ENKAY INDIA RUBBER CO PVT LTD,DELHI vs. ACIT, CIRCLE 8(2), NEW DELHI

The ld. AR submits that similar issue had come before the Tribunal in the case of Chander Mohan Lall vs. ACIT in for assessment year 2015-16. The Tribunal vide order dated 09.12.2021 after considering facts of (AY 2017-18) the case held that the payments are not chargeable to tax in India hence the provisions of section 195 of the Act are not attracted.

Per contra, Shri K.K Mishra representing the department vehemently defending the impugned order prayed for dismissing appeal of the assessee.

We have heard the submissions made by rival sides and have examined the orders of authorities below. The short question before us for consideration is: Whether the assessee was liable to deduct tax at source on payments made to non-resident attorneys where such payments are in the nature of official fees, reimbursement of renewal fees and professional fees? 7. The department has not disputed the fact that the overseas payments made by the assessee are towards reimbursement of expenses incurred by the non-resident attorneys towards renewal of registration of patents abroad and payments to registration authorities. Further, the Revenue has not controverted the fact that professional fee paid to the foreign attorneys who are non residents have no Permanent Establishment (PE) in India and none of the Attorneys have visited India during the year under assessment. The payments made by the assessee to non-resident attorneys for their services rendered are as under:- PARTY NAME PARTICULARS USD/EUR FIGURES INR FIGURES 2160 EUR @ 160716.96 DrSchon, Neymeyr ANNUITY Bill Dated July 74.4060 and Partner 26,2016 581898.81 DrSchon, Neymeyr OFFICIAL FEES Bill dtd 7820.59 EUR @ and Partner July, 26 2016 74.4060 1944 EUR @ 144645.26 ANNUITY Bill Dated July Dr Schon, Neymeyr 74.4060 26,2016 and Partner 551541.17 Dr Schon, Neymeyr OFFICIAL FEES Bill dtd 7412.59 EUR and Partner July, 262016 @74.4060 (AY 2017-18) TOTAL PAYMENT 1438800 (A) 19337.18 EUR @ 74.4060 FEES Bill Dated March Meyertons, Hood, 01,2017 Kivlin, Kowert & 16 USD @ 64.80 1036.8 Goetzel PC Disbursements Bill Meyertons, Hood, Dated March 01,2017 3700 USD @ 64.80 239760 Kivlin, Kowert & Goetzel PC TOTAL PAYMENT 3716 USD @ 64.80 240797(B) GRAND TOTAL (A) +(B) 1679597

After examining the nature of payments made by assessee, we are of considered view that the AO and the CIT(A) have erred in coming to the conclusion that the assessee is liable to deduct tax at source on the aforesaid payments.

The coordinate bench in the case of Chandra Mohan Lall (supra) had occasion to deal with similar issue wherein the payments were made by the assessee therein to non-resident professionals and overseas authorities for renewal/registration of trademarks and patents. The assessee had made payments to overseas attorneys towards professional fee as well as reimbursement of Govt. fee paid by them on behalf of assessee.; The AO and the CIT(A) held that the assessee ought to have deducted tax at source on such payments. In appeal by the assessee, the Tribunal held as under:- “16. A careful perusal of the information furnished in the tabular form reveals that payment of Rs.10,68,995/- to Eli Lilly and company, New Zealand, is towards remittance of amount recovered in court proceeding on behalf of the client in litigation. Further, a payment of Rs.2,56,973/- was made to World Intellectual Property, Switzerland, towards official fee for international application. Similarly, amount of Rs.4,15,484/- was paid to two entities in United Kingdom and Maldives for publication and trade fair services. In our considered view, these payments being in the nature of reimbursement and payment (AY 2017-18) made for official purpose and trade fair services cannot come within the purview of either professional or technical services. Therefore, such payments aggregating to Rs.17,41,450/- not being in the nature of income chargeable to tax in India in terms of section 195 of the Act, there was no obligation on the assessee to deduct tax at source on such payment. Therefore, we delete the disallowance of the aforesaid amount. “ (Emphasized by us) 10. Thus, in the facts of instant case, we see no reason to take a different view. The payments made by assessee to non-resident attorneys who have no permanent establishment in India for the services rendered overseas are not subject to TDS provisions u/s. 195 of the Act. Similarly, the payments made towards reimbursement of renewal fee and official fee are not subject to TDS provisions. Thus, the assessee was not under obligation to deduct tax at source on such payments. In view of above, the impugned order is set aside and appeal of the assessee is allowed. Order pronounced in the open court on Friday the 25th day of October, 2024. Sd/- Sd/- (AVDHESH KUMAR MISHRA) (VIKAS AWASTHY) लेखाकार सद�य/ACCOUNTANT MEMBER �याियक सद�य/JUDICIAL MEMBER िद�ी/Delhi, �दनांक/Dated 25/10/2024 NV/- �ितिलिप अ�ेिषतCopy of the Order forwarded to :