ASST CIT 16(2), MUMBAI vs. BSR AND CO. LLP, MUMBAI

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ITA 361/MUM/2017Status: DisposedITAT Mumbai02 August 2023AY 2012-1353 pages

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Income Tax Appellate Tribunal, MUMBAI BENCH “I”, MUMBAI

Before: SHRI ABY T. VARKEY, HONBLE & SHRI S. RIFAUR RAHMAN, HONBLE

For Appellant: Shri Ajit Kumar Jain &, Shri Siddhesh Chougule

For Respondent: Shri Amit Kumar Soni

Pronounced: 02.08.2023

O R D E R PER BENCH 1. These appeals are filed by revenue against different orders of the Learned Commissioner of Income Tax (Appeals)-5, Mumbai [hereinafter in short “Ld.CIT(A)”] dated 04.10.2016, 05.10.2016 and 05.10.2016 for the A.Y. 2012-13.

Since the issues raised in all these appeals are identical, therefore, for the sake of convenience, these appeals are clubbed, heard and disposed off by this consolidated order.

ITA.No. 360/MUM/2017 (A.Y. 2012-13) ITA.No. 362/MUM/2012 (A.Y. 2012-13) 3. In both these appeals, revenue has raised following identical grounds except for change in figures. Grounds raised in ITA.No.360/MUM/2017 are reproduced below: -

Page No. 2 , 361 & 362/MUM/2017 (A.Y. 2012-13) M/s. BSR and Company& Other group concerns “1. On the facts and in the circumstances of the case and in law, whether the Ld.CIT(A) was justified in deleting the disallowance of Rs. 19,18,003/u/s. 40(a)(i) being professional fees paid outside India without deduction of tax at source; 2. On the facts and circumstances of the case and in law, whether the Ld. CIT(A) was justified in directing to delete the disallowance of Rs. 72,93,039/- made by the Assessing Officer (AO) u/s 40(a)(ia) of the Income Tax Act in respect of payment made to KPMGI Co-operative, Switzerland (henceforth, KPMGI for the sake of brevity/without appreciating that the said receipts in the hands of KPMGI are taxable in India as Royalty Income and as such the tax is required to be deducted on this payment u/s 195 of the IT Act, 1961.

3. On the facts and circumstances of the case and in law, whether the Ld. CIT (A) was justified in holding that KPMGI is a mutual association of the assessee concern and hence its receipts would not be taxable in India without appreciating that the concept of mutuality within concerns operating on multi-national forum is non-existing either under Income-tax Act or under respective Double Taxation Avoidance Agreements (DTAA) and hence, the payments to KPMGI are rightly held as royalty payments.

Page No. 10 , 361 & 362/MUM/2017 (A.Y. 2012-13) M/s. BSR and Company& Other group concerns are in the nature of business profits under Article 7 of the respective tax treaties and are not taxable in India in the absence of permanent establishment of non – residents in India under Article 5 of the said tax treaties since services are not in nature of make available of technical knowledge, experience, skill, know-how or process. b. In the case of payment made to Israel entity at Sr. No. 3, it was pointed out that the Israel tax treaty is similar to Ireland tax treaty and the services cannot be construed as managerial or technical services so as to be governed by article 13 of the Israel tax treaty dealing with FTS. Since there is a specific article 15 on Independent Personal services in Israel tax treaty, this specific article will override the general article pertaining to FTS and these would not be taxable in India in absence of fixed base of non-resident in India. c. In the case of payment made to Philippines entity at Sr. No. 9, it was pointed out that Philippines tax treaty is similar to Bangladesh tax treaty. There is no article dealing with FTS in both the tax treaties. The payment would be covered under article 15 of the Philippines tax treaty and would not be taxable in India in absence of fixed base of non-resident in India. The payment would not be covered under article 23 dealing with other income. Ld. Counsel of the assessee placed reliance on the decision of ITAT Mumbai in the case of P.T. McKinsey Indonesia [2013] 29 taxmann.com 100, placed in the case law compilation at page number 94 d. In the case of payment made to Norway entity at Sr. No. 10 it is submitted that the professional fees are paid for services utilised for the purpose of earning income from a source outside India and hence, are not taxable in India pursuant to the provisions of Section 9(1) (vii) (b) of the IT Act. Ld. Counsel explained that the professional fees have been paid by the assessee, an India tax resident to KPMG Norway, a nonresident for earning income from a source outside India i.e. from an overseas client. Ld. Counsel of the assessee placed reliance on the decision of ITAT Mumbai in the case of Bajaj Hindustan Limited [2011] 13 taxmann.com 13 placed in the case law compilation at page number 99.

13. In so far as payment made to Norway entity at Sr. No. 10 of the table we note that the professional fees have been paid by the assessee, an India tax resident to KPMG Norway, a non-resident. We note from the order of the Ld. AO that the AO has not disputed that the payment has been made by the assessee for earning income from a source outside India i.e. from an overseas client. Thus the payment does not get covered under Section 9(1) (vii) of the IT Act in view of the exclusion pursuant to clause (b) of Section 9(1)(vii) of the Act. We further note that this issue is covered by the decision of ITAT Mumbai in the case of Bajaj Hindustan Limited [2011] 13 taxmann.com 13 reproduced below:- “14……… As far as the second exception mentioned in Sec.9 (1) (vii) clause (b) is concerned viz., “for the purposes of earning any income from any source outside India.” the undisputed facts are that the Assessee wanted to acquire sugar mills/distillery plants in Brazil and for that purpose also wanted to set up a subsidiary company. In fact, the Assessee had set up a subsidiary company on 8.8.2006 in Brazil. Thus the Assessee was contemplating to create a source for earning income outside India. It is no doubt true that the source of income had not come into existence. But Page No. 15 ITA Nos. 360, 361 & 362/MUM/2017 (A.Y. 2012-13) M/s. BSR and Company& Other group concerns there is nothing in Sec.9 (1) (vii) clause (b) of the Act, to show that the source of income should have come into existence so as to except the payment of fees for technical services. The expression used is “for the purpose of earning any income from any source outside India”. There is nothing in the language of Sec.9 (1)(vii) clause (b) of the Act, which would go to show that the same is restricted to only to an existing source of income. We therefore agree with the conclusions of the CIT (A) on this aspect. We therefore uphold the order of the CIT (A) holding that the payment by the Assessee of fees for technical services rendered by M/s. KPMG was outside the scope of Sec. 9(1) (vii) of the Income Tax Act. Hence it cannot be considered as income deemed to have accrued in India and not chargeable to tax in India and hence the Assessee was not liable to deduct tax u/s. 195 of Income Tax Act………..”

Page No. 16 , 361 & 362/MUM/2017 (A.Y. 2012-13) M/s. BSR and Company& Other group concerns to its associate concerns based in Israel, Philippines, constitute payments for Independent Personal Services instead of “Royalty” as defined under Article 12/13 of the respective DTAAs? Whether on the facts and in the circumstances of the case and in law, 4. the Ld. CIT(A) has erred in holding that the services rendered by the associate concerns to the assessee constitute “Independent Personal Services” under DTAAs not appreciating that only those services performed by an independent non-resident alien contractor would constitute “Independent Personal Services” under DTAA which is not the case here as in this case, the Services were rendered by the Group entities to an Indian entity which were closely working with each other? On the facts and in the circumstances of the case and in law, whether 5. the Ld. CIT(A) erred in holding that the KPMG Co-operative, Switzerland, is a mutual association and its receipts would not constitute income chargeable to tax and is not obliged to withhold and any tax without appreciating the facts, thereby deleting the disallowance of Rs.7,89,82,072/- u/s. 40(a)(i). On the facts and in the circumstances of the case and in law, whether 6. the Ld. CIT (A) erred in holding that the payments made by the assessee to KPMG for names, mark and other facilities were in the nature of royalty and chargeable to tax in India. On the facts and circumstances of the case and in law, allowing tax 7. relief in regard to income earned in Japan. The Ld. CIT (A) has not considered the provisions of Article 14A of India-Japan DTAA dealing with Independent Personal Services. As per the provisions of Article 14A the income itself is not taxable, the tax credit in respect thereof is not allowable.” Facts of the case AY 2015-16: 18. The assessee is a Limited Liability Partnership firm of Chartered Accountants and filed its return of income for AY 2015-16 electronically on 28.11.2015 declaring a total income of Rs. 40,97,67,300/- Assessee’s case was selected for scrutiny under CASS-Limited and statutory notices u/s. 142(1) and 143(2) of the I.T Act were issued. During the course of scrutiny proceedings, the AO

9 KPMG Phoomchai Transfer Pricing Covered in favour of taxpayer Tax Ltd (Thailand) 1,82,634 Services by: 1. Tribunal order in taxpayers (Company) own cases for AY 2013 - 14(ITA No. 2549/M/2018) (refer para 7 to 12 on pages 6 to 10 of the case law compilation) (Similar Treaty with Indonesia) 10 KPMG (Mauritius) 2,01,493 Audit Services Covered in favour of taxpayer (Firm of Individuals) by:1. Tribunal order in taxpayers own cases for AY 2013 - 14 (ITA No. 2549/M/2018) (refer para 7 to 12 on pages 6 to 10 of the case law compilation) (Similar Treaty with Bangladesh)2. Bombay High Court order in network member firm's case for AY 2008 - 09 CIT - 16 vs KPMG (ITA No. 690 of 2017) (refer para 9/page 48 of the case law compilation) 11 R.G. Manabat& Co. 1,36,819 Audit Services Covered in favour of taxpayer (Philippines) (Firm of by: Individuals) 1. Tribunal order in Page No. 20 ITA Nos. 360, 361 & 362/MUM/2017 (A.Y. 2012-13) M/s. BSR and Company& Other group concerns Sr. Name of the Amount in Description of Remarks No. Payee INR Services taxpayers own cases for AY 2013 - 14 (ITA No. 2549/M/2018) (refer para 7 to 12 on pages 6 to 10 of the case law compilation) (Similar Treaty with Bangladesh) 2. Tribunal order taxpayers own cases for AY 2011 - 12 (ITA No.4535/Mum/2016 & (refer para 14 on page 24 and and refer 5 & 6 pages 17 to 22of the case law compilation) (similar payments made to ManabatSanagustin& Co, Philippines) 21. On the basis of above chart, the Ld. Counsel submitted that: (a)Payments made to entities mentioned at Sr. No. 2, 3, 4, 5 and 11 which are located in Singapore, the UK, France and Philippines entities are identical to the payments made in the AY 2014-15 and hence the arguments and submissions made in the earlier AY 2014-15 will apply in the current year too. (b) In the case of payment made to the USA entity at Sr. No. 1 the services are in the nature of Independent Personal Services under Article 15 of the USA tax treaty and are not taxable in India in the absence of fixed base of non-resident in India since services are not in nature of make available of technical knowledge, experience, skill, know-how or process. (c) In the case of payment made to Indonesia, Saudi Arabia and Thailand entities at Sr. No. 6, 7, 8 and 9 it was pointed out that Indonesia tax treaty was a subject matter of decision in AY 2013-14 and Saudi Arabia and Thailand tax treaties are similar to Indonesia tax treaty. There is no article dealing with FTS in these tax treaties. The payment would be covered under article 7 of the tax treaties dealing with Business Profits and would not be taxable in India in absence of Permanent Establishment of non-residents in India. The payment would not be covered under article 21/22/23 dealing with other income. Ld. Counsel of the assessee also placed reliance on the decision of ITAT Mumbai in the case of P.T. McKinsey Indonesia [2013] 29 taxmann.com 100, placed in the case law compilation at page number 94.

1. On the facts and in the circumstances of the case and in law, whether the Ld. CIT(A) was justified in deleting the disallowance of Page No. 23 , 361 & 362/MUM/2017 (A.Y. 2012-13) M/s. BSR and Company& Other group concerns Rs.2,59,36,186/- u/s. 40(a)(i) being professional fees paid outside India without deduction of tax at source? Whether on the facts and in the circumstances of the case and 2. in law, the Ld. CIT (A) has erred in holding that the payment made by the assessee to its associate concerns based in countries apart from Israel, Philippines, constitute payments for Independent Personal Service instead of ‘Fees for Technical Services” as defined under Article 12/13 of the respective DTAAs? Whether on the facts and in the circumstances of the case and 3. in law, the Ld. CIT (A) has erred in holding that the payments made by the assessee to its associate concerns based in Israel, Philippines, constitute payments for Independent Personal Services instead of “Royalty” as defined under Article 12/13 of the respective DTAAs? Whether on the facts and in the circumstances of the case and 4. in law, the Ld. CIT(A) has erred in holding that the services rendered by the associate concerns to the assessee constitute “Independent Personal Services” under DTAAs not appreciating that only those services performed by an independent non-resident alien contractor would constitute “Independent Personal Services” under DTAA which is not the case here as in this case, the Services were rendered by the Group entities to an Indian entity which were closely working with each other? On the facts and in the circumstances of the case and in law, 5. whether the Ld. CIT(A) erred in holding that the KPMG Co-operative, Switzerland, is a mutual association and its receipts would not constitute income chargeable to tax and is not obliged to withhold and any tax without appreciating the facts, thereby deleting the disallowance of Rs.10,22,44,715/- u/s. 40(a)(i). On the facts and in the circumstances of the case and in law, 6. whether the Ld. CIT (A) erred in holding that the payments made by the assessee to KPMG for names, mark and other facilities were in the nature of royalty and chargeable to tax in India. On the facts and circumstances of the case and in law, allowing 7. tax relief in regard to income earned in Japan. The Ld. CIT(A) has not considered the provisions of Article 14A of India-Japan DTAA dealing

Sr. Name of the Amount in Description of Remarks No. Payee INR Services Covered in favour of taxpayer 1 KPMG LLP Taxation by: (USA) (Firm of 1,85,96,072 Services Individuals) 1. Tribunal order in taxpayers own cases for AY 2013 - 14 (ITA No. 2549/M/2018) (refer para 7 to 12 on pages 6 to 10 of the case law compilation) 2. Bombay High Court order in network member firm's case for AY 2008 - 09 CIT - 16 vs KPMG (ITA No. 690 of 2017) (refer para 9/page 48 of the case law compilation) 2 KPMG LLP Taxation Covered in favour of taxpayer (UK) (Firm of 23,86,880 Services by: Individuals) 1. Tribunal order taxpayers own cases for AY 2013 - 14 (ITA No. 2549/M/2018) (refer para 7 to 12 on pages 6 to 10 of the case law compilation) 3 KPMG LLP Audit Covered in favour of taxpayer (Singapore) 6,69,650 Services by: (Firm of 1. Tribunal order taxpayers own Individuals) cases for AY 2013 - 14 (ITA No. 2549/M/2018) (refer para 7 to 12 on pages 6 to 10 of the case law compilation) 4 KPMG Taxation Covered in favour of taxpayer Services Pte.Ltd. 13,31,234 Services by:1. Tribunal order taxpayers (Singapore) own cases for AY 2013 - 14 (ITA (Company) No. 2549/M/2018) (refer para 7 to 12 on pages 6 to 10 of the case law compilation) Covered in favour of taxpayer 5 Rahman 2,91,676 Taxation by: Rahman Huq Services (Bangladesh) 1. Tribunal order in taxpayers (Firm of own cases for AY 2013 - 14 (ITA Individuals) No. 2549/M/2018) (refer para 7 to Page No. 26 , 361 & 362/MUM/2017 (A.Y. 2012-13) M/s. BSR and Company& Other group concerns Sr. Name of the Amount in Description of Remarks No. Payee INR Services 12 on pages 6 to 10 of the case law compilation) 6 KPMG 1,91,910 Taxation Covered in favour of taxpayer (Ireland) (Firm by: Services of 1. Tribunal order taxpayers own Individuals) cases for AY 2008 - 09 (ITA No. 2843/M/2014) (refer para 4.8 on page 40 of the case law compilation) 7 KPMG Taxation Covered in favour of taxpayer by:1.Tribunal order in taxpayers Meijburg& Co 4,84,637 Services own cases for AY 2013 - 14 (ITA Special No. 2549/M/2018) (refer para 7 to Services B.V. 12 on pages 6 to 10 of the case law (Netherlands) compilation) (Similar Treaty with (Company) UK and Singapore)2. Bombay High Court order in network member firm's case for AY 2008 - 09 CIT - 16 vs KPMG (ITA No. 690 of 2017) (refer para 9/page 48 of the case law compilation) (Similar to payments made to KPMG Accountants NV a company resident of Netherlands) 8 KPMG Audit services Covered in favour of taxpayer Phoomchai Audit 5,58,828 by: 1. Tribunal order in taxpayers Ltd. own cases for AY 2013 - 14 (ITA (Thailand) (Company) No. 2549/M/2018) (refer para 7 to 12 on pages 6 to 10 of the case law compilation) (Similar Treaty with Indonesia)

Page No. 30 , 361 & 362/MUM/2017 (A.Y. 2012-13) M/s. BSR and Company& Other group concerns to tax and is not obliged to withhold and any tax without appreciating the facts, thereby deleting the disallowance of Rs.10,79,68,274/- u/s. 40(a)(i). On the facts and in the circumstances of the case and in law, whether 6. the Ld. CIT (A) erred in holding that the payments made by the assessee to KPMG for names, mark and other facilities were in the nature of royalty and chargeable to tax in India. On the facts and circumstances of the case and in law, allowing tax 7. relief in regard to income earned in Japan. The Ld. CIT (A) has not considered the provisions of Article 14A of India-Japan DTAA dealing with Independent Personal Services. As per the provisions of Article 14A the income itself is not taxable, the tax credit in respect thereof is not allowable.” Facts of the case AY 2017-18: 37. The assessee is a Limited Liability Partnership firm of Chartered Accountants and filed its return of income for AY 2017-18 electronically on 31.10.2017 declaring a total income of Rs. 93, 92, 72,310/- Assessee’s case was selected for compulsory scrutiny under CASS and statutory notices u/s. 142(1) and 143(2) of the I.T Act were issued. During the course of scrutiny proceedings, the AO made addition to the total income of the assessee on account of (i) claim of professional fees of Rs. 3,48,31,787/- paid to nonresidents without deduction of tax at source and (ii) claim of remittance of Rs. 10,79,68,274/- made to KPMG International Co-operative, Switzerland without TDS. The AO also denied the claim of the assessee of foreign tax credit to the extent of 58, 66,651/-. Ground Nos. 1 to 4 of AY 2017-18: 38. During the year under consideration, the assessee has made payments of Rs. 3,48,31,787/- as professional fees to various non-residents without deduction of tax at source as under:- Sr. No. Name of the non-resident Amount 1 KPMG LLP (Singapore) 1,746,709 2 KPMG Al Fozan& Partners Saudi Arabia 676,400 3 KPMG Australia 567,280 4 KPMG LLP, UK 778,765

Page No. 32 , 361 & 362/MUM/2017 (A.Y. 2012-13) M/s. BSR and Company& Other group concerns Sr. Name of Amount in Description Remarks No. the Payee INR of Services 4 KPMG Audit Covered in favour of taxpayer by:1. Services Pte. 24,25,121 Service, Tribunal order taxpayers own cases Ltd. Tax for AY 2013 - 14 (ITA No. (Singapore) Advisory 2549/M/2018) (refer para 7 to 12 on (Company) Services pages 6 to 10 of the case law compilation) 5 KPMG Tax Covered in favour of taxpayer by: 1. (Australia) 5,67,280 Advisory Tribunal order taxpayers own cases for AY 2013 - 14 (ITA No. (Firm of Services 2549/M/2018) (refer para 7 to 12 on Individuals) pages 6 to 10 of the case law compilation) 6 Rahman 13,34,140 Taxation Covered in favour of taxpayer by: Rahman Huq Services 1. Tribunal order in taxpayers own (Bangladesh) cases for AY 2013 - 14 (refer para 7 (Firm of to 12 on pages 6 to 10 of the case Individuals) law compilation) 7 KPMG Tax Covered in favour of taxpayer by:1. Meijburg& Co 1,56,261 Advisory Tribunal order taxpayers own cases Special Services for AY 2013 - 14(refer para 7 to 12 on Services BV. pages 6 to 10 of the case law (Netherlands) compilation) - (Similar treaty with Singapore and UK)2. Bombay High (Company) Court order in network member firm's case for AY 2008 - 09 CIT - 16 vs KPMG (ITA No. 690 of 2017) (refer para 9/page 48 of the case law compilation) (Similar to payments made to KPMG Accountants NV a company resident of Netherlands) 8 KPMG Al Audit Covered in favour of taxpayer by: Fozan& 6,76,400 Service 1. Tribunal order in taxpayers own Partners cases for AY 2013 - 14 (ITA No. (Saudi Arabia) 2549/M/2018) (refer para 7 to 12 on (Firm of pages 6 to 10 of the case law Individuals) compilation) (Similar Treaty with Indonesia) 9 KPMG 10,07,754 Audit Covered in favour of taxpayer by:1. (Mauritius) Services Tribunal order in taxpayers own cases (Firm of for AY 2013 - 14 (ITA No. Individuals) 2549/M/2018) (refer para 7 to 12 on pages 6 to 10 of the case law compilation) (Similar Treaty with Bangladesh)2. Bombay High Court order in network member firm's case for AY 2008 - 09 CIT - 16 vs KPMG (ITA No. 690 of 2017) (refer para 9/page 48 of the case law compilation)

9. For the above, the appellant relied on decisions of the ITAT, Mumbai, in its own case for AYs. 2008-09, 2009-10, 2010-11, 2011-12 and 2012-13. The Tribunal in I.T. Appeal No. 1917(Mum) of 2013, A.Y. 2009-10 decided on 06.05.2016, in assessee’s own case held as under: “In the context of payments made to KPMG Tax Services Pvt. Ltd., Singapore, KPMG LLP, Singapore and KPMG Tax Advisor, Belgium, the CIT (Appeals) noted that they are companies registered in the respective countries, who have rendered services outside India. Such services related to assistance in audit, taxation, information technology services, conducing background checks, etc. Considering the nature of the services rendered, which is not disputed by the Revenue, in our view, the CIT(Appeals) made no mistake in holding that the payments are not 'fee for technical services'. The aforesaid services have been rightly held to be outside the purview of Article-12 and/or Article-13 of the respective tax treaties, and instead such income falls within the scope of Article-7 thereof i.e. in the nature of ‘business profits’. It has also (Assessment Year : 2009-10) not been disputed that such entities do not have a permanent establishment in India, therefore, such incomes are not chargeable to tax in India so as to require deduction of tax at source. On this aspect also, we affirm the stand of the Page No. 36 , 361 & 362/MUM/2017 (A.Y. 2012-13) M/s. BSR and Company& Other group concerns CIT (Appeals) that such payments are not liable for disallowance under section 40(a)(i) of the Act. 5.1 In so far as payments to KPMG LLP, UK and KPMG USMCG Ltd. UK are concerned, herein also the said entities do not have permanent establishment in India. The CIT (Appeals) has found that such entities are eligible for the benefit of Article -15 of Indo-US Double Taxation Avoidance Agreement dealing with independent personal services and hence, payments are not chargeable to tax in India so as to require deduction of tax at source. The aforesaid findings have not been disputed before us on the basis of any cogent material and, therefore, we hereby affirm the same. Consequently, invoking of section 40(a) (i) in the context of aforesaid payments is also not justified.

Page No. 38 , 361 & 362/MUM/2017 (A.Y. 2012-13) M/s. BSR and Company& Other group concerns by the assessee to SiddhartaSiddharta and Widjaja, Indonesia for rendering of audit services, it is seen by the learned CIT (A) that the India-Indonesia DTAA does not have any Article defining FTS and that the services were rendered in respect of audit and taxation matters. In these factual circumstances the learned CIT(A) was of the view that since the payment made by the assessee for such services fall within the scope of Article-14 of the India- Indonesia DTAA dealing with independent personal services and in the absence of any PE of the recipient in India, income from such services is not exigible to tax in India, there was no requirement to deduct tax at source on the said payment and accordingly deleted the disallowance under section 40(a)(ia) of the Act as not sustainable. In this factual matrix, we are of the considered view that the assessee is not liable to deduct tax at source on the aforesaid non-resident entity in Indonesia for the provisions of section 40(a) (i) of the Act to be evoked. We, therefore, uphold the finding of the learned CIT (A) on this issue which has not been controverted before us by the Revenue. 2.3 I have considered the facts and perused the material on record. It is noticed that Rahman RahmanHuq, Bangladesh and KPMG Mauritius are firms of individuals registered in Bangladesh and Mauritius respectively. KPMG Portugal, KPMG Sweden, KPMG Netherlands, Background Bureau Inc., USA Scherzer Intl, USA, KPMG IFRG Lid, UK and KPMG USCMG Ltd, UK are companies registered in the respective countries. The services were entirely rendered outside India. Further the services relate to assistance in audit, taxation, information technology services, conducting background checks, responses to queries related to International Financial Reporting Standards and review of documents to be filed with Securities and Exchange Commission in respect of companies listed in US stock exchanges which are not fees for technical services in nature and having been rendered outside India, fall outside the purview of Article 12/13 of the respective tax treaties, therefore the income fell under the ambit of Article 7 of the respective tax treaties dealing with Business Profits. Since the overseas entities did not have a permanent establishment in India, there was no income chargeable to tax in India and consequently, no requirement of tax withholding.” 4.9 With respect to the payment made by the assessee to SiddhartaSiddharta and Widjaja, Indonesia for KP rendering

5. In the above background, we have carefully considered the rival submissions. Pertinently, the issue revolves around the payments made by the assessee to certain non-resident entities for professional services rendered by them outside India. It has been consistently explained by the assessee that the services of such entities were availed during thecourse of the execution of engagements of assessee firm. The assessee firm did not deduct the tax at source and, therefore, the Assessing Officer invoked the provisions of section 40(a)(i) of the Act and disallowed such expenditure. The details of the entities alongwith the amounts paid have been culled out by the Assessing Officer in Para-3 of the assessment order and the same is not being repeated for the sake of brevity. The payments have been made to 12 different professional entities based in 10 different countries. In so far as the payments that are made to KPMG LLP, USA and KPMG LLP, Canada are concerned, the same has been made on account of professional services rendered in relation to taxation and transfer pricing. Undisputedly, the professional services have been rendered by the aforesaid entities outside India. The stand of the Revenue is that such services are in the nature of ‘fee for technical services’ and, therefore, tax was liable to be deducted at source in India. Factually speaking, the aforesaid stand of the Revenue is devoid of any support because there is no material to establish that any technical knowledge, skill, etc. has been made available to the assessee so as to consider it as falling within the purview of Article- 12 of Indo-US Double Taxation Avoidance Agreement. It is also an established fact that such non-resident recipients do not have permanent establishment in India and, therefore, in the said background the same can, at best, be treated as independent personal services covered by Article-15 of the Indo-US Double Taxation Avoidance Agreement. As a consequence and in the absence of any fixed base in India, such income cannot be held chargeable to tax in India so as to require deduction of tax at source.Therefore, invoking of section 40(a)(i) of the Act to disallow such expenditure is not tenable. 5.1 In so far as payments to KPMG LLP, UK and KPMG USMCG Ltd. UK are concerned, herein also the said entities do not have permanent establishment in India. The CIT(Appeals) has found that such entities are eligible for the benefit of Article -15 of Indo-US Double Taxation Avoidance Agreement dealing with independent personal services and hence, payments are not chargeable to tax in Page No. 41 , 361 & 362/MUM/2017 (A.Y. 2012-13) M/s. BSR and Company& Other group concerns India so as to require deduction of tax at source. The aforesaid findings have not been disputed before us on the basis of any cogent material and, therefore, we hereby affirm the same. Consequently, invoking of section 40(a)(i) in the context of aforesaid payments is also not justified. 5.2 In the context of payments made to KPMG Tax Services Pvt. Ltd., Singapore, KPMG LLP, Singapore and KPMG Tax Advisor, Belgium, the CIT(Appeals) noted that they are companies registered in the respective countries, who have rendered services outside India. Such services related to assistance in audit, taxation, information technology services, conducing background checks, etc. Considering the nature of the services rendered, which is not disputed by the Revenue, in our view, the CIT(Appeals) made no mistake in holding that the payments are not 'fee for technical services'. The aforesaid services have been rightly held to be outside the purview of Article-12 and/or Article-13 of the respective tax treaties, and instead such income falls within the scope of Article-7 thereof i.e. in the nature of ‘business profits’. It has alsonot been disputed that such entities do not have a permanent establishment in India, therefore, such incomes are not chargeable to tax in India so as to require deduction of tax at source. On this aspect also, we affirm the stand of the CIT(Appeals) that such payments are not liable for disallowance under section 40(a)(i) of the Act. 5.3 With regard to the payments to KPMG, Mauritius, KPMG Hazen Hassan, Egypt, KPMG Dubai, UAE and KPMG, Sri Lanka are concerned, the CIT(Appeals) has noticed that the tax treaties with the respective countries do not have any Article defining 'fee for technical services'; and that the services were being rendered in relation to taxation matters. In this back ground, the CIT(Appeals) held that the payments for such services fall within the scope of article 14/15 of the respective treaties dealing with independent personal services and in the absence of any fixed place of business of the recipient in India, income from such services was not chargeable to tax in India. Therefore, there was no requirement to deduct tax at source and accordingly the invoking of section 40(a)(i) of the Act has been set-aside by the CIT(Appeals). The aforesaid factual matrix brought out by the CIT(Appeals) has not been assailed by the Revenue before us on the basis of any cogent material and, thus, the same is hereby affirmed. 5.4 The last item remaining is payment made by assessee to KPMG, Malaysia for audit services. It is not in dispute that the said services have been rendered outside India and the same cannot be Page No. 42 , 361 & 362/MUM/2017 (A.Y. 2012-13) M/s. BSR and Company& Other group concerns construed as managerial or technical services so as to be governed by Article-13 ofIndia-Malaysia tax treaty, as contended by the Revenue. Clearly, they are in the nature of independent personal services falling for consideration under Article-14 of Indo-Malaysia tax treaty and, therefore, in the absence of any fixed place of business of the recipient in India, the impugned income is not chargeable to tax in India. Therefore, in such a situation, assessee is not liable for deduction of tax at source in India so as to invoke the provisions of section 40(a)(i) of the Act. The stand of the CIT(Appeals) on this aspect is also affirmed by us on the basis of his findings, which have remained uncontroverted before us by the Revenue.

Page No. 43 , 361 & 362/MUM/2017 (A.Y. 2012-13) M/s. BSR and Company& Other group concerns to certain non-resident entities for professional services rendered by them outside India. It has been consistently explained by the assessee that the services of such entities were availed during the course of the execution of engagements of assessee firm. The assessee firm did not deduct the tax at source and, therefore, the Assessing Officer invoked the provisions of section 40(a)(i) of the Act and disallowed such expenditure. The details of the entities alongwith the amounts paid have been culled out by the Assessing Officer in Para-3 of the assessment order and the same is not being repeated for the sake of brevity. The payments have been made to 12 different professional entities based in 10 different countries. In so far as the payments that are made to KPMG LLP, USA and KPMG LLP, Canada are concerned, the same has been made on account of professional services rendered in relation to taxation and transfer pricing. Undisputedly, the professional services have been rendered by the aforesaid entities outside India. The stand of the Revenue is that such services are in the nature of 'fee for technical services' and, therefore, tax was liable to be deducted at source in India. Factually speaking, the aforesaid stand of the Revenue is devoid of any support because there is no material to establish that any technical knowledge, skill, etc. has been made available to the assessee so as to consider it as falling within the purview of Article-12 of Indo-US Double Taxation Avoidance Agreement. It is also an established fact that such non- resident recipients do not have permanent establishment in India and, therefore, in the said background the same can, at best, be treated as independent personal services covered by Article-15 of the Indo-US Double Taxation Avoidance Agreement. As a consequence and in the absence of any fixed base in India, such income cannot be held chargeable to tax in India so as to require deduction of tax at source. Therefore, invoking of section 40(a)(i) of the Act to disallow such expenditure is not tenable. 5.1 In so far as payments to KPMG LLP, UK and KPMG USMCG Ltd. UK are concerned, herein also the said entities do not have permanent establishment in India. The CIT(Appeals) has found that such entities are eligible for the benefit of Article-15 of Indo-US Double Taxation Avoidance Agreement dealing with independent personal services and hence, payments are not chargeable to tax in India so as to require deduction of tax at source. The aforesaid findings have not been disputed before us on the basis of any cogent

Page No. 44 , 361 & 362/MUM/2017 (A.Y. 2012-13) M/s. BSR and Company& Other group concerns material and, therefore, we hereby affirm the same. Consequently, invoking of section 40(a)(i) in the context of aforesaid payments is also not justified. 5.2 In the context of payments made to KPMG Tax Services Pvt. Ltd., Singapore, KPMG LLP, Singapore and KPMG Tax Advisor, Belgium, the CIT(Appeals) noted that they are companies registered in the respective countries, who have rendered services outside India. Such services related to assistance in audit, taxation, information technology services, conducing background checks, etc. Considering the nature of the services rendered, which is not disputed by the Revenue, in our view, the CIT(Appeals) made no mistake in holding that the payments are not 'fee for technical services'. The aforesaid services have been rightly held to be outside the purview of Article12 and/or Article-13 of the respective tax treaties, and instead such income falls within the scope of Article-7 thereof i.e. in the nature of 'business profits'. It has also not been disputed that such entities do not have a permanent establishment in India, therefore, such incomes are not chargeable to tax in India so as to require deduction of tax at source. On this aspect also, we affirm the stand of the CIT(Appeals) that such payments are not liable for disallowance under section 40(a)(i) of the Act. 5.3 With regard to the payments to KPMG, Mauritius, KPMG Hazen Hassan, Egypt, KPMG Dubai, UAE and KPMG, Sri Lanka are concerned, the CIT(Appeals) has noticed that the tax treaties with the respective countries do not have any Article defining 'fee for technical services'; and that the services were being rendered in relation to taxation matters. In this back ground, the CIT(Appeals) held that the payments for such services fall within the scope of article 14/15 of the respective treaties dealing with independent personal services and in the absence of any fixed place of business of the recipient in India, income from such services was not chargeable to tax in India. Therefore, there was no requirement to deduct tax at source and accordingly the invoking of section 40(a)(i) of the Act has been set-aside by theCIT(Appeals). The aforesaid factual matrix brought out by the CIT(Appeals) has not been assailed by the Revenue before us on the basis of any cogent material and, thus, the same is hereby affirmed. 5.4 The last item remaining is payment made by assessee to KPMG, Malaysia for audit services. It is not in dispute that Page No. 45 , 361 & 362/MUM/2017 (A.Y. 2012-13) M/s. BSR and Company& Other group concerns the said services have been rendered outside India and the same cannot be construed as managerial or technical services so as to be governed by Article-13 of India-Malaysia tax treaty, as contended by the Revenue. Clearly, they are in the nature of independent personal services falling for consideration under Article-14 of Indo-Malaysia tax treaty and, therefore, in the absence of any fixed place of business of the recipient in India, the impugned income is not chargeable to tax in India. Therefore, in such a situation, assessee is not liable for deduction of tax at source in India so as to invoke the provisions of section 40(a)(i) of the Act. The stand of the CIT(Appeals) on this aspect is also affirmed by us on the basis of his findings, which have remained uncontroverted before us by the Revenue. 5.5 Apart therefrom, even if we were to accept, for the sake of argument, that the services by the aforesaid entities are in the nature of technical services and are rendered and utilized in India so as to be taxable in terms of section 9(1)(vii) of the Act, even then the disallowance is not warranted as the following discussion would show. Ostensibly, the requirement of rendering services in India in order to attract section 9(1)(vii) of the Act was removed by insertion of Explanation by the Finance Act, 2010 with retrospective effect from 1/4/1976. This has been understood by the Revenue to say that inspite of the services having been rendered by the recipients outside India, the same is taxable in India by applying the aforesaid amendment. In our view, such retrospective amendment would be determinative of the tax liability in the hands of the recipients of income. So however, in the present case, what is held against the assessee is the failure to deduct tax at source at the time of payment of such income. Ostensibly, dehors the aforesaid amendment, the impugned income was not subject to tax deduction at source in India as per the prevailing legal position. Taxability of a sum in the hands of recipient, on account of a subsequent retrospective amendment would not expose the assessee-payer to an impossible situation of requiring deduction of tax at source on the date of payment. Therefore, on this count also the assessee cannot be held to be in default in not deducting tax at source so as to trigger the disallowance under section 40(a)(i) of the Act. Ld. Representative for the assessee has relied upon the decision of the Mumbai Bench of the Tribunal in the case of Channel Guide India Ltd. v. Asstt. CIT [2012] 25 taxmann.com 25/139 ITD 49 (Mum.) in support of Page No. 46 ITA Nos. 360, 361 & 362/MUM/2017 (A.Y. 2012-13) M/s. BSR and Company& Other group concerns the above said proposition. In the absence of any contrary decision, the said plea of the assessee is also liable to be upheld and the disallowance made by the Assessing Officer under section40(a)(i) of the Act is untenable. The disallowance has been rightly deleted by the CIT(Appeals), which we hereby affirm.

19.

Considered the rival submissions and material placed on record, we observe that similar issue was considered and adjudicated by the Coordinate Bench in assessee’s own case in ITA.No. 723/Mum/2023 for the A.Y. 2014-15. We observe that the Tribunal while adjudicating the issued followed the decision in assessee’s own case for the A.Y. 2013-14 in ITA.No. 2549/Mum/2018 dated 15.06.2022 and decided the issue in favour of the assessee. While holding so the Coordinate Bench held as under: - “15. Ground Nos. 5 & 6 are interlinked, hence disposed of by common findings. These grounds pertain to claim of remittance of Rs.7,09,17,956/- made by the assessee to KPMG International Co-operative, Switzerland without TDS. On this issue, during the assessment proceedings, Ld. AO held as under:- “4.3 on perusal of the sub-license agreement dated 01.01.2007 filed by the assessee; it appears that the payment is essentially for use of KPMG marks which belong to KPMG International Co-operative. In this regard, reference is drawn to clause 4(a) and (b) of the sub-license agreement as under: “4. Use of KPMG Marks a) The Signatory Sublicense acknowledges that the Sub licensor’s right to the KPMG Marks derive exclusively from the Sub licensor’s rights under the Membership Agreement and that the sublicense to the KPMG Marks granted pursuant to this Section 4 is derivative there from and subject to the terms and conditions of such Membership Agreement. The Signatory Sublicense further acknowledges that the right of KPMG International to Page No. 49 , 361 & 362/MUM/2017 (A.Y. 2012-13) M/s. BSR and Company& Other group concerns license the KPMG Marks is subject to the terms of the Component License Agreement and the Signatory Sub licensee agrees that it shall not take any action that contravenes the terms of the Component License Agreement. b) Upon the terms and conditions hereinafter set forth, the Sub licensor hereby grants to the Signatory Sub licensee, and the Signatory Sub licensee hereby accepts, the non- exclusive rights, license and privilege to use the KPMG Marks in connection with its marketing and providing of services permitted to be provided by the Signatory Sub licensee in accordance with the provisions of this Agreement, the Statues and the Policies and Regulations, and on products related to such services. Such grant shall include the right and license to issue engagement reports in the name of “KPMG” and to use the KPMG Marks in any local domain name used by the Signatory Sub licensee. Such grant shall not include any right of the Signatory Sub licensee to enter into Sublicense Agreements or otherwise authorize the use of the KPMG Marks to any person, firm or organization other than the Signatory Sub licensee’s Controlled Parties, or allow any other person, firm or organization to otherwise hold itself out to be affiliated with or associated with KPMG International. Thus the payment is primarily for use of the name. The assessee derives substantial benefits by being part of the KPMG group and using the name KPMG. It is clearly evident that the payment is towards acquiring the right to use the name of KPMG which is certainly in the nature of royalty. This would be the position even under Article 12 of the above mentioned DTAA dealing with ‘Royalties’. 4.4 Therefore, once the payments are held to be in the nature of ‘Royalties’, there is income chargeable to tax in the same and the assessee is obliged to deduct tax at source from the payments. 4.5 In view of the above, the assessee should have deducted tax in respect of amounts payable to KPMG International Co-operative under the provisions of section 195 of the Income Tax Act, 1961 on the ground that the amount payable to them waschargeable to tax in India under Section 9(1)(vi) of the Income Tax Act, 1961 r/w Article 12 of the DTAA. 4.6 In view of the above discussion, the payments amounting to Rs.7,09,17,956/- made to KPMG International Co-operative, Switzerland without deduction of tax at source is disallowed u/s. 40(a) (i) of the Income Tax Act, 1961.”