, the Assessing Officer invoked the provisions of section 40(a)(i) of the Act and disallowed such expenditure. The details of the entities alongwith the amounts paid have been culled out by the Assessing Officer in Para-3 of the assessment order and the same is not being repeated for the sake of brevity. The payments have been made to 12 different professional entities based in 10 different countries. In so far as the payments that are made to KPMG LLP, USA and KPMG LLP, Canada are .....

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stablish that any technical knowledge, skill, etc. has been made available to the assessee so as to consider it as falling within the purview of Article-12 of Indo-US Double Taxation Avoidance Agreement. It is also an established fact that such non-resident recipients do not have permanent establishment in India and, therefore, in the said background the same can, at best, be treated as independent personal services covered by Article-15 of the Indo-US Double Taxation Avoidance Agreement. As a c .....

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f Indo-US Double Taxation Avoidance Agreement dealing with independent personal services and hence, payments are not chargeable to tax in India so as to require deduction of tax at source. The aforesaid findings have not been disputed before us on the basis of any cogent material and, therefore, we hereby affirm the same. Consequently, invoking of section 40(a)(i) in the context of aforesaid payments is also not justified. 5.2 In the context of payments made to KPMG Tax Services Pvt. Ltd., Singa .....

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l services'. The aforesaid services have been rightly held to be outside the purview of Article-12 and/or Article-13 of the respective tax treaties, and instead such income falls within the scope of Article-7 thereof i.e. in the nature of business profits . It has also not been disputed that such entities do not have a permanent establishment in India, therefore, such incomes are not chargeable to tax in India so as to require deduction of tax at source. On this aspect also, we affirm the st .....

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ls) held that the payments for such services fall within the scope of article 14/15 of the respective treaties dealing with independent personal services and in the absence of any fixed place of business of the recipient in India, income from such services was not chargeable to tax in India. Therefore, there was no requirement to deduct tax at source and accordingly the invoking of section 40(a)(i) of the Act has been set-aside by the CIT(Appeals). The aforesaid factual matrix brought out by the .....

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re of independent personal services falling for consideration under Article-14 of Indo-Malaysia tax treaty and, therefore, in the absence of any fixed place of business of the recipient in India, the impugned income is not chargeable to tax in India. Therefore, in such a situation, assessee is not liable for deduction of tax at source in India so as to invoke the provisions of section 40(a)(i) of the Act. The stand of the CIT(Appeals) on this aspect is also affirmed by us on the basis of his fin .....

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