The assessee failed to deduct tax on professional fees paid to ...

Fees paid to foreign firms not taxable in India due to lack of PE/fixed base.

Case Laws     Income Tax

August 23, 2024

The assessee failed to deduct tax on professional fees paid to various non-residents. The Assessing Officer (AO) held that the fees were liable to tax in India under the Act and applicable tax treaties. The Commissioner of Income Tax (Appeals) [CIT(A)] deleted substantial disallowance u/s 40(a)(i), holding that the fees were business profits or income from independent personal services not taxable in India due to lack of permanent establishment or fixed base. The Tribunal concurred with CIT(A) that fees paid to UK residents were not taxable in India. Regarding fees to KPMG International Cooperative, Switzerland, following its earlier order, the Tribunal held that contributions were covered by the mutuality concept and not taxable income, upholding CIT(A)'s deletion of disallowance. The Tribunal also upheld CIT(A)'s deletion of 25% ad-hoc disallowance of advertisement expenses, citing lack of basis and judicial precedent. For professional fees to an Australian firm, the Tribunal held that under the tax treaty, such income was not taxable in India due to lack of fixed base, agreeing with CIT(A)'s deletion of disallowance u/s 40(a)(i). The Tribunal also confirmed CIT(A)'s consequential deletion of disallowance of foreign exchange fluctuation loss related to professional fees.

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