9911796707
TMI Blog2024 (8) TMI 1074X X X X Extracts X X X X X X X X Extracts X X X X ..... of the non-residents was not liable to tax in India as FTS or Other Income - CIT(A) accepted the contention of the Assessee that the professional fee was in the nature of Business Profits or income from Independent Personal Services (IPS); and in absence of a Permanent Establishment (PE) or fixed base in India, respectively, the same was not liable to tax in India - HELD THAT:- We do not find merit in the contention advanced on behalf of the Revenue and concur with the conclusion drawn by the CIT(A) that the professional fee paid/payable to tax resident of UK was not liable to tax in India and therefore, Assessee was not required to withhold tax from the payments made to tax residents of UK. There is nothing on record to persuade us to take a different view. Accordingly we do not find any infirmity in the order passed by the CIT(A) deleting the disallowance made u/s 40(a)(i) of the Act by the Assessing Officer in respect of the aforesaid professional fee paid/payable to tax residents of UK. Disallowance in respect of remittance made by the Assessee to KPMG International Cooperative, Switzerland (KPMGI) without deduction of tax at source which was deleted by the CIT(A) - We find tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of payments made to tax residents of France by invoking provisions of Section 40(a)(i) of the Act cannot be sustained. Foreign Exchange Fluctuation - AO disallowed loss in account of foreign exchange fluctuation which was deleted by the CIT(A) as being consequential in nature - HELD THAT:- As per the chart furnished by the Assessee that the foreign exchange fluctuation loss pertains to professional fee paid/payable to tax residents of UK, Sweden, Indonesia and Bangladesh. Since we have confirmed the order passed by the CIT(A) in respect of the professional fee paid to the tax residents aforesaid countries. The order passed by CIT(A) deleting the disallowance of the aforesaid loss on account of foreign exchange fluctuation is confirmed. - ITA No. 2415/MUM/2023, ITA No. 2275/MUM/2023, CO No. 127/MUM/2023 (Arising out of ITA No. 2275/Mum/2023), ITA No. 2414/MUM/2023, ITA No. 2276/MUM/2023, CO No. 128/MUM/2023 (Arising out of ITA No. 2276/Mum/2023), ITA No. 2413/MUM/2023, ITA No. 2277/MUM/2023, CO No. 123/MUM/2023 (Arising out of ITA No. 2277/Mum/2023), ITA No. 2412/MUM/2023 Shri Prashant Maharishi, Accountant Member And Shri Rahul Chaudhary, Judicial Member For the Appellan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessee, the CIT(A) granted substantial relief to the Assessee. The CIT(A) deleted substantial amount of disallowance made by the Assessing Officer under Section 40(a)(i) of the Act in respect of professional fee and allowed deduction as claimed by the Assessee holding that the professional fee paid to most of the non-residents was not liable to tax in India as FTS or Other Income. The CIT(A) accepted the contention of the Assessee that the professional fee was in the nature of Business Profits or income from Independent Personal Services (IPS); and in absence of a Permanent Establishment (PE) or fixed base in India, respectively, the same was not liable to tax in India. The Assessee was, therefore, not under obligation to deduct tax from the same and no disallowance under Section 40(a)(i) of the Act was warranted. The CIT(A) also allowed Assessee s claim for deduction for remittance made to KPMG International Co-operative, Switzerland by following, inter alia, the decision of the Mumbai Bench of the Tribunal, dated 07/04/2017, in the case of Assessee for the Assessment Year 2001-2002 [ITA No. 2493/Mum/2012]. The ad-hoc disallowance of advertisement and promotion expenses was also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble. In any case, the grounds raised by the Assessee in the cross objections are in the nature of legal plea not requiring examination of any fresh facts. Accordingly, the delay in filing cross objections for all the assessment years is condoned. 1.5. During the course of hearing it was submitted that appeals/cross objections for the Assessment Year 2013-14 could be taken as lead matters, and that the findings/adjudication on issues raised in the appeals/cross objections for Assessment Year 2013-14 would apply mutatis mutandis to other appeals/cross objections for Assessment year 2012-2013, 2014-2015, 2015-2016, 2016- 2017, and 2017-2018. Accordingly, taking note of the fact that the CIT(A) has dealt with the grounds raised in all the 6 appeals pertaining to the Assessment Year 2012-2013 to 2017-2018, we proceed to take up appeals cross objection for the Assessment Year 2013-14 as lead matters. Assessment Year 2013-14 2. The appeal/cross-appeal/cross-objection for the AY 2013-14 arise from order, dated 09/05/2023, passed by the National Faceless Appeal Centre (NFAC), Delhi, [hereinafter referred to as the CIT(A) ], whereby the Ld. CIT(A) had partly allowed the appeal of the Assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndia. 7. On the facts and in the circumstances of the case and in law, whether the Ld. CIT(A) was justified in deleting the disallowing a sum of Rs. 14,31,415/- being 25% of the total advertisement and publicity expenses of Rs. 57,25,658/ on the presumption that a portion of the expenses incurred by the assessee benefits KPMG International Co-operative. 8. The assessee craves leave to amend of alter any ground or add a new ground which may be necessary. 2.2. The Assessee has raised following grounds in the cross objections [CO No.125/Mum/2023] filed by the Assessee in appeal preferred by the Revenue: 1 On the facts and in the circumstances of the case and in law and without prejudice, the payment of professional fees of Rs. 19,19,086 to a resident of Sweden and Rs. 35,67.738 to residents of Spain are for availing professional services rendered entirely outside India and are not taxable in India being eligible for the beneficial provisions of Article 14/15 Independent Personal Services under the respective tax treaties with India and accordingly, the payment for these professional services continues to be non-taxable in India.. 2.3. The Assessee has raised the following grounds of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... LLP 5,62,275/- 3 8. KPMG Hadibroto, Indonesia Company 2,81,781/- 2 9. KPMG IFRG LTD, United Kingdom Company 8,03,238/- 2 10. KPMG LLP, Singapore Firm 43,02,822/- 2 11. KPMG LLP, United Kingdom Firm 2,66,44,228/- 2 12. KPMG LLP, United States of America Firm 2,78,12,989/- 1 13. KPMG Lower Gulf Limited, UAE Company 10,36,145/- 2 14. KPMG Meijburg Co Special Services B V, Netherlands Company 1,71,131/- 2 15. KPMG Services Pte.Ltd., Singapore Company 2,09,48,526/- 2 16. KPMG Siddharta Advisory, Indonesia Company 4,11,141/- 2 17. KPMG, Tanzania Firm 4,47,678/- 1 18. KPMG United Kingdom Plc United Kingdom Company 74,17,104/- 2 19. KPMG, Ireland Firm 1,20,808/- 1 20. KPMG, Sri Lanka Firm 30,05,238/- 1 21. Manabat Sanagustin Co. CPAs Philippines Firm 59,15,576/- 1 22. Mr. Philip Baker Q.C, UK Individual 4,07,375/- 1 23. Rahman Rahman Huq, Bangladesh Firm 1,48,076/- 2 24. Simon Mort Reports Limited, UK Company 7,03,300/- 2 Total 11,21,42,029/- 6. The Assessing Officer denied deduction for the entire amount of INR 11,21,42,029/- holding that the Assessee was under obligation to withhold tax from professional fee paid to non-resident under Section 195 of the Act as the same were chargeable t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting the above submission of the Assessee, the CIT(A) concluded that disallowance under Section 40(a)(i) of the Act was not warranted except for the professional fee aggregating to INR 8,55,053/- consisting of professional fee of INR 4,07,375/- paid/payable to Mr. Phillip Baker [at Sl. No 22 of Table in paragraph 5 above] and professional fee of INR 4,47,678/- paid/payable to KPMG Tanzania [at Sl.No. 17 of Table in paragraph 5 above]. In relation to the aforesaid two professional fee payments, the CIT(A) gave direction to the Assessing Officer to decide the issue after verifying whether the aforesaid non-resident parties had a fixed base or physical in India since it was contended on behalf of the Assessee that the professional fee paid/payable to the aforesaid 2 non-resident parties was not liable to tax in India as IPS in terms of Article 14/15 of the DTAA between India and country of tax residence of such non-residents in absence of a fixed base/physical presence in India. Thus, out of the aggregate disallowance of INR.11,21,42,029/- made by the Assessing Officer under Section 40(a)(ia) of the Act, the CIT(A) deleted the disallowance of INR 11,12,86,976/- (INR.9,72,62,585 - INR. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence to the Assessee. Accordingly, payments made by the Assessee to the non-resident are not liable to tax in India as FTS in the hands of such non-residents. Therefore, payments made by the Assessee to tax resident of countries having Make Available Clause in the FTS Article, cannot be treated as FTS. (b) It is not the case of the Revenue that the non-resident parties have a permanent establishment in India in terms of Article 5 of the applicable DTAAs. (c) Similarly, the Revenue has also not set up a case that the non-resident service providers have a fixed base or physical presence in India to satisfy the requirements of Article 14/15 of the applicable DTAA dealing with IPS. 11. The contentions of the Revenue can be summarized as under: (a) The professional fee for services paid/payable to the non-resident parties is liable to tax in India as FTS per the provisions of the Act. (b) The services provided by the non-residents satisfy the requirement of Make Available Clause and therefore, the same are in the nature of FTS liable to tax in India in terms of Article 12/13 of the applicable DTAA in the hands of such non-residents. In view of the judgment of the Hon ble Supreme Court i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion etc. to the Assessee. The requirement of Make Available Clause not being satisfied, such payments could not be taxed in India as FTS. (c) Where DTAAs do not have FTS Clause, the professional fee payments would fall within the ambit of Article 7 of DTAAs and not residuary article on Other Income . (d) The services provided by non-residents to the Assessee were not liable to tax in India in terms of Article 14/15 of the applicable DTAA in absence of a fixed base and/or physical presence of such non-resident in India. The expression resident of contracting state is wide enough to include in its ambit all resident persons whether individual or company. (e) Where the payments have been made by the Assessee to non-residents for the purpose of earning income from a source outside India, such payments were not liable to tax in India in terms of Section 9(1)(vii)(b) of the Act. 13. Before dealing with the specific contentions raised by both the sides, we deem it appropriate to refer to the relevant legal background common to all the contentions. 13.1. Section 40(a)(i) of the Act, inter alia, provides that while computing the income chargeable under the head Profits and Gains of Busines ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icial provisions contained in the DTAAs. In case the FTS do not meet the requirement of Make Available Clause, the same cannot be brought to tax in India as per the provisions of the aforesaid DTAAs. 13.6. In order to drive home their respective points, the Assessee and the Revenue had placed reliance on various clauses of the applicable DTAAs dealing with Business Profits, FTS, IPS and Other Income. To bring out the interplay between different clauses and to address some the broad contentions raised by both the sides, we deem it appropriate to consider the model clauses contained in OECD Model Tax Convention (Organisation for Economic Co-operation and Development (OECD) Model Convention with respect to Taxes on Income and on Capital Model) [for short OECD MTC ] and United Nation Model Tax Convention [for short UN MTC ] and related commentaries (even though the DTAAs may have clauses which depart from model tax conventions). 13.7. Article 7 of OECD Model Tax Convention, 1998 [for Short MTC98 ] deals with allocation of taxing rights between source state and resident state with respect of Business Profits. Article 7(1) of MTC98 reads as under: 1. The profits of an enterprise of a Con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Income Tax, LTU - II, Chennai vs. Ford India Private Ltd. [common order dated 31/01/2017, passed in ITA No. 673 840 /CHNY/2015, and 748 749/CHNY/2015], the Chennai Bench of the Tribunal had, in the context of India-UK DTAA, concluded that profits earned by rendering FTS are only a species of business profits. The relevant extract of the aforesaid decision of the Tribunal reads as under: 9. To understand the scope of these treaty provisions, which are broadly in pari materia with the provisions of Article 21 of UN Model Convention, we find guidance from the OECD Model Convention Commentary which states that The Article covers income of a class not expressly dealt with in the preceding articles (e.g. an alimony or a lottery income) as well as income from sources not expressly referred to therein (e.g. a rent paid by a resident of a Contracting State for the use of immovable property situated in a third State). The Article covers income arising in third States as well as income from a Contracting State . In other words, an income is of such a nature as, on satisfaction of conditions specified in the related provision, could be taxed under any of these specific treaty provisions, c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome is actually taxable under these articles. The question then arises whether income earned by the recipients in question, i.e. Fuji Asia Co Ltd-Thailand ad Auto Alliance Co Ltd-Thailand, can be said to in the nature of an income which is not expressly dealt with by other operative articles (i.e. article 6 to 21) of the treaty. The income earned by these entities was in the regular course of their business, and there is no dispute about this fundamental aspect. There cannot also be dispute about the fact that in the event of these entities satisfying the conditions regarding existence of permanent establishment in India, the amounts so received by these entities would have been taxable as business income. The income in question is thus clearly dealt with by article 7 read with article 5 and the reason why it has not been taxed is that the entities concerned did not have permanent establishments in India. Clearly, therefore, the income in question is covered by the provisions of the Indo Thai tax treaty but is not taxable on the facts of the case before us as the recipients did not have a PE in India. Once we come to the conclusion that the income embedded in the payments in ques ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome by way of fees of technical services continues to be dealt with the provisions of articles relating to business profits, independent personal services, and additionally, in the event of existence of an FTS article, with the article relating to the fees for technical services. 10. In view of the above discussions, in our considered view, even though the remittances in question are in the nature of fees for technical services in the hands of Thai entities, the income embedded in these remittances is not taxable in India in the hands of these entities, in terms of the provisions of Indo Thai tax treaty. The plea of the Assessing Officer, for invoking the domestic law provisions in respect of fees for technical services, as the Indo Thai tax treaty does not specifically deal with the same, already stands negated by Hon'ble jurisdictional High Court in the case of Bangkok Glass Industries (supra), in the context of Indo Thai tax treaty itself. It is only elementary that under article 90(2) where the Government has entered into a tax treaty with any tax jurisdiction, in relation to the assessee to whom such treaty applies, the provisions of this (i.e. Income Tax) Act shall appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his , his in Article 14(1)(a) and his stay his activities in Article 14(1)(b) of MTC98 it was contended that the Article 14 only applied to individuals. In response, reference was made by the Authorized Representative for the Assessee to the expression resident of contracting state used in Article 14 of MTC98. It was submitted the Learned Authorised Representative for the Assessee that expression resident of contracting state has been defined in Article 4 of MTC98 to include any person and the term person has been defined in Article 3(1)(a) of MTC 98 to include an individual, company or any other body corporate. Thus, it was contended on behalf of the Assessee that benefit of IPS clause contained in Article 14 was available to resident be it individual, company or body corporate. On the other hand, it was submitted by the Learned Departmental Representative that the expression resident of contracting state has also been used in Article 15 of MTC98 dealing with Dependent Personal Services. However, it is settled position that the benefit Article 15 dealing with dependent personal services can be availed only by individuals. 13.12. We note that Article 14 as contained in MTC98 read ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to note that Article 14 and the commentary thereon was deleted from the OECD MTC on 29/04/2000 on the basis of the report entitled Issues Related to Article 14 of the OECD Model Tax Convention , the relevant extract of which reads as under: III. WHICH ENTITIES FALL WITHIN ARTICLE 14? 13. The personal scope of application of Article 14 is also unclear. The main issue is whether the Article applies to individuals only or whether it is also applicable to legal persons. Another issue is to what extent it applies to partnerships. 14. It has sometimes been argued that the use of the pronoun his , in paragraph 1 of Article 14, indicates that the Article was intended to apply to individuals only. The Committee, however, found the argument to be far from convincing as paragraph 1 of Article 4, which clearly applies to both individuals and legal persons, also uses the pronoun his when referring to the various criteria for full liability to tax. 15. Whilst the Commentary on Article 14 does not directly deal with this issue, the Commentary on the United Nations Model notes that the Experts Group generally agreed that a payment for services made to an individual would fall under Article 14 whil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar problem if Article 14 were found to apply only to individuals. In that case, either the partners who are legal persons would be covered by Article 7 whilst the partners who are individuals would be covered by Article 14 or, alternatively, Article 14 would not apply to any partner of a partnership where at least one partner were a legal person. Neither approach would be satisfactory. (Emphasis Supplied) 13.15. In the UN MTC Commentary, 2021 took note of the above fact that Article 14 stands deleted from the OECD Model Convention with effect from 29/04/2000 in the following manner: 1. Paragraph 1(a) and paragraph 2 of Article 14 of the United Nations Model Tax Convention reproduce the essential provisions of Article 14 of the 1997 version of the OECD Model Tax Convention. The whole of Article 14 and the Commentary thereon were deleted from the OECD Model Tax Convention on 29 April 2000. Paragraph 1(b) allows the country of source to tax income from independent personal services in one additional situation not covered by paragraph 1 of Article 14 of the 1997 OECD Model Tax Convention: while the former OECD Model Tax Convention allowed the source country to tax income from independe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ness profits and rest in fact on the same principles as those of Article 7. The provisions of Article 7 and the Commentary thereon could therefore be used as guidance for interpreting and applying Article 14. Thus the principles laid down in Article 7 for instance as regards allocation of profits between head office and permanent establishment could be applied also in apportioning income between the State of residence of a person performing independent personal services and the State where such services are performed from a fixed base. Equally, expenses incurred for the purposes of a fixed base, including executive and general expenses, should be allowed as deductions in determining the income attributable to a fixed base in the same way as such expenses incurred for the purposes of a permanent establishment [ ]. Also in other respects Article 7 and the Commentary thereon could be of assistance for the interpretation of Article 14, e.g. in determining whether computer software payments should be classified as commercial income within Article 7 or 14 or as royalties within Article 12. 4. Even if Articles 7 and 14 are based on the same principles, it was thought that the concept of p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e taxable only in that State except in the following circumstances when such income may also be taxed in the other Contracting State : UK 15(1.) Income derived by an individual, whether in his own capacity or as a member of a partnership, who is a resident of a Contracting State in respect of professional services or other independent activities of a similar character may be taxed in that State. Such income may also be taxed in the other Contracting State if such services are performed in that other State and if France 15(1) Income derived by an individual or a partnership of individuals who is a resident of a Contracting State from the performance of professional services or other independent activities of a similar character shall be taxable only in that Contracting State except in the following circumstances when such income may also be taxed in the other Contracting State : USA 15(1) Income derived by a person who is an individual or firm of individuals (other than a company) who is a resident of a Contracting State from the performance in the other Contracting State of professional services or other independent activities of a similar character shall be taxable only in the fir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that from the perspective of the Revenue, whether the payments to non-residents fall within the ambit of Article 14/15 dealing with income from IPS or Article 7 dealing with Business Profits, would not make any difference. In either case the provisions of Article 22 on Other Income would not get triggered. Further, since the Revenue has not set up a case that the non-resident payee had a Permanent Establishment or Fixed Base/physical presence in India, the payments to non-residents, whether covered by Article 7 and/or 14/15 of the applicable DTAA, would not be liable to tax in India. We have already concluded that even in case of DTAAs without FTS Article, there would be no change in the above position as the payments to non-residents would continue to fall within the ambit of Article 7 or Article 14/15, as the case may be, and shall not be liable to tax in India for identical reasons. We have also concluded that in case the countries having FTS Article with Make Available Clause, in the case of the Assessee for the preceding years, it has been held that the payments for services of similar nature were not liable to tax in India under Article 12 of the applicable DTAA as FTS as t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 21]; (i) Bangladesh [applicable to non-resident party at Sl.No. 23] 15.2. In absence of fixed base/physical presence of tax residents of the above countries in India, professional fee paid/payable to such non-residents would not be liable to tax in India in terms of Article 14/15 of the applicable DTAA. There is nothing on record to persuade us to take a different view. Thus, the Assessee would not under obligation to withhold tax from the payments under consideration. Therefore, we concur with the conclusion drawn by the CIT(A) that the disallowance made by the Assessing Officer under Section 40(a)(i) of the Act in respect of the professional fee paid/payable to tax residents of aforesaid countries should be deleted. 16. Singapore 16.1. The professional fee paid/payable to tax residents of Singapore are listed at Sl. No. 10 and 15 of Table in paragraph 5 above. 16.2. On perusal of Article 14 of India-Singapore DTAA, we find that the benefit of Article 14 is available only to an individual resident of Singapore. Therefore, income from performance of IPS by an enterprise carried on by a firm or a company shall be governed by the provisions contained in Article 7 of India-Singapore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lysis in the UN Model Convention Commentary. We are thus of the considered view that, in a situation like the one that we are in seisin of, i.e., in which specific provisions for professional services or independent personal services or included services exist under article 15, when services are rendered by the enterprise, article 5(2)(k) will come into play, and when services are rendered by an individual, article 15 will find application. Therefore, while we agree with the learned counsel that article 15 will not be applicable on the facts of the present case, this finding does not really come to the rescue of the assessee since, as we have already held, the assessee did have a PE in India under article 5(2)(k) of the India-UK tax treaty, and, accordingly, profits attributable to the PE are taxable under article 7 of the India-UK tax treaty. 107. In view of the above discussions, we are unable to uphold the plea so strenuously argued by the learned counsel for the assessee, and we hold that the authorities below have rightly invoked the provisions of article 5(2)(k). We approve the same, and decline to interfere in the matter. (Emphasis Supplied) 17.4. As per Article 7(1) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re, Assessee was not required to withhold tax from the payments made to tax residents of UK reflected at Sl.No. 9, 11, 18, 24 of Table in paragraph 5 above. There is nothing on record to persuade us to take a different view. Accordingly we do not find any infirmity in the order passed by the CIT(A) deleting the disallowance made under Section 40(a)(i) of the Act by the Assessing Officer in respect of the aforesaid professional fee paid/payable to tax residents of UK. 17.7. As regards the professional fee at Sl. No. 22 is concerned we note that the CIT(A) has remitted the issue to the file of Assessing Officer for adjudication after verification. Being aggrieved the Assessee in appeal before us. The contention of the Assessee before the Tribunal was that the CIT(A) does not have the power to remand the issue back to the file of Assessing Officer. We find merit in the aforesaid contention advanced on behalf of the Assessee. We have already concluded that an individual, who is tax resident of UK, would be entitled to claim benefit of Article 15 of DTAA in respect of income from IPS, and such income would not be liable to tax in India in case such individual does not have a fixed base ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... do not qualify as Fee for Included Services since the same do not make available any technical knowledge, skill, experience etc to the Assessee. Therefore, in the aforesaid fact situation income from IPS falling outside the ambit of Article 15 would continue to be governed by Article 5 read with Article 7 of India-USA DTAA and the same shall not be liable to tax in India in terms of Article 7(1) of the India-USA DTAA in case of absence of a PE in India. Similarly, in case of individual or firm of individual, income from IPS would be liable to tax in India only in case the requirement of fixed base or physical presence stated in Article 15 are satisfied. In the present case the Revenue has not set up a case that the tax-resident of USA have a fixed base or physical presence in India. 18.4. In view of the above, the income from IPS would not be liable to tax in India under Article 15 in the hands of firm of individuals which is tax resident of USA. Thus, we concur with the conclusion drawn by the CIT(A) that the Assessee was not required to withhold tax from the payments made to tax resident of USA reflected at Sl. No. 12 of Table in paragraph 5 above. Accordingly we do not find any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udicate the issue afresh after calling for a remand report from the Assessing Officer in this regard, in case the CIT(A) so desires. It is clarified that the Assessee would be granted a reasonable opportunity of being heard as per law. All right and contentions of the Assessee are left open. 20. Nigeria Poland 20.1. The professional fee paid/payable to tax resident of Nigeria and Poland are listed at Sl. No.5 and 7 of Table in paragraph 5 above, respectively. 20.2. On perusal of material on record we find that it was contended by the Assessee that professional services availed by the Assessee from tax resident of Nigeria (i.e KPMG Advisory Services LLP, Nigeria) and Poland (i.e. KPMG Audht Sp. ZOO LLP, Poland) were in the nature of Income Tax Advisory/Audit services and the same were utilized for the purpose of earning income from customers/clients of the Assessee located outside India. While the Assessing Officer rejected the aforesaid contention, the CIT(A) accepted the same holding that the professional fee paid to tax resident of Nigeria and Poland were not liable to tax in India in terms of Section 9(1)(vii)(b) of the Act as the professional fee was paid for earning income fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l benefit of members. The Assessee had entered into a Membership Agreement to this effect with KPMGI. 22.2. During the relevant previous year the Assessee made remittances to KPMGI towards reimbursed its share of costs (including costs of subscriptions to databases) and expenses without withholding tax on the same. In response to query raised by the Assessing Officer during the course of assessment proceeding it was submitted by the Assessee that KPMGI is a mutual association of which the Appellant is a member. It was contended that KPMGI is a mutual association, and therefore, the contributions received by it from its members are not subject to tax and consequently, the Appellant was not required to withhold tax from its contributions. It was also contended that the aforesaid remittances were in the nature of reimbursement of costs and therefore, there was no need to withhold tax from the same. Without prejudice to the aforesaid it was submitted that the remittances to KPMGI were in the nature of business profits not taxable in India under Article 7 of the India-Switzerland DTAA in the absence of any Permanent Establishment of KPMGI in India under Article 5 of the DTAA. However, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me is chargeable to tax in India and assessee should have deducted tax at source. Accordingly the above sum is disallowable for non-deduction of tax at source under section 40 (a) (i) of the act. c The learned CIT A noted that the issue is squarely covered in favour of the assessee by the decision of the coordinate bench in assessee s own case for assessment year 2001 02 vide order dated 7 April 2017 and further the orders of the learned CIT A for subsequent years following that order of ITAT. It covered the issue. He referred to the decision of the coordinate bench in assessee s own case for assessment year 2001 02 in para number 5.15 and 5.16 wherein it has been held that the KPMG and the assessee is having a relationship of mutual Association and its member respectively and no element of income was embedded in the remittances received by the foreign entity. 07. Therefore, the learned assessing officer is in appeal before us. The learned departmental representative imminently supported the order of the learned assessing officer. 08. 12 xx xx 13. With respect to ground number 5 6 of the appeal we find that the coordinate bench in assessee s own case for assessment year 2001 02 has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erein, in turn, reliance was placed on the decision of the Hon ble Supreme Court in the case of Sassoon J David Company Pvt. Ltd Vs. CIT : 118 ITR 261. In the aforesaid judgment it was held, inter alia, that the fact that somebody other than the assessee has also benefited by the expenditure incurred should not come in the way of an expenditure being allowed by way of deduction under section 10(2)(xv) of the Act if it otherwise satisfies the tests laid down by law. The aforesaid judgment supports the contention of the Assessee that even if it is presumed that some benefit accrued to person other than the Assessee from incurring of expenses, deduction for the same cannot be denied merely on that ground alone so long as the requirement of the law are otherwise satisfied. 23.4. Further, in our view, there is no basis for the ad-hoc disallowance made by the Assessing Officer. During the course of hearing reliance was placed on behalf of the Assessee on the judgment of the Hon ble Delhi High Court in the case of Principal Commission of Income Tax (Central) - 3, Vs. Seagram Manufacturing Private Limited : [2017] 245 Taxman 389 (Delhi HC). In that case, in similar facts and circumstances, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered against the revenue. For the above reasons, the appeal fails. It is accordingly dismissed. (Emphasis Supplied) 23.5. In view of the above, we do not find any infirmity in the order passed by the CIT(A) deleting the disallowance of INR 14,31,415/-, being ad-hoc disallowance of 25% of advertisement expenses 57,25,658/-. Accordingly, Ground No. 7 raised by the Revenue is dismissed. Assessment Year 2012-13 24. Next we will take up appeal/cross-appeal/cross-objection pertaining to Assessment Year 2013-14 arising from order, dated 09/05/2023, passed by the CIT(A) partly allowing the appeal of the Assessee against the Assessment Order, dated 29/03/2016, passed by the Assistant Commissioner of Income Tax -16(2), Mumbai under Section 143(3) of the Act. 24.1. For the Assessment Year 2012-13 the Revenue has raised 7 grounds of appeal in ITA No. 2272/Mum/2023. Ground No. 1 to 4 pertain to disallowance made under Section 40(a)(i) of the Act in relation to professional fees paid/payable to non-residents; Ground No. 5 6 pertain to disallowance made under Section 40(a)(i) of the Act in relation to remittances made to KPMG Cooperative, Switzerland and Ground No. 7 pertain to ad-hoc disallowanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 12,64,358 2* 16 KPMG IT Advisory /Netherlands Company 13,13,413 2 17 KPMG LLP, Canada Firm 29,64,167 1 18 KPMG LLP, Singapore Firm 7,04,137 2 19 KPMG LLP, UK LLP 54,63,186 2 20 KPMG Mauritius Firm 1,31,709 1* 21 KPMG Meijburg Co Special Services B V, Netherlands Company 19,98,863 2 22 KPMG Malta Firm 32,044 1* 23 KPMG Phoomchai Tax Ltd., Thailand Company 5,68,173 2* 24 KPMG Services Pte.Ltd., Singapore Company 81,57,187 2 25 KPMG Mauritius Firm 37,287 26 KPMG UAE Sole Proprietor 13,50,164 1* 27 KPMG Ireland Firm 78,218 1** 28 K Studio Associate, Italy Firm 10,30,446 1** 29 Lexis Nexis Screening Solutions Inc., USA Company 14,53,993 2 30 Manabat Sanagustin Co., CPAs, Philippines Firm 15,18,069 1* 31 KPMG Siddhartha Advisory, Indonesia Company 6,86,377 2 32 Rahman Rahman Huq, Bangladesh Firm 14,58,496 1* 33 Sarrau Thomas Couderc, France Firm 1,79,644 1 34 Scherzer International, USA Company 32,723 2 35 KPMG LLP, USA Firm 3,97,42,963 1 36 KPMG LLP (USCMG), USA Company 2,14,07,696 2 37 KPMG United Kingdom Pic., UK Company 6,83,217 2 38 KPMG Australia Firm 11,65,340 1 39 Somekh Chaikin, Israel Firm 1,52,190 1** 40 Willkie Farr- Gallagher LLP, USA Firm 12,41,64,354 1 41 KPMG Tanacsado ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) UAE [applicable to non-resident party at Sl.No.26] (k) Ireland [applicable to non-resident party at Sl.No.27], (l) Italy [applicable to non-resident party at Sl.No.28], (m) Philippines [applicable to non-resident party at Sl.No.30], (n) Bangladesh [applicable to non-resident party at Sl.No.32], (o) Israel [applicable to non-resident parties at Sl.No.39] 28.2. In absence of fixed base/physical presence of tax residents of the above countries in India, professional fee paid/payable to such non-residents would not be liable to tax in India in terms of Article 14/15 of the applicable DTAA. There is nothing on record to persuade us to take a different view. Thus, the Assessee would not under obligation to withhold tax from the payments under consideration. Therefore, we concur with the conclusion drawn by the CIT(A) that the disallowance made by the Assessing Officer under Section 40(a)(i) of the Act in respect of the professional fee paid/payable to tax residents of aforesaid countries should be deleted. 29. Singapore 29.1. The professional fee paid/payable to tax residents of Singapore are listed at Sl. No. 18, 24 of Table in paragraph 26 above. 29.2. In view of paragraph 16 to 16.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oncluded that in case of income derived by individual from IPS would be governed by Article 15 of India-UK DTAA whereas income derived by persons (other than those covered by Article 15) shall be governed by Article 5 read with Article 7 of the India-UK DTAA. As per Article 7(1), the Business Profits, to the extent attributable to PE in India, can be brought to tax in India. Similarly, as per Article 15 of India-UK DTAA income from IPS can be brought to tax in India in case of existence of fixed base or physical presence in India during the relevant previous year. We have noted in paragraph 10 above that the Revenue has not set up a case to show that the tax-resident of UK had a PE in India in terms of Article 5 or a fixed base or physical presence in India in terms of Article 15 of India-UK DTAA during the relevant previous year. Therefore, in either case, the payments made to tax resident of UK cannot be brought to tax in India as Business Profits or as income from IPS. Therefore, we concur with the conclusion drawn by the CIT(A) that the Assessee was not required to withhold tax from the payments made to tax residents of UK reflected at Sl.No. 14, 19 37 of Table in paragraph 26 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income derived by firm of individual could not have been brought to tax in India in terms of Article 14 of the India- Canada DTAA. Thus, the Assessee was not be required to withhold tax from the professional fee paid/payable to tax residents of Canada reflected at Sl. No. 17 of Table in paragraph 26 above. Accordingly, we concur with the conclusion drawn by the CIT(A) and decline to interfere with the order passed by the CIT(A) deleting the disallowance made under Section 40(a)(i) of the Act in respect of aforesaid professional fee. 34. France 34.1. The professional fee paid/payable to firm of individuals being tax residents of France are listed at Sl. No. 33 of Table in paragraph 26 above. 34.2. On perusal of Article 15 of the India France DTAA it becomes clear that the benefit of the said article is available to an individual and firm of individuals. Thus, the income from professional services derived by an enterprise carried on by a firm of individual in India shall be governed by the provisions contained in Article 15 of the India-France DTAA. Since the Revenue has failed to set up a case that tax resident of France has a fixed base or physical presence in India in terms of Ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion which required verification. We are also of the view that the CIT(A) was correct in observing that the factual averments made by the Assessee such as absence of PE/Fixed Base/ physical presence of non-resident(s) in India during the relevant previous year, and the existence of source of income being outside India; required verification. However, the CIT(A) could not have simply set aside the issue to the file of the Assessing Officer. Therefore, we deem it appropriate to set aside the order passed by the CIT(A) to this extent. The CIT(A) is directed to adjudicate the issue/grounds raised by the Assessee after calling for a remand report from the Assessing Officer. Since we have restored the issue back to the file of CIT(A), all rights and contentions of the Assessee are left open. The CIT(A) shall grant a reasonable opportunity of being heard to the Assessee. 37. In view of the above, Ground No. 1 to 4 raised by the Revenue are partly allowed; Cross Objection No. 1 raised by the Assessee is allowed; and Ground No. 1 2 raised by the Assessee are allowed for statistical purposes. Ground No. 5 6 raised by the Revenue 38. Ground No. 5 raised by the Revenue pertains to disallowance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e DTAA and therefore, tax withholding provisions contained in Section 195 of the Act and consequently, the provisions contained in Section 40(a)(i) of the Act are not attracted in relation to the same. 40.3. The Assessee has raised the 2 grounds of appeal in ITA No. 2415/Mum/2023 challenging the direction given by CIT(A) to verify arguments made by the Assessee in respect of disallowance made by the Assessing Officer under Section 40(a)(i) of the of the Act in respect of aggregate professional fee of INR 39,87,237/-. 41. Both the sides had adopted the submission made in relation to issues raised in appeal for the preceding assessment year. Accordingly, keeping in view our reasoning/findings/adjudication in relation to appeal/cross-appeal/cross objection pertaining to preceding assessment years, we proceed to adjudicate the above issues raised pertaining to Assessment Year 2014-15. 42. For the Assessment Year 2014-15, the Assessee claimed deduction for the following professional fee paid/payable to the non-residents aggregating to INR 91,450,086/- . Sl.No. Name Country of Tax Residence Status Amount (INR) Note Ref 1 KPMG LLP, UK LLP 2,43,99,801/- 2 2 KPMG Services Pte Ltd(Singapore) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... brought to tax in India in absence of fixed base/physical presence of tax resident of Sweden/Spain in India. 44. Article 14/15 on IPS containing the expression resident of contracting state 44.1. On perusal of Article 14/15 of DTAA entered by India with the following countries (Please refer to Table in paragraph 42 for details) we find that the scope of IPS Article contained in the applicable DTAA covers income derived by resident of a contacting state from IPS: (a) Singapore [applicable to non-resident parties at Sl.No.2, 5]; (b) Philippines [applicable to non-resident party at Sl.No.3]; (c) Netherlands [applicable to non-resident parties at Sl.No.7,10, 11]; (d) Indonesia (Applicable India-Indonesia DTAA [Repealed by Notificaiton No. S.O. 1144(E) [NO. 17/2016 (F.NO. 503/4/2005-FTD-II], DATED 16-3-2016]) [applicable to non-resident parties at Sl.No.9 21]; (e) Bangladesh [applicable to non-resident party at Sl.No.12]; (f) Spain [applicable to non-resident party at Sl.No.13]; (g) Sweden [applicable to non-resident party at Sl.No.14]; (h) Mauritius [applicable to non-resident party at Sl.No.16]; (i) Sri Lanka [applicable to non-resident party at Sl.No.22]; (j) Kazakhstan [applicable t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sional fee paid/payable to firm of individuals being tax residents of New Caledonia are listed at Sl.No.15 of Table in paragraph 42 above. 47.2. During the course of hearing, in support of the order passed by the CIT(A), it was submitted on behalf of the Assessee that India does not have a DTAA with New Caledonia. However, as per the provisions contained in Section 9(1)(vii)(b) of the Act the professional fee paid to tax resident of New Caledonia is not liable to tax in India. It was submitted that the aforesaid professional fee was paid for earning income from source outside India being Branch of an Indian Company (i.e. Bharat Heavy Electricals Ltd). The Assessee had no obligation to withhold tax and therefore, no disallowance could have been made under Section 40(a)(i) of the Act. The aforesaid submissions were opposed by the Learned Departmental Representative. On perusal of the order passed by the CIT(A), we note that there is no discussion on the facts relevant to the adjudication of the issue under consideration. Therefore, in view the aforesaid facts circumstances and having regard to the submission of the Assessee and material on record, we set aside the order passed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer by invoking provisions contained in Section 40(a)(i) of the Act. To this extent we uphold the contention of the Revenue and overturn the decision of CIT(A) reinstating disallowance of professional fee paid/payable to company being tax residents of France listed at Sl.No.20 of Table in paragraph 42 above. 50. Belgium 50.1. The professional fee paid/payable to firm of individuals being tax residents of Belgium are listed at Sl. No. 26 of Table in paragraph 42 above. 50.2. On perusal of Article 14 of the India Belgium DTAA it becomes clear that the benefit of the said article is available to an individual. Thus, the income from professional services derived by an enterprise carried on by a company shall not be governed by the provisions contained in Article 15 of the India-Belgium DTAA and shall fall within the Ambit of Article 7 dealing with Business Profits generally. Article 7(7) of the India-Belgium DTAA provides that when profits include items of income covered separately by other articles, then the provision of those special articles shall not be affected by Article 7. We note that Article 12(3)(b) of the India-France DTAA defines fee for technical services to include pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herefore, the professional services under consideration were utilized for the purpose of earning income from source outside India. Entire work was done outside India. The aforesaid submissions were opposed by the Learned Departmental Representative. On perusal of the order passed by the CIT(A), we note that there is no discussion on the facts relevant to the adjudication of the issue under consideration. In our view the tax resident of Kuwait is entitled to claim the benefit of more beneficial provisions contained in the Act. Thus, in case the professional fee is not chargeable to tax in hands of tax resident of Kuwait as per the provisions of the Act, the tax withholding provisions contained in Section 195 of the Act and the provisions contained in Section 40(a)(i) of the Act would not get attracted. Therefore, keeping in view the aforesaid facts circumstances and having regard to the submission of the Assessee as well as the material on record, we set aside the order passed by the CIT(A) to this extent and direct the CIT(A) to adjudicate the issue afresh after verification of relevant facts. The Assessee would be at liberty to furnish such documents/details at the Assessee may de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in amount of INR 9,14,50,086/- specified in Ground No. 1 raised by the Revenue. As per the chart furnished by the Assessee the foreign exchange fluctuation loss pertains to professional fee paid/payable to tax residents of UK, Sweden, Indonesia and Bangladesh. We have confirmed the order passed by the CIT(A) deleting the disallowance made under Section 40(a)(i) of the Act in respect of the professional fee paid to the tax residents aforesaid countries. Accordingly, the order passed by CIT(A) deleting the disallowance of the aforesaid loss on account of foreign exchange fluctuation is also confirmed. 55. In view of the above, Ground No. 1 to 4 raised by the Revenue are partly allowed; Cross Objection No. 1 raised by the Assessee is allowed; and Ground No. 1 2 raised by the Assessee are allowed for statistical purposes. Ground No. 5 6 raised by the Revenue 56. Ground No. 5 raised by the Revenue pertains to disallowance of INR 22,65,64,370/- made by the Assessing Officer under Section 40(a)(i) of the Act in respect of remittance of made by the Assessee to KPMG International Cooperative, Switzerland (KPMGI) without deduction of tax at source which was deleted by the CIT(A). 56.1. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /2023 challenging the direction given by CIT(A) to verify arguments made by the Assessee in respect of disallowance made by the Assessing Officer under Section 40(a)(i) of the of the Act in respect of aggregate professional fee of INR 68,04,160/-. 59. Both the sides had adopted the submission made in relation to issues raised in appeal for the preceding assessment years. Accordingly, keeping in view our reasoning/findings/adjudication in relation to appeal/cross-appeal/cross objection pertaining to preceding assessment years, we proceed to adjudicate the above issues raised pertaining to Assessment Year 2015-16. 60. For the Assessment Year 2015-16, the Assessee claimed deduction for the following professional fee paid/payable to the non-residents aggregating to INR 13,18,09,731/- Sl.No. Name Country of Tax Residence Status Amount (INR) Note Ref 1 B.K. Agrawal Co, Nepal Firm 1,03,488 1 2 Blakes Professional Corporation, Canada Company 4,99,680 2 3 Financial Reporting Council Ltd, UK Company 18,61,540 2 4 First Advantage LNS Screening Solutions, Inc, USA Company 10,030 2 5 Houthoff Buruma, Netherlands Company 2,84,602 2 6 Idasan Singapore Pte Ltd, Singapore Company 19,32,917 2 7 Inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to tax in India in terms of Article 14/15 of the corresponding DTAAs since the same are in the nature of income from IPS which cannot be brought to tax in India in absence of fixed base/physical presence of tax resident of Sweden/Spain in India. 62. Article 14/15 on IPS containing the expression resident of contracting state 62.1. On perusal of Article 14/15 of DTAA entered by India with the following countries (Please refer to Table in paragraph 60 for details) we find that the scope of IPS Article contained in the applicable DTAA covers income derived by resident of a contacting state from IPS: (a) Singapore [applicable to non-resident parties at Sl.No. 6, 23]; (b) Philippines [applicable to non-resident party at Sl. No. 31 32]; (c) Netherlands [applicable to non-resident parties at Sl. No. 5 9, 12, 18 19]; (d) Indonesia (Applicable India-Indonesia DTAA [Repealed by Notificaiton No. S.O. 1144(E) [NO. 17/2016 (F.NO. 503/4/2005-FTD-II], DATED 16-3-2016]) [applicable to non-resident parties at Sl.No.11 24]; (e) Bangladesh[applicable to non-resident party at Sl.No.33]; (f) Spain [applicable to non-resident party at Sl.No.14 25]; (g) Sweden [applicable to non-resident party at Sl.No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erms of Article 7(1) of the DTAA. In the present case the Revenue has not set up a case that the tax resident of Canada has a PE in India. In view of the aforesaid, we concur with the conclusion drawn by the CIT(A) that the Assessee was not required to withhold tax from the payments made to tax residents of the Canada reflected at Sl. No. 2 of Table in paragraph 60 above. Accordingly we do not find any infirmity in the order passed by the CIT(A) deleting the disallowance made under Section 40(a)(i) of the Act in respect of the aforesaid professional fee payment to tax resident of Canada. 64. United Kingdom (UK) 64.1. The professional fee paid/payable to tax residents of United Kingdom, being LLP/company, are listed at Sl. No. 3, 16, 27 34 of Table in paragraph 60 above. 64.2. In view of paragraph 17 to 17.7 above, we concur with the conclusion drawn by the CIT(A) that the Assessee was not required to withhold tax from the payments made to tax residents of UK reflected at Sl.No. 3, 16, 27 34 of Table in paragraph 60. There is nothing on record to persuade us to take a different view. Accordingly, we do not find any infirmity in the order passed by the CIT(A) deleting the disallowanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2, we hold that the professional services provided by a firm of individuals, being the tax-resident of Saudi Arabia, to the Assessee would be characterized as profits falling within the ambit of Article 7 of the DTAA. In case the tax resident of Saudi Arabia does not have a PE in India, such profits would not be liable to tax in India. The Revenue has failed to set up a case that the tax resident of Saudi Arabia had a Permanent Establishment in India during the relevant previous year. Therefore, we concur with the conclusion drawn by the CIT(A) that the disallowance made under Section 40(a)(i) of the Act in respect of payments made to a firm of individuals, being tax residents of Saudi Arabia, at Sl.No.13 of Table in paragraph 60 above cannot be sustained. Therefore, we decline to interfere with the order passed by the CIT(A) in this regard. 68. France 68.1 The professional fee paid/payable to company being tax residents of France are listed at Sl. No. 21 of Table in paragraph 60 above. 68.2 In view of reasoning given in paragraph 49 to 49.2 above, we hold that in the present case the services provided by a company being tax-resident of France to the Assessee would fall within the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amounts paid/payable to the tax residents of the aforesaid countries and therefore, we do not find any infirmity in the order passed by the CIT(A) deleting the disallowance made by the Assessing Officer Section 40(a)(i) of the Act Ground No. 1 2 raised by the Assessee - Remand to Assessing Officer 71. As regards the professional fee aggregating to INR 68,04,160/- [at Sl. No. 1, 30 36 of Table at Paragraph 60 Above] the CIT(A) has remitted the issue to the file of Assessing Officer for adjudication after verification. Adopting the reasoning given in paragraph 36 above, we set aside the order passed by the CIT(A) to this extent and direct the CIT(A) to adjudicate the issue/grounds raised by the Assessee after calling for a remand report from the Assessing Officer. Since we have restored the issue back to the file of CIT(A), all rights and contentions of the Assessee are left open. Assessee shall be granted a reasonable opportunity of being heard. 72. Foreign Exchange Fluctuation 72.1. We note that the Assessing Officer had disallowed loss in account of foreign exchange fluctuation of INR 2,52,313/- which was deleted by the CIT(A) as being consequential in nature. The aforesaid amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act. 75.1 For the Assessment Year 2016-17 the Revenue has raised 7 grounds of appeal in ITA No. 2276/Mum/2023. Ground No. 1 to 4 pertain to disallowance made under Section 40(a)(i) of the Act in relation to professional fees paid/payable to non-residents; Ground No. 5 6 pertain to disallowance made under Section 40(a)(i) of the Act in relation to remittances made to KPMG Cooperative, Switzerland and Ground No. 7 pertain to ad-hoc disallowance at the rate of 25% of the total advertisement and publicity expenses made by the Assessing Officer. 75.2 The Assessee has raised cross objections [CO No.128/Mum/2023] in the above appeal preferred by the Revenue in relation to professional fee paid/payable to tax residents of Sweden and Spain setting up a claim that the aforesaid professional fee is not liable to tax in India in terms of Article 14/15 of the applicable DTAA and therefore, tax withholding provisions contained in Section 195 of the Act and consequently, the provisions contained in Section 40(a)(i) of the Act are not attracted in relation to the same. 75.3 The Assessee has raised the 2 grounds of appeal in ITA No. 2413/Mum/2023 challenging the direction given by CIT(A) to veri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A) deleting/setting aside the disallowance made by the Assessing Officer under Section 40(a)(i) of the Act in respect of professional fee aggregating to INR 13,69,99,679/-. By way of cross-objections, the Assessee is supporting order of CIT(A) deleting the disallowance made under Section 40(a)(i) of the Act on the ground that provisions of Section 195 of the Act and consequently the provisions contained in Section 40(a)(i) of the Act do not get triggered since the professional fee paid/payable to tax residents of Sweden Spain [at Sl. No 6 and 5 20, respectively, of Table in paragraph 77 above] are not liable to tax in India in terms of Article 14/15 of the corresponding DTAAs since the same are in the nature of income from IPS which cannot be brought to tax in India in absence of fixed base/physical presence of tax resident of Sweden/Spain in India. 79. United Kingdom (UK) 85.1 The professional fee paid/payable to a company, being tax residents of UK, are listed at Sl. No. 1 12 of Table in paragraph 77 above. 85.2 In view of paragraph 17 to 17.7 above, we concur with the conclusion drawn by the CIT(A) that the Assessee was not required to withhold tax from the payments made to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. 81.2. In view of paragraph 18 to 18.4 above, we concur with the conclusion drawn by the CIT(A) that the Assessee was not required to withhold tax from the payments made to tax resident of USA reflected at Sl.No. 3 13 of Table in paragraph 77 above. Accordingly we do not find any infirmity in the order passed by the CIT(A) deleting the disallowance made by the Assessing Officer in respect of payments made to tax resident USA invoking provisions of Section 40(a)(i) of the Act cannot be sustained. 82. Australia 82.1. The professional fee paid/payable to firm of individuals being tax residents of Australia are listed at Sl. No. 11 of Table in paragraph 77 above. 82.2. Payments made to tax resident of Australia, being a firm of individuals, is not liable to tax in India in the present case in view of reasoning given in paragraph 35 to 35.2 above. Accordingly, the Assessee was not under obligation to deduct tax from the amounts paid/payable to the tax residents of Australia and therefore, we do not find any infirmity in the order passed by the CIT(A) deleting the disallowance made by the Assessing Officer Section 40(a)(i) of the Act in respect of the same. 83. France 83.1. The profess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ofessional fee aggregating to INR 56,60,499/- [at Sl. No. 4, 5, 7, 10, 21 23 of Table at Paragraph 77 Above] the CIT(A) has remitted the issue to the file of Assessing Officer for adjudication after verification. Adopting the reasoning given in paragraph 36 above, we set aside the order passed by the CIT(A) to this extent and direct the CIT(A) to adjudicate the issue/grounds raised by the Assessee after calling for a remand report from the Assessing Officer. Since we have restored the issue back to the file of CIT(A), all rights and contentions of the Assessee are left open. It is clarified that the Assessee shall be granted a reasonable opportunity of being heard. 86. In view of the above, Ground No. 1 to 4 raised by the Revenue are partly allowed; Cross Objection No. 1 raised by the Assessee is allowed; and Ground No. 1 2 raised by the Assessee are allowed for statistical purposes. Ground No. 5 6 raised by the Revenue 87. Ground No. 5 raised by the Revenue pertains to disallowance of INR 34,47,89,133/- made by the Assessing Officer under Section 40(a)(i) of the Act in respect of remittance of made by the Assessee to KPMG International Cooperative, Switzerland (KPMGI) without dedu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see has raised the 2 grounds of appeal in ITA No. 2277/Mum/2023 challenging the direction given by CIT(A) to verify averments/submission made by the Assessee in respect of disallowance made by the Assessing Officer under Section 40(a)(i) of the of the Act in respect of aggregate professional fee of INR 39,87,237/-. 90. Both the sides had adopted the arguments made in relation to issues raised in appeal for the preceding assessment years. Accordingly, keeping in view our reasoning/findings/adjudication in relation to appeal/cross-appeal/cross objection pertaining to preceding assessment years, we proceed to adjudicate the above issues raised pertaining to Assessment Year 2017-18. 91. For the Assessment Year 2017-18, the Assessee claimed deduction for the following professional fee paid/payable to the non-residents aggregating to INR 18,05,48,835/-. Sl.No Name Country of Tax Residence Status Amount (INR) Note Ref 1 Idasan Singapore Pte Ltd, Singapore Company 19,46,746 2 2 International Screening Solutions, Inc. USA Company 7,76,901 3 KPMG Associados - Sociedade De Revis,Ores Oficiais De Contas, S.A. Portugal Company 2,59,839 2 4 KPMG Ab, Sweden Company 1,33,740 5 KPMG Advisory Ae, Gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x in India in absence of fixed base/physical presence of tax resident of Sweden/Spain in India. 93. Article 14/15 on IPS containing the expression resident of contracting state 93.1. On perusal of Article 14/15 of DTAA entered by India with the following countries (Please refer to Table in Paragraph 91 for details) we find that the scope of IPS Article contained in the applicable DTAA covers income derived by resident of a contacting state from IPS: (a) Singapore [[applicable to non-resident party at Sl. No. 1], (b) Sweden [applicable to non-resident party at Sl. No. 4]; (c) Netherlands [applicable to non-resident parties at Sl. No. 7,16,17 32], (d) Indonesia (Applicable India-Indonesia DTAA [Repealed by Notificaiton No. S.O. 1144(E) [NO. 17/2016 (F.NO. 503/4/2005-FTD-II], Dated 16-3-2016]) [applicable to non-resident party at Sl.No.23]; (e) Mauritius [applicable to non-resident parties at Sl. No. 8, 24 26]; (f) Spain [applicable to non-resident party at Sl. No. 11], (g) Philippines [applicable to non-resident party at Sl. No. 27], (h) Bangladesh [applicable to non-resident party at Sl. No. 28]; (i) United Arab Republic (Egypt) / UAR [applicable to non-resident party at Sl. No. 14] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in this regard. 96. Australia 96.1. The professional fee paid/payable to firm of individuals being tax residents of Australia are listed at Sl. No. 12 29 of Table in paragraph 91 above. 96.2. Payments made to tax resident of Australia, being a firm of individuals, is not liable to tax in India in the present case in view of reasoning given in paragraph 35 to 35.2 above. Accordingly, the Assessee was not under obligation to deduct tax from the amounts paid/payable to the tax residents of Australia and therefore, we do not find any infirmity in the order passed by the CIT(A) deleting the disallowance made by the Assessing Officer Section 40(a)(i) of the Act in respect of the same. 97. United Kingdom (UK) 97.2 The professional fee paid/payable to a company, being tax residents of UK, are listed at Sl. No. 15 31 of Table in paragraph 91 above. 97.3 In view of paragraph 17 to 17.7 above, we concur with the conclusion drawn by the CIT(A) that the Assessee was not required to withhold tax from the payments made to tax residents of UK reflected at Sl.No.15 31 of Table in paragraph 91 above. There is nothing on record to persuade us to take a different view. Accordingly, we do not find any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Section 40(a)(i) of the Act. To this extent we uphold the contention of the Revenue and overturn the decision of CIT(A) reinstating disallowance of professional fee paid/payable to company being tax residents of France listed at Sl.No.20 of Table in paragraph 91 above. Ground No. 1 2 raised by the Assessee - Remand to Assessing Officer 100. As regards the professional fee aggregating to INR 39,87,237/- [at Sl. No. 3, 5, 6, 13, 21 25 of Table at Paragraph 91 above] the CIT(A) has remitted the issue to the file of Assessing Officer for adjudication after verification. Adopting the reasoning given in paragraph 36 above, we set aside the order passed by the CIT(A) to this extent and direct the CIT(A) to adjudicate the issue/grounds raised by the Assessee after calling for a remand report from the Assessing Officer. Since we have restored the issue back to the file of CIT(A), all rights and contentions of the Assessee are left open. It is clarified that the Assessee shall be granted a reasonable opportunity of being heard. 101. In view of the above, Ground No. 1 to 4 raised by the Revenue are partly allowed; Cross Objection No. 1 raised by the Assessee is allowed; and Ground No. 1 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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