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TMI Blog2021 (3) TMI 832X X X X Extracts X X X X X X X X Extracts X X X X ..... not liable for withholding tax. Therefore, the same cannot be disallowed u/s.40(a)(i) of the Act. Professional charges paid to M/s. TWB Pty Ltd., a company of Chartered Accounts - In this case, evidences filed by the assessee clearly proves that M/s. TWB CA does not have any permanent establishment in India and services are rendered outside India in connection with filing of statutory returns and liaison with statutory authorities. Therefore, said payment is outside the scope of provisions of section 195 of the Act, because it is neither in the nature of royalties as defined u/s.9(1)(vi) of the Act nor in the nature of fess for technical services because the nature of services rendered by the company of accountants does not make available technical knowledge, expertise, skill, know-how or processes to the assessee. Therefore, said payment is also outside the scope of provisions of section 195 of the Act and thus, the assessee is not liable to deduct tax at source u/s.195 of the Act. Therefore, we are of the considered view that the AO as well as the CIT(A) has erred in disallowing professional charges paid to offshore entities for non-deduction of tax at source u/s.195 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x (Appeals) erred in confirming the action of the assessing officer in disallowing the legal and consultancy payment to K L Gates and retainer fee payment to TWBCA for non deduction of tax under section 195 disregarding the fact that the payment is not chargeable to tax in India as services were rendered outside India and hence no withholding tax ligation in this case. 3. The Commissioner of Income tax (Appeals) ought to have appreciated that M/s.K L Gates is a law firm providing professional services and the retainer fee for rendering professional services is not taxable in India as it does not make available any technical knowledge in India. 4. The Commissioner of Income tax ought to have appreciated that TWB, CA was a Chartered Accountant firm, where services were utilized for filing statutory returns in Australia. Payment for such services is not taxable in India as it does not make available any technical knowledge to the Appellant in India. 5. The Commissioner of Income tax (Appeals) erred in confirming the disallowance of internet charges and professional charges for non deduction of tax under Section 194J disregarding the fact that the TDS is deducted and paid in s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s. TWB CA for non-deduction of tax at source u/s.195 of the Act. The ld.AR submitted that the ld.CIT(A) has erred in confirming additions made by the AO towards professional charges paid to offshore entities without appreciating the fact that payment is not eligible to tax in India as services were rendered outside India and hence no withholding tax as per the provisions of section 195 of the Act. The ld.AR for the assessee referring to various documents including professional bill submitted by the parties, argued that as per the provisions of Article 14 of Double Taxation Avoidance Agreement between India and Australia, independent professional services by an individual or a firm of individuals other than a company who is a resident of one of the Contracting States in respect of professional services or other independent activities of a similar character shall be taxable only in that State unless the individual or firm has a fixed base in India. The ld.AR further submitted that even professional charges paid to a company of Chartered Accountants is outside the scope of provisions of section 195 of the Act, because as per Article 7 of DTAA between India and Australia, the profit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al or a firm of individuals [other than a company] who is a resident of one of the Contracting States is taxable only in that State unless individual or firm has a fixed base in India. In this case, on perusal of details filed by the assessee, we find that M/s. KL Gates has rendered professional services in connection with dispute with Tranzact Financial Services and such services are in the nature of independent professional services as defined under Article 14 and hence are outside the scope of definition of royalties as defined u/s.9(1)(vi) of the Act, and thus, outside the scope of provision of section 195 of the Act. Therefore, we are of the considered view that the assessee is not liable to deduct tax at source u/s.195 of the Act, when payment is made to offshore entity for rendering independent professional services which covered under Article 14 of DTAA between India and Australia, consequently not liable for withholding tax. Therefore, the same cannot be disallowed u/s.40(a)(i) of the Act. 8. As regards professional charges paid to M/s. TWB Pty Ltd., a company of Chartered Accounts, although payment made to said company is not covered under Article 14, but said payment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n record and gone through the orders of the authorities below. Admittedly if any payment is made without deduction of tax at source, then said payment cannot be allowed as deduction u/s.40(a)(ia) of the Act. Further, if the assessee does not deduct tax at source within the due dates specified in respective provisions of the Act, but tax deducted at source has been deducted on or before furnishing return of income u/s.139(1) of the Act, then such payment cannot be disallowed u/s.40(a)(ia) of the Act. In this case, the AO has disallowed provision for expenses like internet charges and professional charges on the ground that the assessee has failed to deduct tax at source u/s.194J of the Act. It is a case of the assessee that it has deducted TDS on impugned payments in subsequent financial year, but before the due dates specified in sub-section (1) of section 139 of the Act. If the claim of the assessee is correct, then the impugned payments cannot be disallowed u/s.40(a)(ia) of the Act. Therefore, to verify the facts the issue has been set aside to the file of the AO for the limited purpose of verification with regard to ascertaining the fact of deduction of TDS on or before the due ..... 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