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TMI Blog2021 (10) TMI 78X X X X Extracts X X X X X X X X Extracts X X X X ..... justified for the purpose of profession as the IBA Annual Conference and Exhibition was only from 30th September to 5th October, 2012 (only for 6 days). The Learned Counsel of the assessee could not justify before us also the period of 21 days in foreign country for the purpose of professional work. In our opinion, the finding of the Learned CIT(A) on the issue in dispute is well reasoned and we do not find any error in the same. Accordingly, we uphold the same and dismiss the ground no. (ii) of the appeal of the assessee. TDS u/s 195 - Disallowance u/s 40(a)(ia) - non-deduction of the tax at source on payment made to International Bar Association (IBA) - HELD THAT:- Neither the Assessing Officer, nor the Ld. CIT(A) has specified which kind of PE exist in the case of non-resident entity or how the business connection of non-resident is established. Even if, we assume that lower authorities have thought of fixed place PE, then the authorities are required to establish that place of Indian Bar Association was under 'control' and at the 'disposal' of International Tax Bar Association and 'core activity' of International Tax Bar Association has been carrie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax Act, 1961 (in short 'the Act') on 13/12/2015, after making certain additions/disallowances. On further appeal, the Learned CIT(A) allowed part relief to the assessee. Aggrieved, the assessee is in appeal before the Tribunal raising the grounds as reproduced above. 3. Before us, the parties appeared through Video Conferencing facility and filed paper-book and other documents through email. 4. The ground No. (i) of the appeal relates to disallowance of electricity and water expenses, amounting to ₹ 26,303/-. The assessee claimed entire electricity expenses of residence located at B-252 Greater Kailash, Delhi as expenses incurred wholly and exclusively for the purpose of profession, however, the Assessing Officer held that at maximum a room in the residence could have been claimed to be used for the purpose of the professional work and, accordingly, he allowed 10% of the electricity expenses of the residence towards professional expenses and balance 90% was disallowed. The Ld. CIT(A) following the decision of the Tribunal in the case of the assessee in earlier year sustained 50% of the disallowance and allowed relief for the balance amount. The finding of the Ld ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitted before me and it is found that the supporting bills of ₹ 67,000/- are not legible. As per the submission of the appellant the expenses are incurred over a period of 21 days whereas IBA Annual Conference Exhibition was held from 30th September to 5th October, 20(sic) only. Hence, the period of stay of 21 days foreign visit cannot be held 'wholly and exclusively for the purpose of business. In this light, as the appellant has failed to give legible supporting evidence, the justification of expenses cannot be ascertained and disallowance of ₹ 67,000/- made by the Assessing Officer is confirmed. 5.1. Before us, the learned Counsel of the assessee relied on the submissions made before the Learned CIT(A), whereas the Learned DR relied on the finding of the lower authorities. 5.2. We have heard rival submission of the parties on the issue in dispute and perused the relevant material on record. We find that Learned CIT(A) has justified the disallowance mainly on two grounds. First, the assessee failed to submit legible copies of bills/vouchers for amount of expenses disallowed by the Assessing Officer. Secondly, according to her, period of stay of 21 days i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epted by AO, as per the detailed discussion made in Para 8.1 Supra. The AO has treated that International Bar Association has permanent establishment (PE) in India through Bar Association of India and the income would be deemed to accrue or arise in India u/s. 9 of the Act Finally, the AO has treated that the payment made to IBA is related to the business connection in India and as appellant has failed to deduct TDS on this payment the same is disallowed. During the course of appellant proceedings, the appellant has filed a written submission and claimed that IBA has neither PE in India nor any business connection in India. The appellant has further claimed that in terms of article 7 of DTAA between India and UK this payment is excluded from taxability in India. During the appellate proceedings, the appellant was asked to clarify the nature of payment of ₹ 10,01,698/- made to International Bar Association, London, UK. In response, the appellant has explained that it was for sponsoring the Welcome Reception at the Royal Dublin Society (Dublin, Ireland), IBA Annual Conference Exhibition, from 30.09.2012 to 05.10.2012. In support of the claim the appellant has submitted the in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... treated as PE in India. Alternatively, I also hold that if it has no PE, in India, such expenditure cannot be allowed under section 37(1) of the Act and cannot be held 'wholly and exclusively' for the purpose of earning the professional income of the appellant, In this light, the addition of ₹ 10,01,698/- is confirmed. 6.2. Before us, the learned Counsel of the assessee opposed existence of Permanent Establishment of IBA in India held by the Assessing Officer and Ld. CIT(A). According to him, the nonresident entity, i.e., International Tax Bar Association is neither having any business connection in India, nor having any kind of Permanent Establishment in India. He submitted that lower authorities have not demonstrated how Indian Bar Association was permanent establishment for the purpose of International Tax Bar Association. 6.3. On the contrary, the learned DR relied on the order of the lower authorities. He further submitted that as per section 195(2) of the Act, if the assessee was of the view that such sum was not chargeable in the hands of the recipient (i.e. IBA), then the assessee should have made an application for non-deduction of tax at source alon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid provision is reproduced as under: 195 (2) Where the person responsible for paying any such sum chargeable under this Act (other than salary) to a non-resident considers that the whole of such sum would not be income chargeable in the case of the recipient, he may make an application [in such form and manner to the Assessing Officer, to determine in such manner, as may be prescribed, the appropriate proportion of such sum so chargeable, and upon such determination, tax shall be deducted under sub-section (1) only on that proportion of the sum which is so chargeable. 6.7. Thus, it is evident that if in view of the assessee this sum would not have been chargeable in India in the hands of IBA, the assessee should have followed the procedure laid down in Section 195(2) and filed evidence in support of the claim. The Assessing Officer of the assessee was not having any jurisdiction over the recipient and not in position to determine chargeability of sum in the hands of recipient. In the case of non-resident recipient, even if the sum is chargeable under section 9(1) as deemed income, the sum would not be chargeable, if not covered by the Double Tax Avoidance Agreement betwe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a period not exceeding six months and the charges payable for the project or supervisory activity exceed 10 per cent of the sale price of the machinery and equipment; (k) the furnishing of services including managerial services, other than those taxable under Article 13 (Royalties and fees for technical services), within a Contracting State by an enterprise through employees or other personnel, but only if: (i) activities of that nature continue within that State for a period or periods aggregating more than 90 days within any twelvemonth period; or (ii) services are performed within that State for an enterprise within the meaning of paragraph 1 of Article 10 (Associated enterprises) and continue for a period or periods aggregating more than 30 days within any twelve-month period: Provided that for the purposes of this paragraph an enterprise shall be deemed to have a permanent establishment in a Contracting State and to carry on business through that permanent establishment if it provides services or facilities in connection with, or supplies plant and machinery on hire used or to be used in, the prospecting for, or extraction or production of, mineral oils in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... common control, as that enterprise. 5. An enterprise of a Contracting State shall not be deemed to have a permanent establishment in the other Contracting State merely because it carries on business in that other State through a broker, general commission agent or any other agent of an independent status, where such persons are acting in the ordinary course of their business. However, if the activities of such an agent are carried out wholly or almost wholly for the enterprise (or for the enterprise and other enterprises which are controlled by it or have a controlling interest in it or are subject to same common control) he shall not be considered to be an agent of an independent status for the purposes of this paragraph. 6. The fact that a company which is a resident of a Contracting State controls or is controlled by a company which is a resident of the other Contracting State, or which carries on business in that other State (whether through a permanent establishment or otherwise), shall not of itself constitute either company a permanent establishment of the other. 7. For the purposes of this Article the term control , in relation to a company, means the abilit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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