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TMI Blog2023 (3) TMI 912X X X X Extracts X X X X X X X X Extracts X X X X ..... e UK. The assessee provides legal services to its clients on projects undertaken which are related to matters like mergers, acquisitions, restructuring, financing and tax, etc. The services rendered by the assessee are for drafting of documents and legal due diligence based on non Indian laws. The assessee company filed its return of income dated 22.09.2016, declaring total income at Rs. Nil. The assessee's case was selected for scrutiny, wherein the A.O. passed the draft assessment order dated 28.12.2019 u/s. 144C of the Act for which the assessee had filed its objection for the proposed addition/disallowances with the Dispute Resolution Panel (DRP for short). Subsequent to this, the A.O. passed the final assessment order u/s.143(3) r.w.s. 144C(13) of the Act dated 29.04.2021 after the DRP made the proposed adjustment duly after disposing of the objections raised by the assessee. The A.O. determined the total income at Rs.2,17,92,596/- after making the impugned additions/disallowances. 4. The assessee is in appeal before us, challenging the impugned assessment order on various grounds. 5. During the appellate proceedings, the ld. Sr. Counsel Shri Niraj Sheth appeared for the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision which had guidelines about double tax convention and contended that the assessee was not liable to be taxed in India. The assessee also relied on the decision of the co-ordinate bench in the case of Green Emirate Shipping & Travels [2005] 100 ITD 203 which held that the assessee need not be paying taxes in home country to get the benefit of Tax Treaty. 8. The ld. AR for the assessee contended that the assessee was entitled to the benefits under the DTAA between India and UK and placed reliance on the decision of the assessee's case for A.Y. 2011-12 on similar issue. 9. The learned Departmental Representative (ld. DR for short) for the Revenue controverted the same and relied on the assessment order, wherein it was held that the Tribunal's decision in assessee's case was appealed before the Hon'ble Jurisdictional High Court and should not be placed reliance for the reason that it has not attained finality. 10. We have heard the rival submissions and perused the materials on record on this issue. It is observed that the assessee's case for A.Y. 2011-12, the co-ordinate bench has held that the assessee is entitled to the benefits of India - UK DTAA by following the previo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to claim benefits of India UK- DTAA. Therefore, Grounds 8 to 8.4 are allowed. 11. From the above observation, it is evident that this issue being a recurring one, has been dealt with by the Tribunal since A.Ys. 1995 - 1996 in various years and has held that the assessee is entitled to the benefit of India-UK tax treaty. The AO has rejected the assessee's contention for the reason that the provisions of Article 4(1) read with Article 1(1) which states that unless the assessee can be said to be a resident of UK, the assessee cannot claim treaty benefits and unless the assessee is liable to tax in UK, the assessee cannot fulfill the requirement of being the resident in UK. The AO also stated that the assessee is not taxable unit with regard to the income of the LLP and the term 'liable to tax' cannot include a person who is not taxable in the home country. The AO further denied the assessee's claim by stating that since the assessee was not taxed, the assessee will not be covered under the expression 'liable to tax', thereby not treating the assessee as a resident of UK and denied the benefits of the said treaty. 12. The A.O. has held that as per UK laws, LLP is not a taxable enti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal Services' and also relied on the decision of the Hon'ble Apex Court in the case of CBDT vs. Oberoi Hotels (India) Private Limited [1998] 231 ITR 148 (SC) which held that 'technical services' include 'professional services'. The A.O. also relied on various other decisions and held that the services rendered by the assessee to be technical in nature and the fees for included services are within the meaning of Article 13 of the India-UK DTAA and taxed the whole income in India as per the Explanation 1 to section 9 of the IT Act which is suffice to say that if the services are utilized in India then the same amount to taxability in India. The AO also held that since the services are provided by professionals which requires expertise, the same are to be termed as 'technical and consultancy services', which services are made use by the recipient in different areas such as management, finance, risk management analysis and transaction services, etc. The assessee contended that the said services requires no technology and are provided by highly skilled professional not related to any specific industry. The assessee further submitted that the said services pertain to specific laws of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o tax as 'FTS' as per section 90(2) of the Act. 18. From the above observation, we are inclined to follow the said decisions, as the Revenue even during the impugned year has failed to controvert the contention of the assessee. Therefore, ground no. 20 along with the related grounds on this issue raised by the assessee are allowed. 19. The next issue pertains to whether the assessee has a permanent establishment in India. It is observed that the assessee has contended that it does not have a permanent establishment in India as defined in Article 5 of the India-UK DTAA and that the income earned by the assessee is in the nature of 'business income' and, hence, the same is taxable as per Article 7 of India-UK tax treaty. The assessee further submitted that the personnel of the assessee who have rendered services was present in India for less than 90 days during the impugned year, thereby holding that there cannot be a permanent establishment of the assessee in India. The assessee also contended that only if the employee or personnel of the assessee has rendered services in India for a period aggregating to 90 days or more in the financial year, the same would constitute a 'permanen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... independent activities either in their own capacity or in the capacity of the member of a partnership firm are rendered. The assessee further contended that the said DTAA between India-UK is different from that of India-USA where it specifically includes a firm of individuals. The assessee also stated that Article 15(1) of India France DTAA has also been made to a firm of individuals. The assessee has distinguished this with Article 15 of the India UK DTAA where only the individual in his own capacity or an individual as a member of the partnership firm is covered under the said Act. The assessee further stated that only Article 7 of the DTAA would be applicable in assessee's case which reads as under: "(1) The profits of an enterprise of a Contracting State shall be taxable only in that State unless the enterprise carries on business in the other Contracting State through a permanent establishment situated therein. If the enterprise carries on business as aforesaid, the profits of the enterprise may be taxed in the other State but only so much of them as is directly or indirectly attributable to that permanent establishment." 24. From the above observation, the assessee has di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er dated 29.08.2018 for A.Y. 2011-12 is cited hereunder: 35. We have gone through the orders passed by the lower authorities and also Article 15 of India-UK DTAA. It is noted by us that Article 15 of DTAA deals with taxability of independent personal services. This Article starts with the words "Income derived by an individual.......in respect of professional services or other independent activities of similar character........"It is noted by us that Article 15 shall be applicable for determining taxable income in the hands of individual and not other persons. The assessee is certainly not an Individual. Thus this Article cannot be made applicable on the assessee being not an individual. Similar issue had come up before the Tribunal in the aforesaid case of M/s Linklaters (for AY 1995-96) wherein the Tribunal held at para 106 of the order that Article 15 shall be applicable only when services are rendered by an individual. Thus, respectfully following the order of the Tribunal it is held that impugned amount of fee received by the assessee would not be liable to be taxed under Article 15 of India-UK DTAA. Thus, Grounds 10 to 10.5 are allowed in favour of the assessee. 27. From t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the same is not taxable under Article 12 of India-Singapore tax treaty. We hereby hold that the view taken in ITA No. 1256/Mum/2021 for this issue applies mutatis mutandis for this issue also. In view of the above, ground nos. 4 to 18 raised by the assessee is allowed and the impugned addition made by the A.O. is hereby deleted. 35. The issue pertaining to existing of permanent establishment in India raised in ground nos. 19 to 22 has already been decided in ground nos. 27 & 28 of ITA No. 1256/Mum/20121 (in para nos. 19 to 22 above), wherein it was held that the employee or personnel of the assessee who has rendered service in India has not stayed beyond 90 days and as per the statement of the assessee submitted before the A.O., the cumulative total number of days, the furnishing of the services was for 10 days only. 36. From the above facts, we are inclined to hold that the assessee does not have a permanent establishment in India and the decision in ITA No.1256/Mum/20121, ground nos. 27 & 28 applies mutatis mutandis to this appeal also. Hence, ground nos. 19 to 22 raised by the assessee is allowed. 37. The next ground pertains to the applicability of Article 15 of India-Si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct of an employment shall be taxable only in that State unless the employment is exercised in the other Contracting State. If the employment is so exercised, such remuneration as is derived therefrom may be taxed in that other State 2. Notwithstanding the provisions of paragraph 1, remuneration derived by a resident of a Contracting State in respect of an employment exercised in the other Contracting State shall be taxable only in the first-mentioned State, if: (a) the recipient is present in the other State for a period or periods not exceeding in the aggregate 183 days in the relevant fiscal year; and (b) the remuneration is paid by, or on behalf of, an employer who is not a resident of the other State ; and (c) the remuneration is not borne by a permanent establishment or a fixed base which the employer has in the other State. 3. In the case of a recipient who satisfies all the conditions under sub-paragraphs (a), (b) and (c) of paragraph 2. if his remuneration is deductible as an expense against fees for technical services (dealt with under Article 12) derived by his employer and the employer has no permanent establishment in the other Contracting State, the remunerat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not been able to produce all such bills/invoices and considering the facts these bills do not, in any case, have any supporting evidences" and thus brought to tax an amount of Rs. 2,12,23,219, the CIT(A) upheld the action of the Assessing Officer to the extent of 15 per cent of the total amount of reimbursement. The CIT(A) also held that the reimbursements of expenses received by the assessee constitute income of the assessee. It is also important to bear in mind the fact that the CIT(A) confirmed the disallowance of 15 per cent of reimbursement of expenses on the ground that (a) the appellant was not able to produce all supporting evidences in respect of expenditure incurred; and(b) it may be difficult to bifurcate the expenses between disbursements related to services rendered in India and services Linklaters LLP rendered outside India. While the Assessing Officer is not in appeal against the disallowance so restricted by the CIT(A), the assessee is not satisfied by the part relief given by the CIT(A) and is in second appeal before us." 132. Learned counsel has taken us through meticulous documentation in respect of reimbursements of expenses, and also produced before us sam ..... X X X X Extracts X X X X X X X X Extracts X X X X
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