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TMI Blog2015 (4) TMI 724X X X X Extracts X X X X X X X X Extracts X X X X ..... other independent activities of similar character shall be taxable only in the first mentioned State. It further states that such income may also be taxed in the other Contracting State under the specific circumstances The non-resident to whom the Assessee has made the payment does not have any fixed base regularly available to him for performing his duty. Even he does not have any permanent establishment. That is not the case of the Revenue. Admittedly, in the present case Saba and Co. is not having any fixed base in India and hence, as the condition of Article 14 is not fulfilled and Saba and Co. which is a resident of Morocco cannot be taxed in India in respect of fees paid by the assessee company for initiating and prosecuting the legal proceedings in the Morocco. - Decided in favour of assessee. - ITA No. 536/PN/2013 - - - Dated:- 6-1-2015 - SHRI R.S. PADVEKAR AND SHRI R.K. PANDA, JJ. For The Appellant : Shri C.H. Naniwadekar For The Respondent : Shri P.S. Naik ORDER PER R.S. PADVEKAR, JM:- This appeal is filed by the assesse challenging the impugned order of the Ld. CIT(A)-I, Pune dated 03-12-2012 for the A.Y. 2008-09. The assessee has taken the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Sec. 195 of the Act for deducting the tax at source is necessary that the income has to accrue and arise in India and as in the said case there is no accrual of an income, the assessee is not bound to deduct the tax at source. The assessee also pleaded that as per the provisions of DTAA between India and Morocco, the payment is not taxable in India and hence, there is no requirement to deduct the tax at source. The Assessing Officer held the payment made by the assessee to Saba Co. as the fees for technical services and he has discussed the said issue in the assessment order on Page Nos. 4 to 7. 4. The Assessing Officer also relied few decisions in support of his stand that even if the services are rendered outside India as those services are used in India then income of non-resident is taxable. The Assessing Officer also referred to Article 12 of DTAA between India and Morocco which is in respect of royalty and fees for technical services and it treatment in the Contracting State. The Assessing Officer finally made the disallowance of ₹ 22,31,018/- by invoking the provisions of Sec. 40(a)(i) r.w.s. 195 of the Act. The assessee carried the issue before the Ld. CIT(A) b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that as per the description of services the said firm is involved in providing the legal services to the assessee company by initiating legal proceeding and getting a restraining order from the Tribunal of Commerce at Rabat (Morocco). He also referred to other correspondence from Saba Co., copies are filed at Page Nos. 8, 9, 10, 11, 12, 13 14 etc. He submits that as per the evidence on record whatever the services are rendered by Saba Co. are in the nature of legal services and not technical services. The legal services are covered in Article 14 of the DTAA between India and Morocco and not under Article 12. He argues that the Assessing Officer has treated the payment made by the assessee as the fees for technical services without understanding the nature of services rendered by Saba Co. He submits that as per the normal provisions of the Act u/s. 9, the payment made by the assessee may cover as taxable in India but as the provisions of DTAA between India and Morocco are more beneficial to the assessee and hence, the assessee is relying on the said Treaty. He argues that Article 14 of DTAA between India and Morocco specifically refers to the services of the lawyers and unle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and destroy the stock held by them, to publish the expected judgement in local newspapers at their expense and to bear judicial costs. We have also submitted a petition to the president of tribunal acting in chambers seeking the preliminary injunction. We shall not fail to keep you apprised of any new progress of the proceedings and particularly the date of the upcoming Hearing at the appropriate time. Attached herewith is our debit note covering the legal fees and expenses, for your kind settlement, at your earliest convenience. Assuring you always of our best services, we remain, Very truly yours, SABA Co., Casablanca Office MDD 8. The assessee has also filed the copy of bill received from Saba Co. at Page No. 3 of the Compilation, being Bill No. MAT/7377697/08/IN dated 24th September, 2007. In the said bill Saba Co. has claimed the legal fees and expenses for initiating the anti-counterfeiting proceedings before the Tribunal of Commerce at Rabat (Morocco) against one Nice Agricole. There is another written communication from Saba Co. to the assessee dated 25th September, 2007, copy placed at Page No. 4 of the Compilation, which again refers to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... situation when income from the professional services will be taxable in the Contracting State if the resident of the another Contracting State has fixed base regularly available to him in the other Contracting State for the purpose of performing his activities or if his stay in the other Contracting State is for a period or periods amounting to or exceeding in aggregate to 183 days in the relevant fiscal year. As per the certificate filed by the Saba Co. it has no permanent establishment in India. Saba Co. is not an individual but even if it is a firm then what would be the fate. 11. In Article 14 the term a resident is used. The term resident is defined in Article 4 of the said Treaty which reads as under: ARTICLE 4 - Resident : 1. For the purposes of this Convention, the term resident of a Contracting State means any person who, under the laws of that State or any political sub-division or local authority thereof, is liable to tax therein by reason of his domicile, residence, place of management or any other criterion of a similar nature. This term, however, does not include any person who is liable to tax in that State in respect only of income from sources in tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ard the rival submissions and carefully considered the same. We have perused the material on record alongwith the order of the tax authorities below. It is a settled law that the provisions of Sec. 195 of the Income Tax Act will apply only if the payment made to the non-resident has an element of income chargeable to tax in India. If there is a conflict between the provisions of the Income Tax Act and the DTAA entered by India with the other country, the provisions of the DTAA, if beneficial to the Assessee, shall prevail. In this case, it is not disputed that the legal consultancy services has been provided by the non-resident to which Article 14 of the DTAA between India and Portugal are applicable. Article 14 clearly lays down that income derived by a person who is an individual or a firm of individuals (other than a company) who is resident of a Contracting State from the performance in other Contracting State of professional services or other independent activities of similar character shall be taxable only in the first mentioned State. It further states that such income may also be taxed in the other Contracting State under the following circumstances: (a) If such perso ..... X X X X Extracts X X X X X X X X Extracts X X X X
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