Subscription   Feedback   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
Articles Highlights TMI Notes SMS News Newsletters Calendar Imp. Links Database Experts Contact us More....
Extracts
Home List
← Previous Next →

M/s. Kotak Mahindra Bank Limited Versus The Income Tax Officer (International Tax) TDS 3, Mumbai

TDS u/s 195 - whether Legal fees paid to non-resident Attorneys constitute royalty as per India-UK DTAA and also constitute ‘Royalty’ / ‘Fees for technical services’ [FTS] u/s. 9(1)((vi)/vii)? - PE in India - Held that:- Payment in question do not get covered by Section 9(1)(i) due to the fact that the payee has neither business connection in India nor any permanent establishment in India. - The assessee has obtained the legal services and such services find specific treatment as per Treaty .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

f the attorneys were present in India for more than 90 days, we are of the considered view that impugned payments are not taxable in India as per Treaty provisions Hence, the assessee was not liable for tax deduction at source from impugned payment. - Decided in favour of assessee. - ITA No. 3901/Mum/2013. - Dated:- 25-8-2016 - SHRI MAHAVIR SINGH, JM AND SHRI MANOJ KUMAR AGGARWAL, AM For The Revenue : Shri Sanjeev Jain (Sr. DR) For The Assessee : Shri Farrokh Irani ORDER PER MANOJ KUMAR AGGARWAL .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

vices [FTS] u/s. 9(1)((vi)/vii) of the Income Tax Act, 1961 and hence liable for tax deduction at source as per the provisions of the act. 2. Facts in brief, are that the assessee is engaged in the banking business and paid certain legal fees amounting to US $ 37318.87 to one legal firm situated in UK. As per the agreement, withholding tax @20% on gross amount amounting to US $ 9329.72 was the liability of the assessee which was duly deposited. Subsequently, the assessee filed an appeal u/s 248 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

urther, impugned payment constitute royalty as per Treaty provisions on the ground that assessee is provided with specialized knowledge, skill and experience in the field of regulatory norms prevalent in the US which can be utilized independently by the assessee on his own without recourse to the service provider. Finally, CIT(A) concluded that impugned payment are taxable both under domestic laws as well as under the Treaty provisions. Aggrieved, by the stand of CIT(A), the assessee is in appea .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

untry and hence the impugned payment was incurred for the purpose of making or earning a source of income which is situated outside India. Further, the impugned payments is not taxable in India under Section 9(1)(i) of the Act as the foreign attorneys have neither any business connection in India nor a Permanent Establishment in India as per Treaty Provisions. Also, the impugned payment did not constitute Royalty or FTS as per Treaty provisions as services obtained by the assessee did not result .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

h are covered under Article 15 and Article 15 being more specific in nature in the present case and hence override the provisions of Article 13. To support these contentions, AR relies upon following various judicial pronouncements: (i) Commissioner of Income Tax Vs. Rajendra Prasad Moody (Supreme Court) [115 ITR 519] (ii) Asstt. DIT (IT) Vs. M/s Clifford Chance (SB ITAT, Mumbai) [33 Taxmann.com 200] (iii) Income Tax Officer (International Taxation) Vs. Bajaj Hindustan Ltd. (ITAT Mumbai) [13 Tax .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

firms and hence taxable both under domestic law as well as under Treaty provisions. 4. We have heard the rival contentions are perused the material of record. The facts are not in dispute. First of all, it would be prudent to reproduce the nature of services being obtained by the assessee from the foreign attorneys as contained in letter of engagement dated 14/02/2010 issued by the legal attorneys M/s. Reed Smith :- This will confirm that Kotak Mahindra Bank Limited ( Kotak ) has engaged Reed Sm .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

he proposed acquisition. The contents of this letter shall, where specifically stated below, supercede the Standard Terms. Tom Todd and Michael Bleier will be the partners primarily responsible for the work Reed Smith performs on this matter. Subject to discussion with you, we will utilize Travis Nelson and such other additional attorneys, paralegals and other professionals as necessary to efficiently handle your work and to meet time deadlines. We have discussed with you the various aspects of .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

al / regulatory requirement of USA for setting up of a Bank Branch or acquisition of banking company etc. The nature of services are nowhere disputed by the revenue and accordingly, the perusal of documents shows that the payments are, in fact, being made for creating/earning a new source of income outside India by way of establishment of new Bank Branch or acquisition of a Bank. With these objectives, the legal / professional fees have been paid to the attorneys. 5. Now, It would be prudent to .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

s which reads as follows:- (vii)Income by way of fees for technical services payable by- (a)The Government; or (b)a person who is resident, except where the fees are payable in respect of services utilized in a business or profession carried on by such person outside India or for the purposes of making or earning any income from any source outside India; or… Therefore, as observed by us in preceding paragraph, the payment has been made with a view to carry on business outside India and cr .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

rce of income has not come into existence. But there is nothing in sec. 9(1)(vii) clause (b) of the Act, to show that the source of income should have come into existence so as to except he payment of fees for technical services. The expression used is for the purpose of earning any income from any source outside India. There is nothing in the language of sec. 9(1)(vii) clause (b) of the Act, which would go to show that the same is restricted to only to an existing source of income. We therefore .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

sioner of Income Tax Vs. Rajendra Prasad Moody (Supra), it is not necessary to show that the expenditure was a profitable one or that in fact any profit was earned. Expenditure in the course of the trade which is un-remunerative is nonetheless a proper deduction, if wholly and exclusively made for the purposes of the trade. It does not require the presence of receipt on credit side to justify the deduction of an expense. It is nowhere necessary that the purpose must be fulfilled to qualify the e .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

imited liability partnership (LLP) registered in England (registered number OC303620) with its registered office at The Broadgate Tower, 20 Primrose Street, London EC2A 2RS. 2. Reed Smith LLP is the beneficial owner of the legal fees and expenses for US$37,318.87 for which we have raised an invoice, with number 2077564 and dated 23 December 2010, payable by Kotak Mahindra Bank Limited. 3. For the purposes of the captioned remittance, we confirm that: • As an LLP, the partners of Reed Smith .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the meaning of Article 5 of the DTAA. • We do not have any office or establishment or fixed place of business in India. • No partner from our firm was, or will be, present in India for more than 90 days during the year. The above facts are nowhere disputed / confronted by the revenue and there is no adverse material on regard in this respect. Therefore, the payment in question do not get covered by Section 9(1)(i) due to the fact that the payee has neither business connection in India .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ember of a partnership, who is a resident of a contracting state in respect of professional services or other independent activities of a similar character may be taxed in that state. Such income may also be taxed in the other contracting state if such services are performed in that other state and if: (a) He is present in that other state for a period or periods aggregating to 90 days in the relevant fiscal year, (b) He, or the partnership, has a fixed base regularly available to him, or it, in .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

hat state. 3. The term professional services includes independent, scientific, literacy, artistic, educational or teaching activities as well as the independent activities or physicians, surgeons, lawyers, engineers, architects, dentists and accountants. The assessee has obtained the legal services and such services find specific treatment as per Treaty Article 15 and therefore, not covered by Article 13 which deals with Royalty and Fees for Technical Services . This view has also been upheld in .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ons for professional services will override the relatively general provisions of Artcile 13 which apply to broader category of 'managerial, technical or consultancy services'. We may, in this regard, refer to the following observations by the Tribunal in the case of RPG Industries Ltd. v. Asstt. CIT (2003) 79 TTJ (Cal)(TM) 819 : (2003) 85 ITD 105 (Cal) (TM), relevant portion at pp. 115 and 116 wherein one of us observed as follows and those observations were specifically concurred with b .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ys down that the general provisions will not override the specific provisions. In other words, provisions of Section 73, which specifically deal with speculation business, cannot be derogated by the provisions of Section 72 of the Act which deals with business losses in general. As observed by Hon'ble Supreme Court in the case of Union of India and Anr. v. India Fisheries (P) Ltd. (1965) 57 ITR 331 (SC). "If there is an apparent conflict between two independent provisions of law, the sp .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ovisions in the same enactment, one specific and other general with some overlapping between the two. The requisite conditions to attract this principle are: Firstly, both the general enactment and the particular enactment must be simultaneously operative, the general enactment covering larger filed and particular enactment covering a limited field out of the larger field covered by the general enactment and, secondly, there must be nothing contained in the general provisions indicating the legi .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 

what is new what is new
  ↓     Latest Happenings     ↓  

Article: MISTAKES IN DRAFTING

Forum: Duty Drawback- Urgent

Highlight: The Customs and Central Excise Duties Drawback Rules, 2017 and All Industry Rates (AIRs) of Drawback related changes -reg. - Circular

Highlight: The definition of "subsidiary company" or "subsidiary" u/s 2(87) of the Companies Act, 2013 shall come into force w.e.f. 20-9-2017

Highlight: Central Government notified the All Industry Rates of Duty Drawback Schedule w.e.f. 1.10.2017 - Notification

Notification: All Industry Rates of Duty Drawback Schedule w.e.f. 1.10.2017

Circular: Investment by Foreign Portfolio Investors in Corporate Debt Securities – Review

Notification: Exemptions on supply of services under UTGST Act

Notification: Rates for supply of services under UTGST Act

Notification: Exemptions on supply of services under IGST Act

Notification: Rates for supply of services under IGST Act

Notification: List of Exempted supply of services under the CGST Act

Notification: Rates for supply of services under CGST Act

Highlight: Acceptance of deposits by companies from its members - conditions relaxed in case of Specified IFSC Public company and a private company - Rule 3 amended

Notification: Rate of exchange of conversion of the foreign currency with effect from 8th September, 2017

News: Tax Payers Advised To Confirm Identities Of Income Tax Search Authorities

Notification: Amendment in Appendix 3 (SCOMET items) to Schedule- 2 of ITC (HS) Classification of Export and Import Items 2012

Forum: GST Invoice

Notification: The Customs and Central Excise Duties Drawback Rules, 2017

Circular: The Customs and Central Excise Duties Drawback Rules, 2017 and All Industry Rates (AIRs) of Drawback related changes -reg.

News: GST implementation smoother than expected: Jaitley

News: Blockage of Working Capital of Exporters

News: Clarification about Transition Credit

Forum: GST - TRAN1 - filed - Data uploaded with Remarks Processed with Error - Not coming in Electronic credit ledger - need suggession guidance

Forum: 3B mistake

Forum: Input tax credit

Forum: Excise duty credit on finished stock at additional place of business.

Forum: Due date of Filing TRAN-1

Highlight: Diversion of income at source - Joint venture agreement - 97% of the receipt transfer to M/s TRG Industries (P) Ltd. - scope of the agreement - it is diversion by overriding title - not taxable in the hands of assessee - HC

Highlight: Expenditure on eligible projects or schemes u/s 35AC - After 01.04.2017 the legislature desired to withdraw such deduction. - The Union legislature was competent to introduce such amendment - HC

Highlight: Transfer of trading assets at cost price, the profit component also stood transferred to the outgoing Directors, which otherwise belonged to the Company - the fact that AO has made the addition in the hands of the Directors would not make any difference - additions confirmed - HC

Highlight: The interest u/s 234B of the Act cannot go beyond the stage of S.245D(I) before the Settlement Commission - HC

Highlight: Galvanized iron pipe is a different commercial commodity than a iron pipe, therefore the activity of galvanization in our considered opinion amounts to manufacture - Deduction u/s 80-IB allowed - HC

Highlight: Penalty u/s 271C - non deduction of TDS on interest paid to sister concerns in terms of Section 194A - Levy of penalty confirmed - HC

Highlight: Disallowance of interest - reference to section 179 - The legislature has also recognised, that the doctrine of lifting of veil in the matter of tax dues is to be applied to prevent fraud etc. and not where the company has suffered despite its normal bona fide function. - HC

News: RBI Reference Rate for US $

Notification: Amendment in Notification No. S.O. 3118(E), dated the 3rd October, 2016

Highlight: Discount on ESOP to be allowed as business expenditure u/s 37(1), during the years of vesting on the basis of percentage of vesting during such period, subject to upward or downward adjustment at the time of exercise of option.

Notification: Central Government appoints the 20th September, 2017 as the date on which proviso to clause (87) of section 2 of the Companies Act 2013, shall come into force

Notification: Companies (Restriction on number of layers) Rules, 2017

Highlight: Penalty u/s 271(1)(c) - additional income disclosure - surrender of income post survey u/s 133A - he disclosure made by the assessee is voluntary in nature, in the revised return - no penalty

Highlight: Reopening of assessment - notice u/s 148 issued on the directions of JCIT / CIT - a perusal of reasons for initiating reassessment proceedings clearly show that they are against the sprit of provisions u/s 147

Highlight: MAT - Adjustment to book profit - computation u/clause (f) of Explanation-1 to section 115JB(2) is to be made without resorting to the computation as contemplated u/s 14A r.w.Rule 8D of I.T. Rules.

Highlight: Addition on account of alleged suppression of service value received - the addition made simply believing the Form 26AS will be an arbitrary exercise of power which cannot be sustained

Notification: Exempts intra state supply of heavy water and nuclear fuels from DAE to NPCIL

Notification: Seeks to amend notification No. 12/2017-UTT(R) to exempt right to admission to the events organised under FIFA U-17 World Cup 2017

Notification: Seeks to amend notification No. 11/2017- UTT(R) to reduce CGST rate on specified supplies of Works Contract Services

Highlight: Liability to pay duty on import of software - Though no authorization was given by the appellant to DHL, it is an undisputed position that the software has, in fact, been ordered by the appellant and have been delivered to them by DHL - the appellant is to be considered as the importer

Notification: Exempts inter-state supply of heavy water and nuclear fuels from DAE to NPCIL

Notification: Seeks to amend notification No. 09/2017-IT(R) to exempt right to admission to the events organised under FIFA U-17 World Cup 2017



|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version