DELOITTE HASKINS AND SELLS LLP,MUMBAI vs. ASSISTANT COMMISSIONER OF INCOME-TAX-16(2), MUMBAI, MUMBAI

Deloitte & Touche LLP, USA 57,79,027 2. Deloitte Tax LLP, USA 4,37,903 3. Deloitte & Touche Management Services Pte. Ltd., 7,90,968 Singapore 4. II. Purchase of publication 5,43,851 5. III. Reimbursement of expenses 4,76,809 6. IV. Registration charges 1,41,429 TOTAL 81,69,987 2.2 The Assessee submits that considering the facts and circumstances of its case and the law prevailing on the subject, no disallowance u/s. 40(a)(i) of the Act is called for and the NFAC/CIT(A) ought to have held as such. 2.3 The Assessee submits that the NFAC/CIT(A) has confirmed the disallowance made by the Assessing Officer ignoring the facts of the case, the details/ particulars filed and without even analysing the law on the subject. 2.4 The Assessee submits that the Assessing Officer be directed to delete the disallowance so made by him and to re-compute its total income and tax thereon accordingly.

On further appeal the CIT(A) confirmed the additions made by the AO. The assessee is in appeal before the Tribunal against the order of the CIT(A).

During the course of assessment proceedings the AO required the assessee to reconcile the TDS and Professional Fees as appearing in Form 26AS with the books of accounts. The assessee submitted a reconciliation mentioning that because of the voluminous data amount to the extent of Rs. 93,06,204/- could not be reconciled. The assessee further submitted the various reasons that would have resulted in the difference such as method of accounting, reporting error by the third party, etc. The assessee also submitted that a notice under section 133(6) could be issued to the concerned parties with records supporting the payment of fees to assessee as appearing in Form 26AS. The AO however did not consider the submissions and made an addition of Rs. 93,06,204/- as undisclosed revenue being difference between the Professional Fees as per Form 26AS and books of accounts.

The ld. DR on the other hand vehemently argued that the assessee has not provided the proper reconciliation and the ledger copies. Accordingly, the ld. DR supported the order of the lower authorities.

We heard the parties and perused the material on record. Before the AO, the assessee submitted reconciliation between the professional fees received as per books of accounts and what is reflected in Form 26AS in which the assessee could not reconcile the difference to the tune of Rs. 93,06,204/-. During the appellate proceedings, the assessee submitted further reconciling an amount of Rs. 73,20,340/-. The assessee submitted before the CIT(A) the details of invoices, date of receipt of payment, etc. for the un-reconciled balance and also submitted with regard to few parties that the payment as reflected in Form 26AS has not actually been received by the assessee. We notice that the CIT(A) inspite of calling for the remand report has not considered the further details furnished by the assessee reconciling the balances and has simply proceeded to confirm the addition made by the AO. It is a well-settled position that the AO cannot make any addition 289 & 292Mum/2024 Deloitte Haskins and Sells LLP merely based on the mismatch in Form 26AS without examining the additional evidences, reasons for the differences, etc. filed by the assessee. The assessee has provided the party wise details of professional fees along with the date of receipt to substantiate the amount reflected in the books of accounts. In this regard, it is relevant to take note that the following observations of the Co-ordinate Bench in assessee's own case (supra)

The AO stated that as per AIR information, assessee received interest from Rajvaibhav Enterprises Pvt Ltd., amounting to Rs.2,66,916. Further, assessee vide letter dated 18.12.2009 stated that no interest payment was received nor the assessee claimed any TDS in respect of the alleged interest. However, AO did not concur with the contention of the assessee and made this addition to the income of the assessee. In the first appeal, ld CIT(A) confirmed the action of AO. Hence, this appeal by the assessee.

During the course of hearing, ld A.R. reiterated the facts as stated before the authorities below. He referred to pages 41 -43 of PB, which is a copy of ledger account of M/s. Steel World and submitted that assessee has not received any interest from Rajvaibhav Enterprises (P) Ltd.,. He submitted that merely on the basis of AIR information and without any evidence that 289 & 292Mum/2024 Deloitte Haskins and Sells LLP assessee has received any interest from it, hence the amount could not be added to the income of the assessee. Ld D.R. merely relied on orders of authorities below.

We have considered submissions of ld representatives of parties and orders of authorities below.

We further notice that a similar view has been expressed by the Co-ordinate Bench in the cases as listed hereinabove relied on by the assessee. Considering the facts and circumstances of the case and relying on the judicial precedents, we are of the considered view that the AO /CIT(A) is not correct in making the addition merely based on the information in Form 26AS without bringing any evidence on record to show that the assessee has understated its income. Accordingly, we direct the AO to delete the addition made in this regard. Ground No.1 raised by the assessee is allowed. Disallowance under section 40(a)(i) – Ground No.2 12. During the year under consideration the assessee has made the following payments outside India.

The AO during the course of assessment noticed that the above payments have been made without deducting Tax at Source and therefore called on the assessee to show-cause why the amount cannot be disallowed under section 40(a)(i). The assessee submitted that the above payments were made outside India without deduction of tax at source since the said payments were not chargeable to tax under the Act and therefore it was required to deduct tax at source under section 195(1) of the Act. The assessee further submitted that the provisions of section 40(a)(i) are attracted only when any sum chargeable under the Income-tax Act which is payable outside India and on which tax is deductible but tax is not deducted at source. The assessee also made a detailed submission on the taxability of each of payments before the AO to submit that the amounts are not taxable in India and accordingly no TDS was deducted. However, the AO did not accept the submissions made by the assessee and proceeded to make addition towards all the payments as listed above totalling to Rs. 81,69,987/-. The CIT(A) confirmed the addition made by the AO.

The ld AR submitted that the services were rendered by Deloitte & Touche LLP, USA to the clients who required certain assistance with regard compliance under US laws. The ld AR further submitted that Deloitte Tax LLP, USA was rendering service with review of INCAT U.S. Federal and state income tax 289 & 292Mum/2024 Deloitte Haskins and Sells LLP accounting for audit assistance and preparation. The ld AR argued that the payments made are not taxable under section 9(1)(vii) since Deloitte & Touche LLP, USA and Deloitte Tax LLP, USA have rendered professional services and not technical services and drew our attention to section 194J to submit that the professional services and technical services are different. Accordingly the ld AR submitted that the payments are not liable to tax in India in view of the Article 15 of the Tax Treaty between India and USA. It is also submitted that the services are rendered outside India and therefore no tax is liable to be deducted at source. The ld AR made similar submission for payments made to Deloitte & Touche Management Services Pte Ltd, Singapore.

We heard the parties and perused the material on record. We notice that similar disallowance towards payments made by the assessee to Deloitte & Touche LLP, USA, Deloitte Tax LLP, USA and Deloitte & Touche Management Services Pte Ltd, Singapore, in earlier years have been considered by the coordinate bench and the same have been held to be not taxable. Further from the perusal of the nature of services rendered by these parties it is clear that the services have been rendered by these parties to third party clients directly and that the services are rendered outside India. As regards the treaty provisions between India and USA / Singapore which has "make available" clause these parties have not made available any technical or knowhow and therefore the payment is not taxable as per the treaty provisions.

We heard the parties and perused the material on record. From the perusal of the nature of transaction towards purchase of books, reimbursement expenses and registration charges we are of the view that the same cannot be treated income arising in India in the hands of non-resident parties. It is also noticed that the revenue has not preferred further appeal before the Tribunal against the order of CIT(A) in assessee's own case in AY 2012-13 where the issue is decided by the CIT(A) in favour of the assessee In view of these discussions, in our considered view there is no requirement to deduct tax at source on the payments of registration fee and therefore, the disallowance under section 40(a)(i) not warranted.

The AO during the course of hearing noticed that the assessee has paid an amount of Rs. 4,41,38,383/- to ex-partners and the same is claimed as deduction under section 37(1) of the Act. The AO called on the assessee to explain why the said payment cannot be disallowed. The assessee submitted that the payments are made as per the clause agreed in the partnership deed and the said clause in the in the partnership deed also provides for the mechanism to compute the amount payable to the partners. The assessee further submitted that since the payment is done as per the terms agreed in the partnership deed, the payment has a prior and 289 & 292Mum/2024 Deloitte Haskins and Sells LLP overriding charge on the receipts of the assessee and gets diverted before it reaches the hands of the assessee. Accordingly, the assessee submitted that the payments made to ex-partner cannot be taxed in the hands of the assessee and should be allowed as a deduction. The AO however did not accept the submissions of the assessee and by placing reliance on the decision of the AO for AY 2008-09 and 2009-10 the entire payment was disallowed in the hands of the assessee.

We heard the parties and perused the material on record. The ld. AR during the course of hearing drew our attention to the partnership deed (page 154 of PB) and the relevant clauses were the right to receive payment on retirement of partners and the manner of computation of the amount payable (185 & 186 of PB). The ld. AR therefore argued that the payment made to the retiring partners is a diversion by overriding title and therefore cannot be taxed in the hands of the assessee. We notice in this regard that for AY 2008-09 the CIT(A) has allowed the deduction claimed by the assessee and the Department went on appeal before the Tribunal. The Tribunal vide order dated 23.03.2018 has held the issue against the Revenue by holding that “13.3.We have heard the rival submissions and perused the material before us.We find that the AO had held that payment made by the assessee to the ex partners or to the spouses/legal heirs of deceased partners was application of money,that the disputed amount was to be taxed in the hands of the assessee, that the payment to ex-partners was made in pursuance of the various clauses of the partnership deed, that during the assessment proceedings a copy of the deed was submitted, that he did not took cognigance of clauses 7 and 10 of the deed, that the deed clearly provided that the ex partners or the spouses of deceased partners would be paid part of the income of the assessee for the services rendered by them, that the FAA had taken note of the relevant clauses of the partnership deed, that he followed the judgments of the Hon’ble jurisdictional High Court delivered in the case of C C Choksi (ITA 193 of 2008,dtd.25.07. 2008), that in that matter the Hon’ble Court had, in the 289 & 292Mum/2024 Deloitte Haskins and Sells LLP identical situation, held that the payment made to ex-partners or to the spouses of the deceased partners was not application of money, that the FAA had following the judgments had held that it was a case of diversion of income by an overriding title. In our opinion, the order of the FAA does not suffer from any legal or factual infirmity. So, confirming the same, we decide the effective ground of appeal against the AO.”

The facts for the year under consideration being identical in our considered view the decision of the Co-ordinate Bench in assessee's own case for AY 2008-09 is applicable for the year under consideration also. Accordingly, we direct the AO to delete the disallowance made in this regard. The ground raised by the assessee is allowed.

Before us, the counsel explained that receipt of money and not accrual of the right to receive is a determining factor. It is the say of the Id. counsel for the assessee that income must accrue first. Receipt normally follows accrual. For this proposition, reliance was placed on the decision of the Hon'ble Punjab & Haryana High Court in the case of Punjab Tractors Co-operative Multipurpose Society Ltd 234 ITR 105 wherein the Hon'ble court has held that receipt by itself is not sufficient to attract tax.

The Id. counsel for the assessee further drew our attention to the decision of the co-ordinate bench in the case of DHS Chennai in order dated 25.11.2016. The Id. counsel for the assessee pointed out that similar issue was considered and decided in favour of the assessee and against the revenue by the Tribunal. It was further contended that the Assessing Officer has grossly erred in treating Rs. 89,61,930/- as advance from clients for the year under consideration. Drawing our attention 289 & 292Mum/2024 Deloitte Haskins and Sells LLP to Exhibit 14 of the paper book, it was pointed out that Rs. 37,61,336/- is the brought forward balance from earlier years and only Rs. 52,00,594/- pertained to the year under consideration.

From the above, it can be seen that a sum of Rs. 21,18,463/- was adjusted in F.Y. 2009-10 and Rs. 2,57,214/- was adjusted in F.Y. 2010-11.

The Id. DR argued that the assessee-firm is following the cash system of accounting and all the receipts represent income and not offering the income on receipt basis leads to difference of income recognition and contradictory stand to the principles of accounting. Further, the Id. DR also 289 & 292Mum/2024 Deloitte Haskins and Sells LLP argued that the assessee was accounting the expenditure on cash basis, which resulted in mismatch frequently.

On the other hand, the Id. AR submitted that the assessee has disclosed advances of Rs. 64,39,989/- at the end of financial year 2010-11. The said advances represented advances received from clients on account of professional fees. The assessee is following cash system of accounting and the bills are raised as and when the services are rendered. No professional charges are received in advance, therefore, the same cannot take the character of income unless the invoices are raised and services are rendered. In exceptional cases, the assessee-firm received advances from clients before rendering such services. Such advances are kept in advance account. The advance received from client is transferred to professional fee account on completion of service. The assessee further submitted that the advance is a very small amount as compared to the aggregate professional fees. Apart from the above, alternatively the Id. AR submitted that the advance received during the assessment year under consideration was only Rs. 2,79,161/- which may be added to the income of the assessee if the assessee's contentions are not accepted. Further Ld. A.R submitted that on identical facts in the case of A.F. Ferguson &Co in dated 30/01/2008 Mumbai ITAT has dismissed the appeal of the revenue.

We heard the rival submissions and perused the material placed before us. The assessee-firm is a Chartered Accountants rendering professional services. As per Balance Sheet as on 31.3.2011 the advance outstanding was Rs. 64,39,989/-. The assessee contended that the amount of advances were received from clients for the services not yet rendered, therefore, the income is not accrued and accordingly, the advance cannot partake the character of income. Further, the assessee submitted that all advances cannot be held as income. In other words, the receipt resumes the character of income only when the services are rendered. The assessee is following the same method of accounting consistently for several years. The assessee placed reliance on the judgment of P& H High Court in the case of CIT vs Punjab Tractors Co-operative Multi-purpose Society Ltd, 234 ITR 10, decision of this Tribunal in S. Priyadarsan vs JCIT, 73 TTJ 738 and on identical issue in the case of associated concern of the assessee viz. A.F. Ferguson & Co., in dated 30.1.2008, ITAT Mumbai. In the facts and circumstances of the case, we agree with the submission of the assessee that the advance cannot be treated as income in the hands of the assessee unless the services are rendered by the assessee. The Assessing Officer has not made out a case that advances received in question were towards the services rendered by the assessee. The Id. DR also could not bring any evidence to controvert the submissions made by 289 & 292Mum/2024 Deloitte Haskins and Sells LLP the assessee. In view of the above facts and placing reliance on the decisions relied upon by the assessee cited (supra) we do not find any reason to interfere with the order of the CIT(A) and accordingly we uphold the same. In the result, the Revenue's appeal is dismissed."

Respectfully following the observations of the Hon'ble Supreme Court and the findings of the co-ordinate bench [supra], we direct the Assessing Officer to delete the addition of Rs. 89,61,930/-. Ground No. 2 with its sub grounds is allowed.”

The ld. DR on the other hand vehemently argued that the assessee by treating the receipt as advances is following a hybrid system of accounting which is not acceptable. The ld. DR further submitted that in assessee's case the claim that the advance has been offered to tax in the subsequent year has not been examined and therefore the above decision of the Delhi Bench of the Tribunal cannot be directly applied in assessee's case.

We heard the parties and perused the material on record. From the observations of the Delhi Bench of the Tribunal in the above case, it is clear that all receipts in the hands of the assessee cannot assume the character of income and that the amount received becomes income only when the services are rendered. In assessee's case it is submitted that no service has been rendered towards payments treated as advances and that the same is recognized as income once the services are rendered. Therefore, in our considered view the ratio laid down by the Co-ordinate Bench in the above case is applicable in assessee's case also and accordingly we hold that no addition towards advances received from clients should be made for the reason that the services have not been rendered towards those circumstances. We therefore, direct the AO to delete the addition in this regard.

We heard the parties and perused the material on record. We have while deciding the similar issue for AY 2010-11 have held that the addition cannot be made merely based on the amount reflected in Form 26AS and that the burden is on the AO to substantiate the claim that the impugned amount are received by the assessee for making the addition. In assessee's case for the year under consideration, the assessee has furnished the entire details of reconciliation (page 43 to 67 of PB) which have not been examined by the lower authorities. Since the facts for AY 2011-12 are identical in our considered view our decision on the impugned issue in AY 2010-11 is mutatis mutandis applicable for the year under consideration also. Accordingly, we direct the AO delete the addition made towards difference between the amount reflected in Form 26AS and books of account.

Ground No. 2 is with regard to advance received from clients being added as income of the assessee. We have while considering the same issue for AY 2010-11 have held that the addition cannot be sustained by placing reliance on the decision of the Delhi Bench of the Tribunal in the case of M/s Deloitte Haskins & Sells 289 & 292Mum/2024 Deloitte Haskins and Sells LLP (supra). The facts for the year under consideration are identical and therefore we hold that the AO is not correct in treating the advance amount as the income of the assessee since has not rendered services with regard to the advance received. Accordingly, we direct the AO to delete the addition made in this regard.

Ground No.3 is with regard to the disallowance made under section 40(a)(i) towards payments made to the following parties without deducting tax at source. (i) Deloitte & Touche LLP, USA – Rs. 19,63,946/-. (ii) Deloitte Tax LLP, USA – Rs. 23,03,943/-. (iii) Deloitte & Touche Management Services Pte Ltd., Singapore Rs. 7,72,535/-. (iv) Deloitte AB Sweden – Rs. 3,74,166/- (v) Purchase of publication – Rs. 2,96,746/-

We have while deciding the appeal for AY 2010-11 have held that the payments made to Deloitte & Touche LLP, USA, Deloitte Tax LLP, USA and Touche Management Services Pte Ltd., Singapore as not taxable in India by following the decision of the coordinate bench in earlier years. On perusal of nature of payments made to these entities during the year under consideration, we notice that the payments are similar in nature towards services rendered outside India and that they are professional in nature i.e. not technical. Therefore in our considered view, our decision with respect payments made to these parties in AY 2010-11 is mutatis mutandis applicable to the year under consideration also. Accordingly we hold that payments made to Deloitte & Touche LLP, USA, Deloitte Tax LLP, USA and Touche Management Services Pte Ltd., Singapore are not liable for tax deduction at source and therefore no disallowance can be made under section 40(a)(i) in this regard.

With regard to payment made to AB Sweden, the ld AR submitted that – 289 & 292Mum/2024 Deloitte Haskins and Sells LLP  During the P.Y. 2010-11 relevant to the A.Y. 2011-12, the assessee paid professional fees of Rs.3,74,166 to Deloitte AB, Sweden. Deloitte Ab, Sweden has prepared and filed returns in Swedish for employees of Sandvik. Deloitte Sweden has rendered professional services in filing return of income of these employees per Swedish Tax Laws. The entire service is rendered outside India.

We heard the parties and perused the material on record. The main contention of the assessee with regard to payments made to Deloitte AB Sweden, is that the services rendered are professional services and not technical services and therefore not taxable as per the provisions of section 9(1)(vii) of the Act. We see merit in the said submission of the ld AR since we notice that the services 289 & 292Mum/2024 Deloitte Haskins and Sells LLP rendered are towards tax return filing of employees in Sweden which in our view is a professional service. In this regard it is relevant to look at Article 15 of the DTAA between India and Sweden which reads as under – ARTICLE 15 INDEPENDENT PERSONAL SERVICES 1. Income derived by a resident of a Contracting State in respect of professional services or other activities of an independent character shall be taxable only in that State except in the following circumstances, when such income may be taxed in the other Contracting State : (a) if he has a fixed base regularly available to him in the other Contracting State for the purpose of performing his activities; in that case only so much of the income as is attributable to that fixed base may be taxed in the other State; or (b) if his stay in the other State is for a period or periods aggregating 183 days or more in any twelve-month period commencing or ending in the fiscal year concerned; in that case, only so much of the income as is derived from his activities performed in that other State may be taxed in that other State.

The term 'professional services' includes especially independent scientific, literary, artistic, educational or teaching activities as well as the independent activities of physicians, lawyers, engineers, architects, surgeons, dentists and accountants.

From the perusal of the above article it is clear that the nature of services by Deloitte AB Sweden are professional services that would become taxable in India only if the non-resident entity has a PE in India. Therefore this payment made to Deloitte AB Sweden who is non-resident not having a PE in India is not taxable under the DTAA between India and Sweden. The ld. DR argued that the services rendered by the assessee are in the nature of technical services under Article 13 and that Article 13 excludes the independent personal services rendered by individuals only. Therefore Ld. DR submitted that the payments made to Deloitte AB Sweden cannot be excluded under Article 13 and has to be considered as fees for technical services. We are unable to appreciate the said contention of the ld DR 289 & 292Mum/2024 Deloitte Haskins and Sells LLP for the reason that the services rendered by Deloitte AB Sweden are in the nature of professional services that is specifically covered under Article 15 and as per the said Article, Deloitte AB Sweden cannot be taxed in India for the services rendered in Sweden for filing the tax returns as per Swedish law. Considering the nature of services and Aricle 15 of the DTAA between India and Sweden in our view, the requirement to examine the impugned Article 13 as fees for technical services does not arise. In view of these discussion, we hold that the payments made by the assessee to Deloitte AB Sweden is not taxable in India and therefore the assessee is not required deduct tax at source. As a result the question of making disallowance under section 40(a)(i) does not arise.

With regard disallowance made towards purchase of books, we notice that the payments are made to Deloitte UK as reimbursement of expenditure towards supply of 1500 copies of IFRS publications. The AO has disallowed the amount under section 40(a)(i) stating that the assessee did not deduct tax at source on the same. We have while adjudicating a similar issue for AY 2010-11 have held that the payments made towards purchase of publications is not taxable in India and that there is no requirement to deduct tax at source. Since the nature of payments made during the year under consideration being similar, our decision in this regard in AY 2010-11, is mutatis mutandis applicable to AY 2011-12 also. Accordingly we direct the AO delete the disallowance made in this regard.

Ground No.4 is with regard to payment to retired partners is identical to the ground raised for AY 2010-11. The facts being identical, we are of the view that our decision for AY 2010-11 mutatis mutandis applicable to the impugned issue in the year under consideration also. Accordingly, we hold that the disallowance made by the AO towards payment to retired partners is not sustainable.

Ground No.5 is with regard to short credit of TDS to the tune of Rs. 1,44,30,796/-. In this regard we direct the AO to provide the breakup of the amount of short credit of TDS to enable the assessee to submit the necessary details to substantiate the claim. The AO is further directed to allow the credit in accordance with law based on the details to be furnished by the assessee.

Ground No.6 pertaining to interest under section 244A and Ground No. 7 pertains to the calculation error are consequential and do not warrant a separate adjudication.

Ground No. 8 is general.

In result, appeal of assessee for AY 2011-12 is allowed.

The assessee filed the return of income for AY 2014-15 on 29.09.2014 declaring a total income of Rs. 10,50,19,930/-. The assessee filed the revised return of income on 31.03.2016 revising the TDS credit claimed in the original return of income. The AO completed the assessment by making the following additions: (i) Payment outside India without deducting TDS disallowed under section 40(a)(i) – Rs. 1,37,90,368/- (ii) Payment to retired partner – Rs. 8,42,75,884/-. (iii) Un-reconciled balance as per Form 26AS added as income – Rs. 8,20,291/-.

We notice that the nature of payments made to Deloitte AB Sweden, Deloitte & Touche Management Services Pte. Ltd., Singapore, Reimbursement of expenses, and Registration charges are similar to payments made in AY 2010-11 & AY 2011-12. Therefore we hold that our decision in AY 2010-11 & AY 2011- 12 is mutatis mutandis applicable to the year under consideration also towards these payments. Accordingly we hold that the assessee is not required to deduct tax at source on payments made to Deloitte AB Sweden, Deloitte & Touche Management Services Pte. Ltd., Singapore, Reimbursement of expenses, and Registration charges and therefore no disallowance under section 40(a)(i) is warranted.

With regard to payments made to Navex Global Inc. USA., the ld. AR submitted that during the previous year 2013-14 relevant to the assessment year 2014-15, the assessee paid subscription fees of Rs.2,21,926 to Navex Global Inc. USA. The ld. AR further submitted that Navex Global Inc. is the 'integrity' helpline administered by third party to maintain confidentiality and anonymity of the person reporting the breach. The ld. AR also submitted that Navex Global Inc. services are used by the assessee to enable anyone to report potential ethics and 289 & 292Mum/2024 Deloitte Haskins and Sells LLP compliance issues either on an anonymous or named basis by either logging onto the website or calling the Integrity Helpline and enables assessee information/details from the reporter of the issue and generate reports. The ld AR argued that the payment is merely to access the aforesaid portal and therefore the same cannot be treated as Royalty or fees for technical services

We heard the parties and perused the material on record. From the perusal of the nature of payment to Navex Global Inc., USA it is clear that it is towards providing access to any person to raise any complaint on a breach and it helps the assessee by accessing the said report to get the details of compliance issues and breaches. Therefore we see merit in the contention that the subscription fees paid to Navex Global Inc., USA is not for use or right to use any process and therefore cannot be said to be "Royalty" as per Article 12(3)(a) of the Tax Treaty between India and USA. Further Navex Global Inc., USA by providing the aforesaid services does not make available technical knowledge experience, skill, know- how, or processes nor does enable the assessee to apply the technology contained. Accordingly in our considered view payment towards the services cannot be considered as "Fees for included services under 12(4) of Tax Treaty between India and USA. The ld AR also submitted that Navex Global Inc. does not have a PE in India and therefore is not liable to tax as per Article 7 of Tax Treaty between India and USA. In view of these discussions and considering the nature of payment made to Navex Global Inc., USA, we are of the view that the impugned payment is not taxable in India in the hands of Navex Global Inc., USA and therefore the assessee is not liable to deduct tax at source. Accordingly, the disallowance under section 40(a)(i) cannot be made towards payment made to Navex Global Inc., USA.

With regard to treatment of refund of excess fees as a disallowance under section 40(a)(i), the ld AR during the course hearing drew our attention to the below break up as submitted before the lower authorities – Sr. Name of the Particulars Amount No. Recipient (Rs.) 1 Deloitte Tohmatsu Repayment of excess amount received 9,020 Tax Co. from Deloitte Tohmatsu Tax Co. of Japan on our invoice 2 Deloitte Touche Repayment of excess amount received 57,714 Tohmatsu LLC from Deloitte Touche Tohmatsu LLC of 289 & 292Mum/2024 Deloitte Haskins and Sells LLP Japan on our invoice 3 Dolomies Chaux Repayment of wrong (double) payment 3,15,876 SA received from Dolomies Et Chaux on our invoice 4 Deloitte Tax LLP Repayment of wrong payment received 1,62,188 from Deloitte Tax LLP 5 Mercer Non US Repayment of wrong payment received 44,06,186 Equity MF Cash from Mercer funds Steeve IXSE Total 49,50,984

From the perusal of the above details it is clear that the amounts are refund towards excess fees received from these parties. Hence we see merit in the submission that these payments are not in the nature of income in the hands of the recipients to be taxed in India. We also notice that the lower authorities have not examined the details submitted towards nature the nature of payments and have considered the payments as taxable in India without appreciating the real nature of the payments. In view of these discussions we hold that the disallowance made by the AO under section 40(a)(i) towards refund of excess fees received for non- deduction of tax at source is not tenable.

Ground No. 2 is with regard to payment to partners and the facts being identical our decision in AY 2010-11 on the impugned issue is mutatis mutandis applicable for the year under consideration also. Accordingly, we direct the AO to delete the disallowance made towards payments to retired partners.

Ground No.3 is with regard to the addition made on the basis of un- reconciled transaction appearing in Form 26AS and the books of account. The ld. AR brought to our attention that the assessee has submitted a complete reconciliation on the un-reconciled balance before the AO during remand proceeding and that the same has not been considered. On perusal of facts for the 289 & 292Mum/2024 Deloitte Haskins and Sells LLP year under consideration, we are of the view that our decision on the same issue for AY 2010-11 is mutatis mutandis applicable to AY 2014-15 also. Accordingly, we hold that the AO is not correct in making the addition merely based on the amount appearing in Form 26AS and accordingly directed to delete the addition made.

Ground No.4 pertains to the short credit of TDS. Since the facts are identical to AY 2010-11, we are remitting the issue back to AO for the year under consideration also with similar directions.

Ground No.5 pertains to interest under section 244A which is consequential and does not warrant separate adjudication. Ground No. 6 is general.

In the result, appeal of the assessee for AY 2010-11, 2011-12 and 2014-15 are allowed.