TMI Blog2023 (4) TMI 939X X X X Extracts X X X X X X X X Extracts X X X X ..... contrast to Article 14 of India- Germany Treaty, we find a marked difference. While, in all other treaties considered Articles governing Independent Personal Services refer to both individual and partnership firm, however, Article 14 of India- Germany Treaty is quite restricted in its scope as paragraph 1 of Article 14 refers only to income earned by an individual. Decisions of the Tribunal in preceding assessment years would not apply, qua, the payment made to a German entity, which no doubt, is a partnership firm. Therefore, the assessee cannot take the benefit o Article 14 of India-Germany Treaty. Whether the payment made can be treated as FTS under Article 12(4) of the India-Germany Treaty?- From the nature of services for whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 013-14. 2. The dispute in the present appeal is confined to disallowance of Rs.7,57,940 made under Section 40(a)(i) of the Income-Tax Act,1961. 3. Briefly, the facts relating to this issue are, the assessee is a limited liability partnership firm and is a resident of India. As stated by the Assessing Officer, the assessee provides international accounting and advisory services to various clients within India and abroad. For the assessment year under dispute, the assessee filed its return of income on 27.09.2013 declaring income of Rs.20,05,79,536. 4. In course of assessment proceedings, the Assessing Officer noticed that in the year under consideration, the assessee had paid professional fee amounting to Rs.33,06,542 to various ove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he context of facts and material on record, learned Commissioner (Appeals) held that, though, the payment made to entities based in UK, USA and Singapore, are in the nature of managerial, technical and consultancy services, however, since, the make available condition enshrined in the treaties is not fulfilled, they will not qualify as FTS. Accordingly, he deleted the disallowance made under Section 40(a)(i) of the Act in respect of such payments. Further, he deleted the disallowance made under Section 40(a)(i) in respect of payments made to entities in Cyprus and Indonesia on different reasonings. 5. Admittedly, the Revenue is not in appeal against such decision of learned Commissioner (Appeals). The only disallowance sustained by learn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons and perused material on record. 11. Undisputedly, the assessee has paid the amount to an entity in Germany towards certain professional services rendered to assessee s clients in Germany. The issue which falls for consideration is the nature of payment made and its taxability in India at the hands of the recipient. While, learned Commissioner (Appeals) has treated it as FTS under Article 12(4) of India-Germany Treaty, the assessee claimed it as payment for Independent Personal Services falling under Article 14 of the treaty. On careful reading of Article 14 of treaty as a whole and specifically Article 14(1), it is observed that it is only applicable to income derived by an individual towards certain professional services. The term ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n is whether the payment made can be treated as FTS under Article 12(4) of the India-Germany Treaty. From the nature of services for which payment was made, it can very well be said that neither it is managerial, nor technical nor consultancy services. Even, the Assessing Officer has admitted that it is in the nature of professional fee. Thus, undoubtedly, payment made by the assessee to CA firm is for professional services rendered. The fact that payment made for professional services will not fall within the definition of FTS under Article 12(4) of the treaty is evident from putting it under Article 14 of the treaty, though, it applies to Individuals only. Thus, in absence of a specific provision under the treaty, the payments have to be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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