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TMI Blog2017 (1) TMI 1053X X X X Extracts X X X X X X X X Extracts X X X X ..... ount is not disallowable u/s. 40(a)(ia). Accordingly, assessee’s grounds are allowed. AO is directed to exclude the amount and allow the same as deduction. - Decided n favour of assessee. - I.T.A. No. 1101/HYD/2016 - - - Dated:- 16-12-2016 - SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER For The Assessee : Shri M.V. Anil Kumar, AR For The Revenue : Smt. Suman Malik, DR ORDER PER B. RAMAKOTAIAH, A.M. : This is an appeal by assessee against the order of the Commissioner of Income Tax (Appeals)-3, Hyderabad dated 26-05-2016, confirming the action of the Assessing Officer (AO) in disallowing an amount of ₹ 1,05,05,655/- under the provisions of Section 40(a)(ia) of the Income Tax Act [Act]. 2. Briefly stated facts are that assessee debited an amount of ₹ 1,05,05,655/- under the head professional charges . When enquired, it was explained that this payment was made to a party called Precision Energy Associates, LLC, USA, represented by its proprietor, Mr. Joe Mitchell, a professional consultant. AO disallowed the amount on the reason that the services rendered by the said person are technical services and as pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant company and Mr.Joe Mitchell, who was a technical expert rendering his advice on operation and maintenance of this imported machinery. In the meantime, the appellant developed in-house talent and from February 2010 onwards the consultancy of foreigners was done away with. 5.3 During the relevant financial year an amount of ₹ 1,05,05,650/- was paid to foreign consultant Mr.Joe Mitchell. The amounts were paid through banking channels. From the copy of Invoices raised by Mr. Joe Mitchell, one can understand that Mr.Joe Mitchell raised one invoice per month which Includes remuneration of 18,000/- USD per month along with other expenses like travel, living and other misc expenses. As per the ledger account of Mr.Joe Mitchell, all the amounts were paid through the banks. 5.4 As per note given by the appellant during appeal proceedings, the services rendered by Mr.Joe Mitchell are as under: All the Plant Technical decisions were finalized vetted by him. Mr. Joe Mitchell used to visit Kakinada Site for couple of days every month/alternate month and he communicated either telephonically or through email for the rest of the period during the financial year 2008- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (b) a person who is a 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 is deemed to be income accruing or arising in India. In the Instant case, the services were rendered In India by a foreign consultant. Therefore, the provisions of Sec.9(1)(vii)(b) are clearly attracted and the payment made to Mr.Joe Mitchell Is clearly taxable in India. Explanation to Sec.9(2) read as under:- [Explanation. - For the removal of doubts, it ls hereby declared that for the purposes of this section, income of a non-resident shall be deemed to accrue or arise in India under clause (v) or clause (vi) or clause (vii) of sub-section (1) and shall be included in the total income of the non-resident, whether or not. (i) the non-resident has a residence or place of business or business connection in India, or (ii) the non-resident has rendered services in India. This explanation was introduced In Finance Act 2010 with retrospective effect from 1.6.1976. According to this explanation, the non-res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the aggregate 90 days in the relevant taxable year. 2. The term professional services includes independent scientific, literary, artistic, educational or teaching activities as well as the independent activities of physicians, surgeons, lawyers, engineers, architects, dentists and accountants. As evident from clause (b) of Article 15, the professional services are taxable In other contracting state (India) if the period of stay exceeds 90 days during the relevant financial year. In the Instant case, period of stay was 93 days, therefore Mr. Joe Mitchell was clearly liable to tax in India, therefore such payment is liable to TDS . Article 16 of DTAA read as under: . Dependent Personal Services 1. Subject to the provisions of Articles 17 (Directors' Fees), 18 (Income Earned by Entertainers and Athletes), 19 (Remuneration and Pensions in Respect of Government Service), 20 (Private Pensions, Annuities, Alimony and Child Support), 21 (payments Received by Students and Apprentices) and 22 ( Payments received by Professors, Teachers and Reserch Scholrs), salaries, wages and other similar remuneration derived by a resident of a Contracting State in r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,655. 4. Your Appellant submits that the Provisions of section 40(a)(i) or 40(a)(ia) are not applicable to the facts of the case, therefore the addition may be deleted. 5. Your Appellant submits that the CIT(A) erred in holding that the services rendered by Mr. Joe Mitchell are independent personal services and not dependent personal services ignoring the fact that he is an employee of M/s. Precision Energy Associates, a company in USA. 6. Your Appellant submits that the actual stay of Mr. Joe Mitchell during the previous year relevant to the Assessment year in question is only 86 days and not 93 days, as the day of arrival or departure are ignored while calculating the days of stay, therefore even as per Article 15 or Article 16 of DTAA with USA, his stay in India is within the stipulated period. Hence, the payment is not taxable in India. 7. Your Appellant alternatively submits that in absence of any Permanent Establishment (PE) in India, the services of Mr. Joe Mitchell or M/s Precision Energy Associates are not taxable under the Income Tax Act, 1961 by virtue of the DTAA with USA. 8. Your Appellant submits that it is not the case of the Assessing O ..... X X X X Extracts X X X X X X X X Extracts X X X X
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