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TMI Blog2018 (1) TMI 666X X X X Extracts X X X X X X X X Extracts X X X X ..... me of non-resident Amount (Rs.) 1 KPMG LLP, USA 6,82,800/- 2 KPMG, Mauritius 1,01,982/- Total 7,84,782/- ITA No. 4844/Mum/2016 Sr. No. Name of non-resident Amount (Rs.) 1 KPMG LLP, USA 3,98,070 2 Manabat Sanagustin & Co., Philippines 12,27,430 Total 16,25,500 ITA No. 4556/Mum/2016 Sr. No. Name of non-resident Amount (Rs.) 1 KPMG LLP, USA 3,51,300 2 KPMG United Kingdom Plc. UK 10,18,416 3 KPMG United Kingdom Plc. UK 4,48,744 4 Manabat Sanagustin & Co., Philippines 4,50,896 Total 22,69,356 3. In these cases, the asseessee is the firm of chartered accountants and during the years under consideration it has paid sums to various entities on account of professional fee. On being show caused as to why the requisite tax was not deducted at source, the asseessee firm explained that the payment was made to various nonresidents and it is not in the nature of income chargeable to tax in India and, thus, tax was not required to be deducted in terms of section 195 of the Act. The assessing officer however did not accept the submissions of the assessee and instead held that tax was required to be deducted at source and on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 as has been discussed upon. Therefore, such a payment does not attract the provisions of TDS under section 195. Provisions of section 195(1) uses the expression "chargeable under the provisions of the Act". The payer is bound to deduct tax at source only if the sum paid is assessable to tax in India. The obligation to deduct tax is limited to the appropriate proportion of income which is chargeable under the Act and not otherwise. The Hon'ble Supreme Court in G.E. India Technology Centre Pvt. Ltd.(supra), after analyzing the provisions of section 195 and the decision in Transmission Corporation of KPMG A.P. Ltd. (supra) has given its observation on section 195(1) of the Act. 9. Further, we note that ITAT in assessee's own case on similar issue in the case of Asst. CIT vs. M/s. BSR & Co. (in ITA No.1917/Mum/2013 dated 06.05.2016) has expounded as under: 5. In the above background, we have carefully considered the rival submissions. Pertinently, the issue revolves around ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt 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., Singapore, KPMG LLP, Singapore and KPMG Tax Advisor, Belgium, the CIT(Appeals) noted that they are companies registered in the respective countries, who have rendered services outside India. Such services related to assistance in audit, taxation, information technology services, conducing background checks, etc. Considering the nature of the services rendered, which is not disputed by the Revenue, in our view, the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he sake of argument, that the services by the aforesaid entities are in the nature of technical services and are rendered and utilized in India so as to be taxable in terms of section 9(1)(vii) of the Act, even then the disallowance is not warranted as the following discussion would show. Ostensibly, the requirement of rendering services in India in order to attract section 9(1)(vii) of the Act was removed by insertion of Explanation by the Finance Act, 2010 with retrospective effect from 1/4/1976. This has been understood by the Revenue to say that inspite of the services having been rendered by the recipients outside India, the same is taxable in India by applying the aforesaid amendment. In our view, such retrospective amendment would be determinative of the tax liability in the hands of the recipients of income. So however, in the present case, what is held against the assessee is the failure to deduct tax at source at the time of payment of such income. Ostensibly, dehors the aforesaid amendment, the impugned income was not subject to tax deduction at source in India as per the prevailing legal position. Taxability of a sum in the hands of recipient, on account of a subsequent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that identical issue has been decided in favour of the assessee by ITAT in assessee's own case. Per Contra the learned counsel of the assessee did not dispute this proposition. 12. Upon careful consideration we find that identical issue was considered by this tribunal in assessee's own case in ITA No. 2493/Mum/2012 & CO No. 97/Mum/2013 dated 07.04.2017 very elaborately and the conclusion read as under: 19. With the above discussion we may conclude that in the case in hand, there is a complete identity between the contributors and participators; the actions of the participators and contributors are in furtherance of the mandate of the association. There seems be no element of profit by the contributors from a fund made by them, which could only be expended or returned to themselves. Based on these conditions and respectfully relying on the case laws as the Hon'ble Apex Court and various High Courts laid down that the case of the assessee falls within the four corner of the ambit of the 'Principle of Mutuality'. Thus, we do not find any reason or ground to interfere in the order passed by learned Commissioner (Appeals) hence the appeal filed by the revenue is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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