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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 ..... to DTAA to Australia. Hence, we remit this issue to the file of the ld. Commissioner of Income Tax (Appeals) to examine the issue of payment made to KPMG Australia with reference to the concerned DTAA . Disallowance u/s. 40(a)(i) - Held that:- As decided in assessee's own case 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 dismissed. - I.T.A. No.4842/Mum/2016 - - - Dated:- 4-1-2018 - SHRI SHAMIM YAHYA, AM AND SHRI SANDEEP GOSAIN, JM For The Appellant : Shri M. V. Rajguru For The Respondent : Shri Arijit Chakravarti And Shri Abhishek Tilak ORDER Per Shamim Yahya, A. M.: These are appeals by the Revenue directed against the respective orders of the ld. Commissioner of Income Tax (Appeals) for the concerned assessment years. Since the issues are connected and the appeals were heard together, these are being consolidated and disposed of by this common order. 2. The first common issue raised is that the ld. Commissioner of Income Tax (Appeals) erre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 failure to do so, the impugned expenditure was disallowed in terms of section 40(a)(i) of the Act. 4. Before the ld. Commissioner of Income Tax (Appeals), the assessee made various submissions contending that invoking the provisions of section 40(a)(i) was not justified. It was contended that the payment made to various non-resident entities were governed by the respective provisions of double taxation avoidance agreement with respective countries, in terms of which such payments were not income chargeable to tax in India. 5. The learned Commissioner of Income Tax (Appeals) referred to earlier decision of the ld. Commissioner of Income Tax (Appeals) in assessee s own case and its sister concern s and accepted that assessee s contention and decided the issue in favour of the asseessee. 6. Against the above order, the assessee is in appeal before us. 7. We have heard both the counsel and perused the records. Learned counsel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the payments made by the assessee to certain non-resident entities for professional services rendered by them outside India. It has been consistently explained by the assessee that the services of such entities were availed during the course of the execution of engagements of assessee firm. The assessee firm did not deduct the tax at source and, therefore, the Assessing Officer invoked the provisions of section 40(a)(i) of the Act and disallowed such expenditure. The details of the entities alongwith the amounts paid have been culled out by the Assessing Officer in Para-3 of the assessment order and the same is not being repeated for the sake of brevity. The payments have been made to 12 different professional entities based in 10 different countries. In so far as the payments that are made to KPMG LLP, USA and KPMG LLP, Canada are concerned, the same has been made on account of professional services rendered in re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayments 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 of 'business profits'. It has also not been disputed that such entities do not have a permanent establishment in India, therefore, such incomes are not chargeable to tax in India so as to require deduction of tax at source. On this aspect also, we affirm the stand of the CIT(Appeals) that such payments are not liable for disallowance under section 40(a)(i) of the Act. 5.3 With regard to the payments to KPMG, Mauritius, KPMG Hazen Hassan, Egypt, KPMG Dubai, UAE and KPMG, Sri Lanka are concerned, the CIT(Appeals) has noticed that the tax treaties with the respective countries do not have any Article defining 'fee for technical services'; and that the services were being rendered in relation to taxation matters. In this back ground, the CIT(Appeals) held that the payments for such services fall within the scope of article 14/15 of the respective treaties dealing with independent personal se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... educt 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 retrospective amendment would not expose the assessee-payer to an impossible situation of requiring deduction of tax at source on the date of payment. Therefore, on this count also the assessee cannot be held to be in default in not deducting tax at source so as to trigger the disallowance under section 40(a)(i) of the Act. Ld. Representative for the assessee has relied upon the decision of the Mumbai Bench of the Tribunal in the case of Channel Guide India Ltd. vs. ACIT, 25 taxmann.com 25 (Mum.) in support of the above said proposition. In the absence of any contrary decision, the said plea of the assessee is also liable to be upheld and the disallowance made by the Assessing Officer under section40(a)(i) of the Act is untenable. The disallowance has been rightly deleted by the CIT(Appeals), which we hereby affirm. 10. From the above, we find the issues raised are covered in favour of the asses ..... 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