DCIT, CIR 16(2), MUMBAI vs. M/S KPMG ASSURANCE AND CONSULTING SERVICES LLP, MUMBAI

On the facts and in the circumstances of the case and 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.

On the fact and in the circumstances of the case and 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.

On the facts and in the circumstances of the case and 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, 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. 16,55,49,225/- under Section 40(a)(i).

On the facts and in the circumstances of the case and in law, whether the Ld. CIT(A) erred in holding that the payments made by the assessee to KPMG for names, mark and other facilities where in the nature of royal and chargeable to tax in India.

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.

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 appeal in ITA No. 2410/Mum/2023 “Ground No. 1 Commissioner of Income Tax (Appeals) remanding issue to the Assessing Officer is bad in law 1. On facts and circumstances of the case and in law, the CIT(A) erred in directing the AO to verify the Appellant's arguments in respect of disallowances under Section 40(a)(i) of the Income Tax Act, 1961 [the Act'] amounting to Rs. 8,55,053 and decide the issue. Such findings of the CIT(A) are in violation of the provisions of section 251 of the Act, accordingly the said findings are bad in law and ought to be quashed. Ground No. 2 Issues are covered by the Hon’ble ITAT orders in respect of Member Firm of the Appellant 2. On the facts and circumstances of the case and in law, AO/CIT(A) erred in not appreciating that the said disallowances u/s 40(a)(i) of the Act, are covered by the Hon'ble ITAT orders in respect of Member firm of the Appellant. Accordingly, the said disallowances be deleted.”

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 juri ictional 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 juri iction, in relation to the assessee to whom such treaty applies, "the provisions of this (i.e. Income Tax) Act shall apply to the extent they are more beneficial to that assessee". While on this issue, we may also take note of the landmark Special Bench decision in the case of Motorola Inc. vs. Dy. CIT [(2005) 96 TTJ (Del)(SB) 1] wherein the Tribunal had, inter alia, observed that "DTAA is only an alternate tax regime and not an exemption regime" and, therefore, "the burden is first on the Revenue to show that the assessee has a taxable income under the DTAA, and then the burden is on the assessee to show that its income is exempt under DTAA". Quite clearly, when there is no taxability under the respective treaty provisions, there cannot be any taxability under the provisions of the Income Tax Act either. 13. 10. On perusal of above, it can be seen that unless otherwise provided in the specific DTAA, profits of an enterprise from professional services shall fall within the scope of Article 7. However, such profits may also fall within the ambit of Article 14/15 dealing with income from IPS. In which case, the provisions of Article 14/15 (and not Article 7) shall apply to this species of income in terms of Article 7(7) of the MTC98. It is in this context that the Tribunal has, in paragraph 9 of the above decision, observed that the scope of business profit and independent personal service completely covers the fees for technical services as well. Without FTS article, the income by way of FTS continues to be dealt with the provisions of articles on Business Profits or IPS, as the case may be, and in the event of existence of an FTS article, additionally, with such article relating to FTS. Therefore, we do not find merit in the contention of the Revenue that in the absence of FTS Clause, the income of the non-residents would fall within the ambit of Article 22 on ‘Other Income’. 13. 11. During the course of hearing it was also contended by the Revenue that the provisions of Article 14 on IPS do not apply to the payments made to non-residents (other than individuals) and therefore, the provisions of Article 22 would be attracted in such cases. This takes us to the issue of the scope and applicability of Article 14 of MTC98. It was contended by the Revenue that the provisions related to IPS contained in Article 14 were meant only for the benefit of individual professionals. Relying upon the text of Article 14 and the use of ‘he’, ‘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 as under: “Article 14: 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 unless he has a fixed base regularly available to him in the other Contracting State for the purpose of performing his activities. If he has such a fixed base, the income may be taxed in the other State but only so much of it as is attributable to that fixed base.

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, dentists and accountants” (Emphasis Supplied) 13. 13. The above IPS Clause contained in MTC98 gives right to the source state to tax income from IPS on fulfillment of requirement of fixed base in the source state. On perusal of IPS Article contained in the UN MTC we find that the said article, in addition, gives the right to the source state to tax the income from IPS on satisfaction of physical presence criterion. Article 14 as contained in UN MTC, 2001 reads as under: “Article 14 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 also 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 that other Contracting State; or (b) If his stay in the other Contracting State is for a period or periods amounting to or exceeding in the aggregate 183 days 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, dentists and accountants.” (Emphasis Supplied) 13. 14. It would be pertinent 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.

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.

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 whilst "payments made to an enterprise in respect of the furnishing by that enterprise of the activities of employees or other personnel are subject to Article 5" [i.e. would fall under Article 7 because of the definition of permanent establishment under Article 5]. That statement, however, can be explained by the fact that the United Nations Model includes a 183 day rule applicable to services in both Articles but that only the provision in Article 5 is drafted in a way that makes it readily applicable to a legal person. Also, the Commentary of the United Nations Model expressly allows parties that believe that the relationship between Articles 5 and 14 needs to be clarified to do so in the course of negotiations, thereby recognising the potential uncertainty.

In an observation included in the Commentary on Article 14 (cf. paragraph 4.1 of that Commentary), Mexico has officially stated its position that Article 14 also applies to legal persons. This view is shared by other countries, such as Turkey, which have interpreted Article 14 as applying to legal persons.

The Committee noted that it was now more frequent for professionals to incorporate than it was when Article 14 was drafted. Since it could not see any justification for imposing different rules to services depending on whether they were provided by an individual (Article 14) or a legal person (Article 7),2 or to have different Articles if the rules were the same, it considered this as another reason to eliminate Article 14 18. The application of Article 14 to partnerships presents other problems. Countries that treat partnerships as fiscally transparent would generally recognise that Article 14 applies to the individuals who are partners in that partnership.3 This, however, raises the question as to whether the partners must then personally perform services in the source country to be taxable therein on their share of the partnership's income attributable to a fixed base of the partnership located in that country. This issue is discussed below.

In the case of countries that treat partnerships as non-fiscally transparent, the result would likely be different since, in that case, the problem of the application of Article 14 to legal persons, which is discussed above, would arise.

Mixed partnerships, where some partners are individuals and others are legal persons, would create a particular 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:

Since Article 14 of the United Nations Model Tax Convention contains all the essential provisions of Article 14 of the 1997 OECD Model Tax Convention, the Committee considers that the following part of the Commentary on Article 14 of the 1997 OECD Model Tax Convention is applicable to Article 14 of this Model: 1. The Article is concerned with what are commonly known as professional services and with other activities of an independent character. This excludes industrial and commercial activities and also professional services performed in employment, e.g. a physician serving as a medical officer in a factory. It should, however, be observed that the Article does not concern independent activities of artistes and sportsmen, these being covered by Article 17. 2. The meaning of the term "professional services" is illustrated by some examples of typical liberal professions. The enumeration has an explanatory character only and is not exhaustive. Difficulties of interpretation which might arise in special cases may be solved by mutual agreement between the competent authorities of the Contracting States concerned.

The provisions of the Article are similar to those for business 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 permanent establishment should be reserved for commercial and industrial activities. The term "fixed base" has therefore been used. It has not been thought appropriate to try to define it, but it would cover, for instance, a physician's consulting room or the office of an architect or a lawyer. A person performing independent personal services would probably not as a rule have premises of this kind in any other State than of his residence. But if there is in another State a centre of activity of a fixed or a permanent character, then that State should be entitled to tax the person's activities.” (Emphasis Supplied) 13. 16. On perusal of above it can be seen that there were two views in relation to the IPS provided by persons (other than individuals). First, that Article 14 covered only IPS provided by the Individuals while the IPS provided by persons (other than individuals) was covered by Article 7, and the second, that Article 14 covered IPS provided by ‘person’ including a company or corporate body. 13. 17. It would be pertinent to note that the UN MTC Commentary also provided that the contracting states were free to negotiate and clarify relationship between Article 14, & Article 5 & 7. The relevant extract of the UN MTC Commentary reads as under: “The remuneration paid by the enterprise to the individual who performed the activities is subject either to Article 14 (if he is an independent contractor engaged by the enterprise to perform the activities) or Article 15 (if he is an employee of the enterprise). If the parties believe that further clarification of the relationship between Article 14 and Articles 5 and 7 is needed, they may make such clarification in the course of negotiations.” 13. 18. On perusal of the DTAAs entered by India with different nations we find that there is difference in the text of Article 14/15 dealing with income from IPS. In this regard we deem it appropriate to refer to Article 14/15 as contained in the DTAA entered into by India with the following countries: Singapore “14(1). Income derived by an individual 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 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 first-mentioned State except in the following circumstances when such income may also be taxed in the other Contracting State:” Bangladesh “ 15(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 Contracting State. However, such income may be taxed in the other Contracting State, if..” Netherlands “14(1) Income derived by a resident of one of the States 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 also be taxed in the other State:…” 13. 19. Given the difference in the text of Article 14/15 dealing with income from IPS contained in the different DTAAs, in our view, the scope of Article 14/15 on IPS has to be interpreted keeping in view the text of Article 14/15 of the applicable DTAA and the context of use of terms therein as well as the other articles contained in the DTAA. Our views draw support from the General Rule of Interpretation contained in Article 31(1) of the Vienna Convention on Law of Treaties, 1969 which reads as under:

In the above background/understanding, we proceed to examine the payment of professional fee made to tax residents of different countries during the relevant previous year.

Article 14/15 on IPS containing the expression ‘resident of contracting state’ 15. 1. On perusal of Article 14/15 of DTAA entered by India with the following countries19 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) Netherlands [applicable to non-resident parties at Sl.No.1, 4, 14]; (b) Sweden [applicable to non-resident party at Sl.No.2]; (c) Spain [applicable to non-resident parties at Sl.No.3 & 6]; (d) Indonesia11 [applicable to non-resident parties at Sl.No.8 & 16]; (e) UAE [applicable to non-resident party at Sl.No.13]; (f) Ireland [applicable to non-resident party at Sl.No.19]; (g) Sri Lanka12 [applicable to non-resident party at Sl.No.20]; (h) Philippines [applicable to non-resident party at Sl.No. 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.

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 DTAA. We note that Article 7(7) of the India-Singapore DTAA provides that where profits include items of income dealt separately by other articles, the provisions of those articles shall not be affected by the provisions of Article 7. We note that Article 12(4)(b) of India-Singapore DTAA contains Make Available Clause. Since, the services provided by tax resident of Singapore to the Assessee do not make available technical knowledge, skill, experience etc to the Assessee, the same shall not qualify as FTS for the purpose of Article 12 of India-Singapore DTAA. Therefore, in the facts of the present case the provisions contained in Articles 7(7) of India-Singapore DTAA would not be attracted and the profession fee paid/payable to tax residents of Singapore would continue to be governed by Article 7 of India Singapore DTAA. Since, the tax residents of Singapore do not have a PE in India, the aforesaid profession fee shall not be liable for tax in India as Business Profits in the hands of such non resident in terms of Article 7(1) of India-Singapore DTAA. There is nothing on record to persuade us to take a different view. Therefore, we concur with the conclusion drawn by the CIT(A) that the disallowance made by the Assessing Officer in respect of payments made to tax residents of Singapore by invoking provisions of Section 40(a)(i) of the Act cannot be sustained.

United Kingdom (UK) 17. 1. The professional fee paid/payable to a company, being tax residents of UK, are listed at Sl. No. 9, 11, 18, 22 & 24 of Table in paragraph 5 above. 17. 2. On perusal of Article 15 of the India–UK DTAA it becomes clear that the benefit of the said article is available to an individual either in his own capacity or in his capacity as a member of the partnership. 17. 3. In the case of Linklaters LLP Vs Income-Tax Officer, International Taxation, Ward 1(1)(2) Mumbai: [2010] 40 SOT 51 (MUM.), while examining the provisions contained in India-UK DTAA, it was held by the Mumbai Bench of the Tribunal that when the professional services are rendered by individual Article 15 of India-UK DTAA would apply; whereas when the professional services are rendered by an enterprise the provisions contained in Article 5 read with Article 7 of the India UK DTAA would be attracted. The relevant extract of the decision of the Tribunal reads as under: “106. We are in considered agreement with this analysis 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 India-UK DTAA, 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 only in case the tax resident of UK has fixed base or physical presence in India. We have noted hereinabove that it is not the case of the Revenue that the tax resident of UK receiving payments from the Assessee had a PE in India in terms of Article 5 or a fixed base or physical presence in India in terms of Article 15 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. 17. 5. Further, we also note that Article 7(9) of India-UK DTAA is similar to Article 7(7) contained in MTC98. It provides that in case items of income are dealt with separately in the other articles of India-UK DTAA, then the application of provisions of those specific articles shall not be affected by the provisions of Article 7. Article 13 of India-UK DTAA dealing with Royalties and Fees Technical Services is one such special article. On perusal of Article 13 of India-UK DTAA, we find that the services provided by the tax resident of UK to the Assessee do not fall within the definition of ‘Fee for Technical Services’ as defined in Article 13(4)(c) of India–UK DTAA since the aforesaid services do not ‘make available’ any technical knowledge, skill, experience etc. to the Assessee. Therefore, the provisions contained in Article 7(9) of India-UK DTAA would not be triggered in the facts of the present case. It would be pertinent to note Article 13(5)(e) of India-UK DTAA specifically excludes from the ambit of FTS, the income from IPS covered by Article 15 of DTAA. Thus, in the present case the professional fee paid/payable to tax residents of UK would not fall within the ambit of Article 13 of the India-UK DTAA and shall be governed by Article 7 or Article 15 of the India-UK DTAA, as the case may be. Therefore, the provisions contained in Article 23 of India-UK DTAA dealing with ‘Other Income’ would also not come into play. 17. 6. In view of the above, 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 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 or physical presence in India in terms of provisions contained in Article 15 of the India- UK DTAA. The contention of the Assessee is that the tax resident of UK did not have a fixed base/physical presence in India during the relevant previous year. The contention of the Revenue is that this aspect requires verification. In view of the aforesaid, we deem it appropriate to restore the issue back to the file of the CIT(A). Accordingly, we direct the CIT(A) to adjudicate 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.

United Stated of America (USA) 18. 1. The professional fee paid/payable to a firm, being tax residents of USA, is listed at Sl. No. 12 of Table in paragraph 5 above. 18. 2. On perusal of Article 7 (Business Profits), 12 (Royalty & Fee for Included Services) and 15 (Independent Personal Services) of India-USA DTAA, we find that there provisions contained therein are at slight variance from the provision contained in corresponding articles of MTC98 or UN MTC. 18. 3. Article 7(7) of the India-USA DTAA defines ‘Business Profits’ to mean income derived from trade or business including income from provision of services (other than included services defined in Article 12 of the India-USA DTAA). Article 12(4) of India-USA DTAA defines ‘Fee for Included Services’ and Article 12(4)(b) forming part thereof contains ‘Make Available Clause’. Article 12(5)(e) of the India-USA DTAA excludes from the ambit of ‘Fee for Included Services’ income covered by Article 15 of the India USA DTAA. Article 15 of the India-USA DTAA clearly provides that benefit of the said article shall be available in respect of income derived an individual or firm of individuals (other than a company). Therefore, income from IPS derived by persons other than individual or firm of individuals such as a company would be governed by provisions contained in Article 7 of the India-USA DTAA (unless the same fall within the definition of term ‘Fee for Included Services’ as contained in Article 12(4) of the India-USA DTAA). We have noted in paragraph 10 above that it has been held in the case of the Assessee that services of identical nature provided by tax residents of USA 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 infirmity in the order passed by the CIT(A) holding that 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.

Tanzania 19. 1. The professional fee paid/payable to firm of individuals, being tax residents of Tanzania, are listed at Sl. No. 17 of Table in paragraph 5 above. 19. 2. On perusal of Article 15 of the India–Tanzania DTAA13 it becomes clear that the benefit of the said article is available to an individual. Thus, the income from IPS derived by a person (other than individual) shall be governed by the provisions contained in Article 5 read with Article 7 of the India-Tanzania DTAA. The India-Tanzania DTAA does not contain FTS Article. Therefore, the professional services provided by the tax-resident of Tanzania, being person (other than an individual), to the Assessee would be characterized as profits falling within the ambit of Article 7 of the India-Tanzania DTAA and the same would be liable to tax in India only in case tax-resident of Tanzania has a PE in India during the relevant previous year. 19. 3. We note that CIT(A) had remitted the issue to the file of Assessing Officer for adjudication after verification. The contention of the Assessee is 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 firm of individual, being tax resident of Tanzania, would be entitled to claim benefit of Article 7 of DTAA in respect of profits/income from IPS, and such income would not be liable to tax in India in case such firm individual does not have a PE in India in terms of provisions contained in Article 5 of the India-Tanzania DTAA. In the represent case, it has been contended by the Assessee that the tax resident of Tanzania did not have a PE in India during the relevant previous year. The contention of the Revenue is that this aspect requires verification. In view of the aforesaid, we deem it appropriate to restore the issue back to the file of the CIT(A). Accordingly, we direct the CIT(A) to adjudicate 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.

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 from source outside India and therefore, the Assessee was not required to withhold tax from the same. Accordingly, the CIT(A) deleted the disallowance made by the Assessing Officer under Section 40(a)(i) of the Act in respect of the professional fee payment under consideration. 20. 3. 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 CIT(A) to this extent and direct the CIT(A) to adjudicate the issue afresh as per law after verification of relevant facts and taking into consideration the submission of the Assessee. The Assessee would be at liberty to furnish such documents/details at the Assessee may deem fit to support its contentions. The CIT(A) shall grant the Assessee a reasonable opportunity of being heard.

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 & 6 raised by the Revenue 22. Ground No. 5 raised by the Revenue pertains to disallowance of INR 16,55,49,225/- made by the Assessing Officer under Section 40(a)(i) of the Act 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). 22. 1. The facts relevant to adjudication of this ground in brief are that it is admitted position that KPMG International Co-operative, Switzerland (‘KPMGI) is a mutual association of member firms having over 150 members including the Assessee. The objective of the KPMGI was to develop, co-ordination, support, promote and facilitate the operations/services of the KPMG member firms to its clients in various ways. It was stated that KPMGI neither makes any profits on its activities nor does it have any commercial purpose. All members contribute to their share of costs incurred by KPMGI in providing support to the member firms. The total costs are shared amongst member firms based on their budgeted revenues and collected in advance/installments and adjusted year-on-year for any shortfall/excess recovery for the eventual 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, the Assessing Officer was not convinced. The Assessing Officer considered the remittance to KPMGI to be essentially for the use of name and held that the Assessee derived substantial benefits by being part of KPMG group and using the name KPMG. Therefore, the Assessing Officer concluded that the payment were towards acquiring the right to use the name of KPMG and thus, in the nature of royalty taxable in India. Accordingly, this income 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. 22. 3. In appeal the CIT(A) deleted the disallowance by following the decision of the Tribunal in the case of the Assessee. 22. 4. Being aggrieved the Revenue is now in appeal before the Tribunal. 22. 5. Having considered the rival and on perusal of records, we find that identical issue had come up for consideration before the Tribunal in the case of the Assessee for the preceding assessment years. Vide order dated 30/10/2023 passed in appeal for the Assessment Year 2018-19 [ITA No. 1974/Mum/2023] the Tribunal had deleted identical disallowance made by the Assessing Officer holding as under:

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 already held that contribution paid by the assessee to KPMG cooperative, Switzerland is covered by Mutuality concept i.e. mutual Association on its receipts would not constitute income chargeable to tax. The learned departmental representative could not controvert the above decision of the coordinate bench in assessee’s own case, therefore, respectfully following the decision of the coordinate bench in assessee’s own case for assessment year 2001 – 02, which has been followed by the learned CIT – A, we do not find any infirmity in the order of the learned CIT – (A) thus, the disallowance of INR 434,019,511/– for non-deduction of tax at source is correctly deleted. Accordingly the order of the learned CIT – A is upheld and ground number 5 – 6 of the appeal is dismissed.” 22. 6. There is nothing on record to persuade us to take a view different from the view so taken by the Tribunal while deciding the above appeal for the Assessment Year 2018-19. Since the order passed by the CIT(A) on this issue is in conformity with the above decision of the Tribunal in the case of the Assessee, we do not find any reason to interfere with the same. Accordingly, Ground No. 5 & 6 raised by the Revenue are dismissed. Ground No. 7 raised by the Revenue 23. Ground No. 7 raised by the Revenue is directed against the order of CiT(A) deleting the disallowance of INR 14,31,415/- made by the Assessing Officer 23. 1. The Assessing Officer was of the view that a portion of advertisement & publicity expenses incurred by the Assessee during the relevant previous year were for the benefits KPMG International Co-operative, Switzerland (KPMGI). Therefore, following similar disallowance made in the preceding assessment years, the Assessing Officer disallowed, on ad-hoc basis, 25% of the total advertisement and publicity expenses of INR.57,25,658/- claimed as deduction by the Assessee. The aforesaid disallowance amounting to INR 14,31,415/- was deleted by the CIT(A) and therefore, the Revenue is in appeal before the Tribunal. 23. 2. We have considered the rival submission and perused the material on record including the details of advertisement and publicity expenses as stated in statement of facts filed before the CIT(A). 23. 3. We note that the CIT(A) has deleted the disallowance by following the decision of his predecessor in appeal for the Assessment Year 2011-12 [Order No. IT-140/14-15, dated 02/01/2017] wherein, 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, the Hon’ble Delhi High Court confirmed the order passed by the Tribunal deleting ad-hoc disallowance of 10% brand enhancement expenses made by the Assessing Officer observing that disallowance made on an entirely artificial and notional basis from the expense otherwise deductible was not justified. The relevant extract of the aforesaid judgment of the Hon’ble Delhi High Court reads as under:

The expenses in this case were incurred by the assessee. The arrangement inter alia between the assessee and the brand proprietor was such that specified required brands were made available in the assessee deals. No doubt, the profits reported were put through the recourse of transfer pricing exercise for the purpose of Arm’s Length Price determination. Yet, the fact remains that the overseas owner did not set up any other licensee, at least in the area where the assessee operated, to operate as a rival. Under the Trade Mark Act, especially Section 48, as long as the arrangement existed, the assessee, who was a licensee of the products, was entitled to claim them as business expenditure though in the ultimate analysis they might have enhanced the brand of the overseas owner. No doubt, if the arrangements were terminated, the brand presence of the overseas owner of the articles/IPR would have subsisted. But that would nevertheless subsist in any event on the theory of trans-national reputation of the IPR owner. In the circumstances, disallowing a certain proportion on an entirely artificial and notional basis from the expense otherwise deductible, in our opinion, was not justified. The question of law is answered 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 Co operative, 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. 24. 2. The Assessee has raised cross objections [CO No.126/Mum/2023] in 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 and consequently, provisions contained in Section 40(a)(i) of the Act are not attracted in relation to the same. 24. 3. The Assessee has raised the 2 grounds of appeal in ITA No. 2411/Mum/2023 challenging the direction given by the 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 8,17,690/-.

Both the sides had adopted the arguments made in relation to issues raised in appeal for the Assessment Year 2013-14. Accordingly, keeping in view our findings/adjudication in relation to appeal/cross-appeal/cross objection pertaining to Assessment Year 2013-14 in paragraph 4 to 23 above, we proceed to adjudicate the issues raised in Assessment Year 2012-13. Ground No. 1 to 4 raised by the Revenue; Cross Objection No. 1 raised by the Assessee; 26. For the Assessment Year 2012-13 the Assessee had claimed deduction of the professional fee aggregating to INR 23,52,84,267/- consisting of the following: Sl.No Name & Country of Tax Residence Status Amount (INR) Note Ref 1 Aon Benfield Asia Pte Ltd, Singapore Company 19,97,905 2 2 Background Bureau, Inc, USA Company 33,113 2 3 Climate Human Capital, UK Company 9,62,820 2 4 Frank De Bats, Netherlands 33,541 2&& 5 International Bureau of Fiscal Documentation, Netherlands Non-profit 13,78,104 2&& 6 KPMG AB, Sweden Company 26,06,983 2 7 KPMG Abogados S.L., Spain Company 15,81,750 2 8 KPMG Al Fozan & AI Sadhan, Saudi Arabia Firm 6,88,863 2* 9 KPMG Asesores S.L, Spain Company 41,87,807 10 KPMG Consultores, S. A.Guatemala Company 1,00,639 5 11 KPMG Ford Rhodes, Thornton & Co, Sri Lanka Firm 20,14,698 1* 12 KPMG Hadibroto, Indonesia Company 6,26,547 2* 13 KPMG Hamzem Hassan Accountants & Consultants, Egypt/UAR Firm 72,585 1* 14 KPMG IFRG Ltd., UK Company 9,90,249 2 15 KPMG International Corporate Tax Services Ltd., Mauritius Company 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 Siddharta 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 Kft, Hungary Company 2,70,249 5 Total 23,52,84,267 27. Ground No. 1 to 4 are directed against the order of 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 23,52,84,267/-. 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 2 and 3 & 6, respectively, of Table in paragraph 26 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.

Article 14/15 on IPS containing the expression ‘resident of contracting state’ 28. 1. On perusal of Article 14/15 of the DTAA entered by India with the following countries14 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) Netherlands [applicable to non-resident parties at Sl.No.4, 5, 16 & 21]; (b) Sweden [applicable to non-resident party at Sl.No.6]; (c) Spain [applicable to non-resident parties at Sl.No.7 & 9]; (d) Sri Lanka15 [applicable to non-resident party at Sl.No.11]; (e) Indonesia16 [applicable to non-resident parties at Sl.No.12 & 31]; 43. Ground No. 1 to 4 raised by the Revenue; Cross Objection No. 1 raised by the Assessee; 44. Ground No. 1 to 4 are directed against the order of 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 9,14,50,086/-. 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 14 and 13, respectively, of Table in paragraph 42 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. 44. 1. On perusal of Article 14/15 of DTAA entered by India with the following countries19 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) Indonesia20 [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 to non-resident party at Sl.No.23]; (k) Thailand21 [applicable to non-resident party at Sl.No.24] (l) Malta22 [applicable to non-resident party at Sl.No.27]; 44. 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 cannot be sustained.

United Kingdom (UK) 45. 1. The professional fee paid/payable to tax residents of UK are listed at Sl. No. 1, 6, 8, 18 & 25 of Table in paragraph 42 above. 45. 2. In 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.1 6, 8, & 25 of Table in paragraph 29 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 in respect of the aforesaid payments.

Australia 46. 1. The professional fee paid/payable to firm of individuals being tax residents of Australia are listed at Sl. No. 4 of Table in paragraph 42 above. 46. 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.

New Caledonia 47. 1. The professional 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 CIT(A) to this extent and direct the CIT(A) to adjudicate the issue afresh after verification of relevant facts and taking into consideration the submission of the Assessee. The Assessee would be at liberty to furnish such documents/details at the Assessee may deem fit to support its contentions.

United Stated of America (USA) 48. 1. The professional fee paid/payable to tax residents of USA are listed at Sl. No. 19 of Table in paragraph 42 above. 48. 2. In 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.19 of Table in paragraph 42 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.

France 49. 1. The professional fee paid/payable to company being tax residents of France are listed at Sl. No. 20 of Table in paragraph 42 above. 49. 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 company shall not be governed by the provisions contained in Article 15 of the India-France DTAA and shall fall within the Ambit of Article 7 dealing with Business Profits generally. Article 7(7) of the India-France 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 13(4) of the India-France DTAA defines ‘fee for technical services’ to include payment of any kind as consideration for technical, managerial or consultancy services. In our view, the services provided by the tax-resident of France to the Assessee would fall within the ambit of Article 13 of the DTAA and therefore, the tax withholding provisions contained in Section 195 of the Act would be attracted. Since the Assessee had failed to comply with tax withholding requirements contained in Section 195 of the Act, deduction claimed by the Assessee in respect of professional fee paid/payable to tax resident of France has been correctly disallowed by the Assessing Officer 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.

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 payment of any kind as consideration for technical, managerial or consultancy services. In our view, the services provided by the tax-resident of Belgium to the Assessee would fall within the ambit of Article 13 of the DTAA and therefore, the tax withholding provisions contained in Section 195 of the Act would be attracted. Since the Assessee had failed to comply with tax withholding requirements contained in Section 195 of the Act, deduction claimed by the Assessee in respect of professional fee paid/payable to tax resident of Belgium has been correctly disallowed by the Assessing Officer 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 made by the Assessing Officer under Section 40(a)(i) of the Act in respect of professional fee listed at Sl. No. 26 of Table in paragraph 42 above.

Kuwait 51. 1. The professional fee paid/payable to a firm of individuals, being tax residents of Kuwait, are listed at Sl. No. 28 of Table in paragraph 42 above. 51. 2. On perusal of Article 15 of the India–Kuwait DTAA it becomes clear that the benefit of the said article is available to an individual only. Thus, the income from professional services derived by an enterprise carried on by firm of individuals shall be governed by the provisions contained in Article 5 read with Article 7 of the India-Kuwait DTAA. Article 7(8) of the India- Kuwait DTAA provides that wherein 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- Kuwait DTAA defines ‘fee for technical services’ to include payment of any kind as consideration for technical, managerial or consultancy services. In view of the aforesaid, the services provided by the tax resident Kuwait to the Assessee would fall within the ambit of ‘Fee for Technical Services’ taxable in India in terms of Article 12(1)/(2) of the DTAA 51. 3. However, in support of the order passed by the CIT(A) it was contended on behalf of the Assessee that the professional fee paid/payable to tax resident of Kuwait, being a firm of individuals, was not liable to tax in India as per Section 9(1)(vii)(b) of the Act. It was submitted that the Assessee was engaged by the customers in Kuwait and therefore, 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 deem fit to support its contentions. All rights and contentions of the Assessee are left open. The Assessee shall be granted reasonable opportunity of being heard.

Qatar 52. 1. The amount paid/payable to a firm of individuals, being tax residents of Qutar, are listed at Sl. No. 29 of Table in paragraph 42 above. 52. 2. It was contended on behalf of the Assessee that payment under consideration are in the nature of reimbursement of business visa expenses cost incurred by tax residents of Qatar on behalf of employees of the Assessee and therefore, is not chargeable to tax under the provisions of the Act and the provisions of IndiaQatar DTAA. We find merit in the aforesaid contention of the Assessee. Since the payments do not have an element of income/profit the question of chargeability of the same to tax in India does not arise. Even otherwise, the said payments can, at best, be classified as business profits which are not liable to tax in the hands of tax residents of Qatar in the absence of PE in India. The Revenue has not set-up a case that the tax resident of Qatar has a PE in India. Therefore, we decline to interfere with the order passed by the CIT(A) in this regard and concur with the conclusion drawn by the CIT(A) that the disallowance made by the Assessing Officer in respect of payments made to tax resident of Qatar by invoking provisions of Section 40(a)(i) of the Act cannot be sustained. Ground No. 1 & 2 raised by the Assessee - Remand to Assessing Officer 53. As regards the professional fee aggregating to INR 8,17,690/- [at Sl. No. 17 & 23 of Table at Paragraph 42 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.

Foreign Exchange Fluctuation 54. 1. We note that the Assessing Officer had disallowed loss in account of foreign exchange fluctuation of INR 23,00,200/- which was deleted by the CIT(A) as being consequential in nature. The aforesaid amount is included 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.

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 40,54,71,001/- 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 view of paragraph 22 to 22.6 above, we do not find any reason to interfere with the order passed by the CIT(A) on this issue. There is nothing on record to persuade us to take a view different from the view taken by the Tribunal while deciding the above appeal for the Assessment Years 2018-19. Accordingly, Ground No. 5 & 6 raised by the Revenue are dismissed. Ground No. 7 raised by the Revenue 57. Ground No. 7 raised by the Revenue is directed against the order of CIT(A) deleting the ad-hoc disallowance of INR 7,52,310/- made by the Assessing Officer at the rate of 25% of the aggregate advertising and publicity expenses of INR 23,109,087/- claimed as deduction by the Assessee during the relevant previous year. 57. 1. In view of paragraph 23 to 23.5 above, we do not find any infirmity in the order passed by the CIT(A) and therefore, Ground No. 7 raised by the Revenue are dismissed. Assessment Year 2015-16 58. Next we would take up appeal/cross-appeal/cross-objection pertaining to Assessment Year 2015-16 arising from order, dated 09/05/2023, passed by the CIT(A) partly allowing the appeal of the Assessee against the Assessment Order, dated 28/12/2017, passed by the Assistant Commissioner of Income Tax -16(2), Mumbai under Section 143(3) of the Act 58. 1. Assessment Year 2015-16 the Revenue has raised 7 grounds of appeal in ITA No. 2275/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 Co-operative, 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. 58. 2. The Assessee has raised cross objections [CO No.127/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. 58. 3. The Assessee has raised the 2 grounds of appeal in ITA No. 2414/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 68,04,160/-.

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 International Screening Solutions, Inc, USA Company 46,62,262 2 8 KPMG AB, Sweden Company 13,75,351 2 9 KPMG Accountants N.V., Netherlands Company 32,03,968 2 10 KPMG Advisors AE, Greece Company 6,02,491 2 11 KPMG Advisory Indonesia Company 5,37,426 2 12 KPMG Advisory N.V., Netherlands Company 33,17,899 2 13 KPMG Al Fozan & Partners, Saudi Arabia Firm 8,89,608 1 14 KPMG ASESORES S.L., Spain Company 2,12,250 2 15 KPMG International Cooperative, Switzerland - - - 16 KPMG LLP UK LLP 71,26,762 2 17 KPMG LLP, USA Firm 5,82,59,016 1 18 KPMG Meijburg & Co Special Services B.V. Netherlands Company 18,12,425 2 19 KPMG Meijburg & Co. B.V., Netherlands Company 4,89,144 2 20 KPMG Phoomchai Tax Ltd, Thailand Company 2,99,081 2 21 KPMG S.A., France Company 46,44,032 2 22 KPMG Safi Al Mutawa & Partners, Kuwait Firm 5,19,613 3 23 KPMG Services Pte. Ltd., Singapore Company 1,72,52,365 1 24 KPMG Siddharta Advisory, Indonesia Company 20,12,614 2 25 KPMG Spain (KPMG Assesores S.L.) Company 20,26,648 2 26 KPMG Tax Services Ltd., Mauritius Company 12,20,776 2 27 KPMG United Kingdom Plc, UK Company 20,05,100 2 28 KPMG, Australia Firm 24,84,333 1 29 KPMG, Ireland Firm 10,97,561 1 61. Ground No. 1 to 4 raised by the Revenue; Cross Objection No. 1 raised by the Assessee; 62. Ground No. 1 to 4 are directed against the order of 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 13,18,09,731/-. 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 8 and 14 & 25, respectively, of Table in paragraph 60 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. 62. 1. On perusal of Article 14/15 of DTAA entered by India with the following countries23 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) Indonesia24 [applicable to non-resident parties 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], 62. 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 was 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 cannot be sustained.

Canada 63. 1. The professional fee paid/payable to company being tax residents of Canada are listed at Sl. No. 2 of Table in paragraph 60 above. 63. 2. On perusal of Article 15 of the India–Canada DTAA it becomes clear that the benefit of the said article is available to an individual or firm of individuals and not to a company. Thus, the income from professional services derived by an enterprise carried on by a company shall be governed by the provisions contained in Article 7 dealing with Business Profits generally. Article 7(7) of the India-Canada 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. On perusal of Article 12(4)(b) of India-Canada DTAA, we find that the services provided by the tax resident of Canada to the Assessee do not fall within the definition of ‘Fee for Technical Services’ since the aforesaid services did not ‘make available’ any technical knowledge, skill, experience etc. to the Assessee. Therefore, the provisions contained in Article 7(7) of India-Canada DTAA would not be triggered. Thus, the payments made to company, being tax residents of Canada, would not fall within the ambit of Article 12 and shall be governed by Article 7 of the India-Canada DTAA. In case the tax resident of Canada does not have a PE in India, the same would not be taxable in India in terms 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.

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 disallowance made under Section 40(a)(i) of the Act in respect of the aforesaid payments.

United Stated of America (USA) 65. 1. The professional fee paid/payable to tax residents of USA, being a firm of individual or company, are listed at Sl. No. 4, 7, 17 & 35 of Table in paragraph 60 above. 65. 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. 4, 7, 17 & 35 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 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.

Greece 66.1 The professional fee paid/payable to a company being tax resident of Greece is listed at Sl. No. 10 of Table in paragraph 60 above. 66.2 The contention of the Assessee was that the professional fee paid/payable to tax resident of Greece was not liable to tax in India in terms of Article 3(1) of the India-Greece DTAA since the tax resident of Greece did not have a PE in India. We note that in identical facts and circumstances the CIT(A) had, for the Assessment Year 2014-15, set aside this issue to the file of Assessing Officer for adjudication after verification whereas for the Assessment Year 2015-16 the CIT(A) deleted the disallowance made under Section 40(a)(i) of the Act. In appeal preferred by the Assessee for the Assessment Year 2014-15, we have restore the issue back to the file of CIT(A) for adjudication after verification of factual averments made by the Assessee26. Accordingly, for the Assessment Year 2015-16 also we restored the issue back to the file CITA(A) for adjudication with directions identical to those given for Assessment Year 2014-15 in paragraph 53 above. Since we have restored the issue back to the file of the CIT(A), all right and contention of the Assessee are left open.

Saudi Arabia 67.1 The professional fee paid/payable to firm of individuals, being tax residents of Saudi Arabia, are listed at Sl. No. 13 of Table in paragraph 60 above. 67.2 Adopting the reasoning given in paragraph 32.1 to 32.2, 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.10 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.

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 ambit of Article 13 of the DTAA and therefore, the tax withholding provisions contained in Section 195 of the Act would be attracted. Since the Assessee had failed to comply with tax withholding requirements contained in Section 195 of the Act, deduction claimed by the Assessee in respect of professional fee paid/payable to tax resident of France has been correctly disallowed by the Assessing Officer 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.21 of Table in paragraph 60 above.

Kuwait 69.1 The professional fee paid/payable to firm of individuals being tax resident of Kuwait is listed at Sl. No. 22 of Table in paragraph 60 above. 69.2 While dealing with the professional fee paid/payable to the same tax resident of Kuwait, we have, in appeal for the AY 2014-15, set aside the order passed by the CIT(A) with the direction to decide the issue afresh. In view of our reasoning/finding/adjudication in appeal for the AY 2014-15 contained in paragraph 51 to 51.3 above, and also keeping in view the identical facts and circumstances prevailing in the relevant previous year, we set aside the order passed by the CIT(A) deleting the disallowance made by the Assessing Officer under Section 40(a)(i) of the Act in respect of professional fee paid/payable to firm of individuals being tax resident of Kuwait listed at Sl. No. 17 of Table in paragraph 60 above; and direct the CIT(A) to adjudicate the issue afresh after verification of facts prevailing during the relevant previous year. The Assessee would be at liberty to furnish such documents/details at the Assessee may deem fit to support its contentions. All rights and contentions of the Assessee are left open. The Assessee shall be granted reasonable opportunity of being heard. Ground No. 1 & 2 raised by the Assessee - Remand to Assessing Officer 70. Australia 70. 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. 70. 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.

United Kingdom (UK) 71. 1. 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. 71. 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.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 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 payments.

United Stated of America (USA) 72. 1. The professional fee paid/payable to tax residents of USA are listed at Sl. No. 2 & 30 of Table in paragraph 91 above. 72. 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. 2, & 30 of Table in paragraph 91 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.

Saudi Arabia 73. 1. The professional fee paid/payable to firm of individuals, being tax residents of Saudi Arabia, are listed at Sl. No. 10 of Table in paragraph 91 above. 73. 2. Adopting the reasoning given in paragraph 32.1 to 32.2, 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.10 of Table in paragraph 91 above cannot be sustained. Therefore, we decline to interfere with the order passed by the CIT(A) in this regard.

France 74. 1. The professional fee paid/payable to company being tax residents of France are listed at Sl. No. 21 of Table in paragraph 91 above. 74. 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 ambit of Article 13 of the DTAA and therefore, the tax withholding provisions contained in Section 195 of the Act would be attracted. Since the Assessee had failed to comply with tax withholding requirements contained in Section 195 of the Act, deduction claimed by the Assessee in respect of professional fee paid/payable to tax resident of France has been correctly disallowed by the Assessing Officer 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 91 above. Ground No. 1 & 2 raised by the Assessee - Remand to Assessing Officer 75. 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.

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 77. Ground No. 5 raised by the Revenue pertains to disallowance of INR 40,54,71,001/- 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). 77.1 In view of paragraph 22 to 22.6 above, we do not find any reason to interfere with the order passed by the CIT(A) on this issue. There is nothing on record to persuade us to take a view different from the view taken by the Tribunal while deciding the above appeal for the Assessment Years 2018-19. Accordingly, Ground No. 5 & 6 raised by the Revenue are dismissed. Ground No. 7 raised by the Revenue 78. Ground No. 7 raised by the Revenue is directed against the order of CIT(A) deleting the ad-hoc disallowance of INR 5,79,772/- made by the Assessing Officer at the rate of 25% of the aggregate advertising and publicity expenses of INR 23,109,087/- claimed as deduction by the Assessee during the relevant previous year. 78. 1. In view of paragraph 23 to 23.5 above, we do not find any infirmity in the order passed by the CIT(A) and therefore, Ground No. 7 raised by the Revenue are dismissed. Assessment Year 2016-17 79. Next we would take up appeal/cross-appeal/cross-objection pertaining to Assessment Year 2016-17 arising from order, dated 09/05/2023, passed by the CIT(A) partly allowing the appeal of the Assessee against the Assessment Order, dated 24/12/2019, passed by the Assistant Commissioner of Income Tax -16(2), Mumbai under Section 143(3) of the Act. 79.1 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. 79.2 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. 79.3 The Assessee has raised the 2 grounds of appeal in ITA No. 2413/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 56,60,499/-.

Both the sides 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 2016-17. 77. For the Assessment Year 2016-17, the Assessee claimed deduction for the following professional fee paid/payable to the non-residents aggregating to INR 13,69,99,679/-. Sl.No. Name & Country of Tax Residence Status Amount (INR) Note Ref 6 KPMG AB, Sweden Company 1,611,010/- 2 7 KPMG Advisors AE, Greece Company 1,029,256/- 2 8 KPMG Advisory N.V. Netherlands Company 2,510,649/- 2 9 KPMG Advisory Services Ltd. Mauritius Company 2,344,775/- 10 KPMG Auditores & Consultores, SA, Mozambique Company 468,241/- 2 11 KPMG Australia Firm 2,560,224/- 1 12 KPMG LLP, United Kingdom LLP 21,289,238/- 2 13 KPMG LLP, USA Firm 65,319,561/- 1 14 KPMG Meijburg & Co, Netherlands Company 2,197,222/- 2 15 KPMG PHOOMCHAI TAX LTD, Thailand Company 1,855,273/- 2 16 KPMG S.A., France Company 47,061/- 2 17 KPMG Safi Al Mutawa & Partners, Kuwait Firm 576,109/- 3 18 KPMG Services Pte.Ltd. Singapore Company 16,200,770/- 2 19 KPMG Siddharta Advisory, Indonesia Company 981,691/- 2 20 KPMG Spain (KPMG Assesores S.L.) Company 1,735,530/- 2 21 KPMG Tax and Advisory LLC, Kazakhstan Company 29,123/- 22 KPMG Tax Services Ltd. Mauritius Company 1,762,800/- 2 23 KPMG, Kenya Firm 3,122,626/- 1 24 KPMG, Mauritius Firm 471,438//- 1 25 R.G Manabat & Co. Philippines Firm 4,063,956/- 1 26 Rahman Rahman Huq. Bangladesh Firm 1,152,942/- 2 Total 13,69,99,679/- 78. Ground No. 1 to 4 raised by the Revenue; Cross Objection No. 1 raised by the Assessee; 79. Ground No. 1 to 4 are directed against the order of 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.

Article 14/15 on IPS containing the expression ‘resident of contracting state’ 80. 1. On perusal of Article 14/15 of DTAA entered by India with the following countries27 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 & 18], (b) Spain [applicable to non-resident parties at Sl.No.5 & 20], (c) Sweden [applicable to non-resident party at Sl.No.6], (d) Netherlands [applicable to non-resident parties at Sl. No. 8, & 14], (e) Mauritius [applicable to non-resident parties at Sl.No.9,22, & 24], (f) Thailand28 [applicable to non-resident party at Sl.No.15] (g) Indonesia29 [applicable to non-resident party at Sl.No.19]; (h) Kazakhstan [applicable to non-resident party at Sl.No.21] (i) Philippines [applicable to non-resident party at Sl.No. 25], (j) Bangladesh [applicable to non-resident party at Sl.No.26], 80. 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 was 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 cannot be sustained.

United Stated of America (USA) 81. 1. The professional fee paid/payable to tax residents of USA are listed at Sl. No. 3 & 13 of Table in paragraph 77 above. 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.

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.

France 83. 1. The professional fee paid/payable to company being tax residents of France are listed at Sl. No. 16 of Table in paragraph 77 above. 83. 2. In view of the reasoning given in paragraph 34 to 34.2 above, we hold that the services provided by the tax-resident of France, being a company, to the Assessee would fall within the ambit of Article 13 of the DTAA and therefore, the tax withholding provisions contained in Section 195 of the Act would be attracted. Since the Assessee had failed to comply with tax withholding requirements contained in Section 195 of the Act, deduction claimed by the Assessee in respect of professional fee paid/payable to tax resident of France has been correctly disallowed by the Assessing Officer 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 77 above. Ground No. 1 & 2 raised by the Assessee - Remand to Assessing Officer 84. 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.

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 86. Ground No. 5 raised by the Revenue pertains to disallowance of INR 40,54,71,001/- 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). 86. 1. In view of paragraph 22 to 22.6 above, we do not find any reason to interfere with the order passed by the CIT(A) on this issue. There is nothing on record to persuade us to take a view different from the view taken by the Tribunal while deciding the above appeal for the Assessment Years 2018-19. Accordingly, Ground No. 5 & 6 raised by the Revenue are dismissed. Ground No. 7 raised by the Revenue 87. Ground No. 7 raised by the Revenue is directed against the order of CIT(A) deleting the ad-hoc disallowance of INR 5,79,772/- made by the Assessing Officer at the rate of 25% of the aggregate advertising and publicity expenses of INR 23,109,087/- claimed as deduction by the Assessee during the relevant previous year. 87. 1. In view of paragraph 23 to 23.5 above, we do not find any infirmity in the order passed by the CIT(A) and therefore, Ground No. 7 raised by the Revenue are dismissed. Assessment Year 2016-17 88. Next we would take up appeal/cross-appeal/cross-objection pertaining to Assessment Year 2016-17 arising from order, dated 09/05/2023, passed by the CIT(A) partly allowing the appeal of the Assessee against the Assessment Order, dated 24/12/2019, passed by the Assistant Commissioner of Income Tax -16(2), Mumbai under Section 143(3) of the Act. 88. 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 Co operative, 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. 88. 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. 88. 3. The Assessee has raised the 2 grounds of appeal in ITA No. 2413/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 56,60,499/-.

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 2016-17. 90. For the Assessment Year 2016-17, the Assessee claimed deduction for the following professional fee paid/payable to the non-residents aggregating to INR 13,69,99,679/-. Sl.No. Name & Country of Tax Residence Status Amount (INR) Note Ref 1 Financial Reporting Council Ltd, United Kingdom Company 1,040,708/- 2 2 Idasan Singpore Pte Ltd, Singapore Company 2,769,279/- 2 3 International Screening Solutions, Inc, USA Company 848,945/- 2 4 Klynveld Peat Marwick Goedeler B V CVBA / SC SCRL Belgium Company 536,895/- 2 5 KPMG & Associados - Sociedade de Revisores Oficiais de Contas, S.A. Portugal Company 474,358/- 2 79.1 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 Co operative, 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. 79.2 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. 79.3 The Assessee has raised the 2 grounds of appeal in ITA No. 2413/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 56,60,499/-.

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 2016-17. 81. For the Assessment Year 2016-17, the Assessee claimed deduction for the following professional fee paid/payable to the non-residents aggregating to INR 13,69,99,679/-. Sl.No. Name & Country of Tax Residence Status Amount (INR) Note Ref 6 KPMG AB, Sweden Company 1,611,010/- 2 7 KPMG Advisors AE, Greece Company 1,029,256/- 2 8 KPMG Advisory N.V. Netherlands Company 2,510,649/- 2 9 KPMG Advisory Services Ltd. Mauritius Company 2,344,775/- 10 KPMG Auditores & Consultores, SA, Mozambique Company 468,241/- 2 11 KPMG Australia Firm 2,560,224/- 1 12 KPMG LLP, United Kingdom LLP 21,289,238/- 2 13 KPMG LLP, USA Firm 65,319,561/- 1 14 KPMG Meijburg & Co, Netherlands Company 2,197,222/- 2 15 KPMG PHOOMCHAI TAX LTD, Thailand Company 1,855,273/- 2 16 KPMG S.A., France Company 47,061/- 2 17 KPMG Safi Al Mutawa & Partners, Kuwait Firm 576,109/- 3 18 KPMG Services Pte.Ltd. Singapore Company 16,200,770/- 2 19 KPMG Siddharta Advisory, Indonesia Company 981,691/- 2 20 KPMG Spain (KPMG Assesores S.L.) Company 1,735,530/- 2 21 KPMG Tax and Advisory LLC, Kazakhstan Company 29,123/- 22 KPMG Tax Services Ltd. Mauritius Company 1,762,800/- 2 23 KPMG, Kenya Firm 3,122,626/- 1 24 KPMG, Mauritius Firm 471,438//- 1 25 R.G Manabat & Co. Philippines Firm 4,063,956/- 1 26 Rahman Rahman Huq. Bangladesh Firm 1,152,942/- 2 Total 13,69,99,679/- 81. United Stated of America (USA) 81. 1. The professional fee paid/payable to tax residents of USA are listed at Sl. No. 3 & 13 of Table in paragraph 77 above. 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.

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.

France 83. 1. The professional fee paid/payable to company being tax residents of France are listed at Sl. No. 16 of Table in paragraph 77 above. 83. 2. In view of the reasoning given in paragraph 34 to 34.2 above, we hold that the services provided by the tax-resident of France, being a company, to the Assessee would fall within the ambit of Article 13 of the DTAA and therefore, the tax withholding provisions contained in Section 195 of the Act would be attracted. Since the Assessee had failed to comply with tax withholding requirements contained in Section 195 of the Act, deduction claimed by the Assessee in respect of professional fee paid/payable to tax resident of France has been correctly disallowed by the Assessing Officer 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 77 above.

Kuwait 84. 1. The professional fee paid/payable to a firm of individuals tax, being residents of Kuwait, is listed at Sl. No. 17 of Table in paragraph 77 above. 84. 2. While dealing with the professional fee paid/payable to the same tax resident of Kuwait, we have, in appeal for the AY 2014-15, set aside the order passed by the CIT(A) with the direction to decide the issue afresh. In view of our reasoning/finding/adjudication in appeal for the AY 2014-15 contained in paragraph 51 to 51.3 above, and also keeping in view the identical facts and circumstances prevailing in the relevant previous year, we set aside the order passed by the CIT(A) deleting the disallowance made by the Assessing Officer under Section 40(a)(i) of the Act in respect of professional fee paid/payable to firm of individuals being tax resident of Kuwait listed at Sl. No. 17 of Table in paragraph 77 above; and direct the CIT(A) to adjudicate the issue afresh after verification of facts prevailing during the relevant previous year. The Assessee would be at liberty to furnish such documents/details at the Assessee may deem fit to support its contentions. All rights and contentions of the Assessee are left open. The Assessee shall be granted reasonable opportunity of being heard. Ground No. 1 & 2 raised by the Assessee - Remand to Assessing Officer 85. As regards the professional 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.

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 40,54,71,001/- 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). 87. 1. In view of paragraph 22 to 22.6 above, we do not find any reason to interfere with the order passed by the CIT(A) on this issue. There is nothing on record to persuade us to take a view different from the view taken by the Tribunal while deciding the above appeal for the Assessment Years 2018-19. Accordingly, Ground No. 5 & 6 raised by the Revenue are dismissed. Ground No. 7 raised by the Revenue 88. Ground No. 7 raised by the Revenue is directed against the order of CIT(A) deleting the ad-hoc disallowance of INR 5,79,772/- made by the Assessing Officer at the rate of 25% of the aggregate advertising and publicity expenses of INR 23,109,087/- claimed as deduction by the Assessee during the relevant previous year. 88. 1. In view of paragraph 23 to 23.5 above, we do not find any infirmity in the order passed by the CIT(A) and therefore, Ground No. 7 raised by the Revenue are dismissed. Assessment Year 2017-18 89. Next we would take up appeal/cross-appeal/cross-objection pertaining to Assessment Year 2017-18 arising from order, dated 09/05/2023, passed by the CIT(A) partly allowing the appeal of the Assessee against the Assessment Order, dated 24/12/2019, passed by the Assistant Commissioner of Income Tax -16(2), Mumbai under Section 143(3) of the Act. 89. 1. For the Assessment Year 2017-18 the Revenue has raised 7 grounds of appeal in ITA No. 2277/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 Co operative, 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. 89. 2. The Assessee has raised cross objections [CO No.123/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. 89. 3. The Assessee 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/-.

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, Greece Company 8,65,412 2 6 KPMG Advisory - Consultores De Gestao S.A, Portugal Company 8,07,192 7 KPMG Advisory N.V. Netherlands Company 25,05,984 2 8 KPMG Advisory Services Ltd, Mauritius Company 29,68,898 2 9 KPMG Advisory Services Pte Ltd, Singapore Company 2,26,139 10 KPMG Al Fozan & Partners, Saudi Arabia Firm 54,57,920 1 11 KPMG Asesores S.L. Spain Company 17,97,300 2 12 KPMG Australia Firm 14,22,432 13 KPMG Consulting (Philippines) Inc. Company 482,556 2 14 KPMG Hazem Hassan Accountants & Consultants, Egypt Firm 6,83,258 1 15 KPMG Llp, United Kingdom LLP 79,07,249 2 16 KPMG Meijburg & Co Special Services B.V. Netherlands Company 22,14,801 2 17 KPMG Meijburg M & A Tax B.V. Netherlands Company 1,59,615 18 KPMG Phoomchai Audit Ltd, Thailand Company 5,09,175 2 19 KPMG Phoomchai Tax Ltd, Thailand Company 9,33,033 2 20 KPMG S.A. France Company 1,14,44,653 2 21 KPMG Safi Al Mutawa & Partners, Kuwait Firm 5,77,166 3 22 KPMG Services Pte.Ltd. Singapore Company 1,72,52,365 1 23 KPMG Siddharta Advisory, Indonesia Company 10,46,321 2 24 KPMG Tax Services Ltd., Mauritius Company 4,65,380 2 25 KPMG, Kenya Firm 9,95,072 1 26 KPMG, Mauritius Firm 2,39,652 1 27 R.G Manabat & Co. Philippines Firm 26,59,380 1 28 Rahman Rahman Huq, Bangladesh Firm 14,50,031 2 29 Wladyslawroch Gontarczyk, Australia Firm 11,96,841 1 92. Ground No. 1 to 4 raised by the Revenue; Cross Objection No. 1 raised by the Assessee; 93. Ground No. 1 to 4 are directed against the order of 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 18,05,48,835/-. 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 2 and 3 & 6, respectively, of Table in paragraph 91 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. 93. 1. On perusal of Article 14/15 of DTAA entered by India with the following countries30 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) Spain [applicable to non-resident parties at Sl.No.5 & 20], (c) Sweden [applicable to non-resident party at Sl.No.6], (d) Netherlands [applicable to non-resident parties at Sl. No. 8, & 14], (e) Mauritius [applicable to non-resident parties at Sl.No.9,22, & 24], (f) Thailand28 [applicable to non-resident party at Sl.No.15] (g) Indonesia29 [applicable to non-resident party at Sl.No.19]; (h) Kazakhstan [applicable to non-resident party at Sl.No.21] (i) Philippines [applicable to non-resident party at Sl.No. 25], (j) Bangladesh [applicable to non-resident party at Sl.No.26], 93. 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 was 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 cannot be sustained.

United States of America (USA) 94. 1. The professional fee paid/payable to tax residents of USA are listed at Sl. No. 2 & 30 of Table in paragraph 91 above. 94. 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. 2, & 30 of Table in paragraph 91 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 95. Saudi Arabia 95. 1. The professional fee paid/payable to firm of individuals, being tax residents of Saudi Arabia, are listed at Sl. No. 10 of Table in paragraph 91 above. 95. 2. Adopting the reasoning given in paragraph 32.1 to 32.2, 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.10 of Table in paragraph 91 above cannot be sustained. Therefore, we decline to interfere with the order passed by the CIT(A) in this regard.

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.

United Kingdom (UK) 97. 1. 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. 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.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 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 payments.

Thailand 98. 1. The professional fee paid/payable to company, being tax residents of Thailand, are listed at Sl. No. 18, & 19 of Table in paragraph 91 above. 98. 2. On perusal of Article 15 of the India-Thailand DTAA32 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 be governed by the provisions contained in Article 5 read with Article 7 of the India-Thailand DTAA. We note that there is no FTS Clause in the India-Thailand DTAA. Thus, in the facts of the present case, the provisions of Article 7(7) of the India-Thailand DTAA shall not be attracted and the professional services provided by the tax resident of Thailand to the Assessee would be characterized as profits falling within the ambit of Article 7 of the DTAA. In case the tax resident of Thailand does not have a PE in India, such profits would not be liable to tax in India. There is nothing on record to persuade us to take a different view. As a result, the Assessee would not be required to withhold tax from the payments made to tax residents Thailand reflected at Sl. No. 23 of Table in paragraph 91 above. 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 payments made to tax residents of Thailand cannot be sustained.

France 99. 1. The professional fee paid/payable to company being tax residents of France are listed at Sl. No. 20 of Table in paragraph 91 above. 99. 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 ambit of Article 13 of the DTAA and therefore, the tax withholding provisions contained in Section 195 of the Act would be attracted. Since the Assessee had failed to comply with tax withholding requirements contained in Section 195 of the Act, deduction claimed by the Assessee in respect of professional fee paid/payable to tax resident of France has been correctly disallowed by the Assessing Officer 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 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 raised by the Assessee are allowed for statistical purposes. Ground No. 5 & 6 raised by the Revenue 102. Ground No. 5 raised by the Revenue pertains to disallowance of INR 40,54,71,001/- 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). 102.1 In view of paragraph 22 to 22.6 above, we do not find any reason to interfere with the order passed by the CIT(A) on this issue. There is nothing on record to persuade us to take a view different from the view taken by the Tribunal while deciding the above appeal for the Assessment Years 2018-19. Accordingly, Ground No. 5 & 6 raised by the Revenue are dismissed. Ground No. 7 raised by the Revenue 103. Ground No. 7 raised by the Revenue is directed against the order of CIT(A) deleting the ad-hoc disallowance of INR 5,79,772/- made by the Assessing Officer at the rate of 25% of the aggregate advertising and publicity expenses of INR 23,109,087/- claimed as deduction by the Assessee during the relevant previous year. 103. 1. In view of paragraph 23 to 23.5 above, we do not find any infirmity in the order passed by the CIT(A) and therefore, Ground No. 7 raised by the Revenue are dismissed. Assessment Year 2017-18 104. Next we would take up appeal/cross-appeal/cross-objection pertaining to Assessment Year 2017-18 arising from order, dated 09/05/2023, passed by the CIT(A) partly allowing the appeal of the Assessee against the Assessment Order, dated 24/12/2019, passed by the Assistant Commissioner of Income Tax -16(2), Mumbai under Section 143(3) of the Act. 104. 1. For the Assessment Year 2017-18 the Revenue has raised 7 grounds of appeal in ITA No. 2277/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 Co operative, 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. 104. 2. The Assessee has raised cross objections [CO No.123/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. 104. 3. The Assessee 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/-.

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 KPMG AB, Sweden Company 1,611,010/- 2 2 KPMG Advisors AE, Greece Company 1,029,256/- 2 3 KPMG Advisory N.V. Netherlands Company 2,510,649/- 2 4 KPMG Advisory Services Ltd. Mauritius Company 2,344,775/- 5 KPMG Auditores & Consultores, SA, Mozambique Company 468,241/- 2 6 KPMG Australia Firm 2,560,224/- 1 7 KPMG LLP, United Kingdom LLP 21,289,238/- 2 8 KPMG LLP, USA Firm 65,319,561/- 1 9 KPMG Meijburg & Co, Netherlands Company 2,197,222/- 2 10 KPMG PHOOMCHAI TAX LTD, Thailand Company 1,855,273/- 2 11 KPMG S.A., France Company 47,061/- 2 12 KPMG Safi Al Mutawa & Partners, Kuwait Firm 576,109/- 3 13 KPMG Services Pte.Ltd. Singapore Company 16,200,770/- 2 14 KPMG Siddharta Advisory, Indonesia Company 981,691/- 2 15 KPMG Spain (KPMG Assesores S.L.) Company 1,735,530/- 2 16 KPMG Tax and Advisory LLC, Kazakhstan Company 29,123/- 17 KPMG Tax Services Ltd. Mauritius Company 1,762,800/- 2 18 KPMG, Kenya Firm 3,122,626/- 1 19 KPMG, Mauritius Firm 471,438//- 1 20 R.G Manabat & Co. Philippines Firm 4,063,956/- 1 21 Rahman Rahman Huq. Bangladesh Firm 1,152,942/- 2 Total 13,69,99,679/- 94. United States of America (USA) 94. 1. The professional fee paid/payable to tax residents of USA are listed at Sl. No. 2 & 30 of Table in paragraph 91 above. 94. 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. 2, & 30 of Table in paragraph 91 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 95. Saudi Arabia 95. 1. The professional fee paid/payable to firm of individuals, being tax residents of Saudi Arabia, are listed at Sl. No. 10 of Table in paragraph 91 above. 95. 2. Adopting the reasoning given in paragraph 32.1 to 32.2, 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.10 of Table in paragraph 91 above cannot be sustained. Therefore, we decline to interfere with the order passed by the CIT(A) in this regard.

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.

United Kingdom (UK) 97. 1. 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. 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.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 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 payments.

Thailand 98. 1. The professional fee paid/payable to company, being tax residents of Thailand, are listed at Sl. No. 18, & 19 of Table in paragraph 91 above. 98. 2. On perusal of Article 15 of the India-Thailand DTAA32 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 be governed by the provisions contained in Article 5 read with Article 7 of the India-Thailand DTAA. We note that there is no FTS Clause in the India-Thailand DTAA. Thus, in the facts of the present case, the provisions of Article 7(7) of the India-Thailand DTAA shall not be attracted and the professional services provided by the tax resident of Thailand to the Assessee would be characterized as profits falling within the ambit of Article 7 of the DTAA. In case the tax resident of Thailand does not have a PE in India, such profits would not be liable to tax in India. There is nothing on record to persuade us to take a different view. As a result, the Assessee would not be required to withhold tax from the payments made to tax residents Thailand reflected at Sl. No. 23 of Table in paragraph 91 above. 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 payments made to tax residents of Thailand cannot be sustained.

France 99. 1. The professional fee paid/payable to company being tax residents of France are listed at Sl. No. 20 of Table in paragraph 91 above. 99. 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 ambit of Article 13 of the DTAA and therefore, the tax withholding provisions contained in Section 195 of the Act would be attracted. Since the Assessee had failed to comply with tax withholding requirements contained in Section 195 of the Act, deduction claimed by the Assessee in respect of professional fee paid/payable to tax resident of France has been correctly disallowed by the Assessing Officer 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 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 raised by the Assessee are allowed for statistical purposes. Ground No. 5 & 6 raised by the Revenue 102. Ground No. 5 raised by the Revenue pertains to disallowance of INR 40,54,71,001/- 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). 102.1 In view of paragraph 22 to 22.6 above, we do not find any reason to interfere with the order passed by the CIT(A) on this issue. There is nothing on record to persuade us to take a view different from the view taken by the Tribunal while deciding the above appeal for the Assessment Years 2018-19. Accordingly, Ground No. 5 & 6 raised by the Revenue are dismissed. Ground No. 7 raised by the Revenue 103. Ground No. 7 raised by the Revenue is directed against the order of CIT(A) deleting the ad-hoc disallowance of INR 5,79,772/- made by the Assessing Officer at the rate of 25% of the aggregate advertising and publicity expenses of INR 23,109,087/- claimed as deduction by the Assessee during the relevant previous year. 103. 1. In view of paragraph 23 to 23.5 above, we do not find any infirmity in the order passed by the CIT(A) and therefore, Ground No. 7 raised by the Revenue are dismissed. Assessment Year 2017-18 104. Next we would take up appeal/cross-appeal/cross-objection pertaining to Assessment Year 2017-18 arising from order, dated 09/05/2023, passed by the CIT(A) partly allowing the appeal of the Assessee against the Assessment Order, dated 24/12/2019, passed by the Assistant Commissioner of Income Tax -16(2), Mumbai under Section 143(3) of the Act. 104. 1. For the Assessment Year 2017-18 the Revenue has raised 7 grounds of appeal in ITA No. 2277/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 Co operative, 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. 104. 2. The Assessee has raised cross objections [CO No.123/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. 104. 3. The Assessee 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/-.

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 KPMG AB, Sweden Company 1,611,010/- 2 2 KPMG Advisors AE, Greece Company 1,029,256/- 2 3 KPMG Advisory N.V. Netherlands Company 2,510,649/- 2 4 KPMG Advisory Services Ltd. Mauritius Company 2,344,775/- 5 KPMG Auditores & Consultores, SA, Mozambique Company 468,241/- 2 6 KPMG Australia Firm 2,560,224/- 1 7 KPMG LLP, United Kingdom LLP 21,289,238/- 2 8 KPMG LLP, USA Firm 65,319,561/- 1 9 KPMG Meijburg & Co, Netherlands Company 2,197,222/- 2 10 KPMG PHOOMCHAI TAX LTD, Thailand Company 1,855,273/- 2 11 KPMG S.A., France Company 47,061/- 2 12 KPMG Safi Al Mutawa & Partners, Kuwait Firm 576,109/- 3 13 KPMG Services Pte.Ltd. Singapore Company 16,200,770/- 2 14 KPMG Siddharta Advisory, Indonesia Company 981,691/- 2 15 KPMG Spain (KPMG Assesores S.L.) Company 1,735,530/- 2 16 KPMG Tax and Advisory LLC, Kazakhstan Company 29,123/- 17 KPMG Tax Services Ltd. Mauritius Company 1,762,800/- 2 18 KPMG, Kenya Firm 3,122,626/- 1 19 KPMG, Mauritius Firm 471,438//- 1 20 R.G Manabat & Co. Philippines Firm 4,063,956/- 1 21 Rahman Rahman Huq. Bangladesh Firm 1,152,942/- 2 Total 13,69,99,679/- 95. Saudi Arabia 95. 1. The professional fee paid/payable to firm of individuals, being tax residents of Saudi Arabia, are listed at Sl. No. 10 of Table in paragraph 91 above. 95. 2. Adopting the reasoning given in paragraph 32.1 to 32.2, 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.10 of Table in paragraph 91 above cannot be sustained. Therefore, we decline to interfere with the order passed by the CIT(A) in this regard.

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.

United Kingdom (UK) 97. 1. 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. 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.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 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 payments.

Thailand 98. 1. The professional fee paid/payable to company, being tax residents of Thailand, are listed at Sl. No. 18, & 19 of Table in paragraph 91 above. 98. 2. On perusal of Article 15 of the India-Thailand DTAA32 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 be governed by the provisions contained in Article 5 read with Article 7 of the India-Thailand DTAA. We note that there is no FTS Clause in the India-Thailand DTAA. Thus, in the facts of the present case, the provisions of Article 7(7) of the India-Thailand DTAA shall not be attracted and the professional services provided by the tax resident of Thailand to the Assessee would be characterized as profits falling within the ambit of Article 7 of the DTAA. In case the tax resident of Thailand does not have a PE in India, such profits would not be liable to tax in India. There is nothing on record to persuade us to take a different view. As a result, the Assessee would not be required to withhold tax from the payments made to tax residents Thailand reflected at Sl. No. 23 of Table in paragraph 91 above. 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 payments made to tax residents of Thailand cannot be sustained.

France 99. 1. The professional fee paid/payable to company being tax residents of France are listed at Sl. No. 20 of Table in paragraph 91 above. 99. 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 ambit of Article 13 of the DTAA and therefore, the tax withholding provisions contained in Section 195 of the Act would be attracted. Since the Assessee had failed to comply with tax withholding requirements contained in Section 195 of the Act, deduction claimed by the Assessee in respect of professional fee paid/payable to tax resident of France has been correctly disallowed by the Assessing Officer 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 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 raised by the Assessee are allowed for statistical purposes. Ground No. 5 & 6 raised by the Revenue 102. Ground No. 5 raised by the Revenue pertains to disallowance of INR 40,54,71,001/- 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). 102.1 In view of paragraph 22 to 22.6 above, we do not find any reason to interfere with the order passed by the CIT(A) on this issue. There is nothing on record to persuade us to take a view different from the view taken by the Tribunal while deciding the above appeal for the Assessment Years 2018-19. Accordingly, Ground No. 5 & 6 raised by the Revenue are dismissed. Ground No. 7 raised by the Revenue 103. Ground No. 7 raised by the Revenue is directed against the order of CIT(A) deleting the ad-hoc disallowance of INR 5,79,772/- made by the Assessing Officer at the rate of 25% of the aggregate advertising and publicity expenses of INR 23,109,087/- claimed as deduction by the Assessee during the relevant previous year. 103. 1. In view of paragraph 23 to 23.5 above, we do not find any infirmity in the order passed by the CIT(A) and therefore, Ground No. 7 raised by the Revenue are dismissed. Assessment Year 2017-18 104. Next we would take up appeal/cross-appeal/cross-objection pertaining to Assessment Year 2017-18 arising from order, dated 09/05/2023, passed by the CIT(A) partly allowing the appeal of the Assessee against the Assessment Order, dated 24/12/2019, passed by the Assistant Commissioner of Income Tax -16(2), Mumbai under Section 143(3) of the Act. 104. 1. For the Assessment Year 2017-18 the Revenue has raised 7 grounds of appeal in ITA No. 2277/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 Co operative, 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. 104. 2. The Assessee has raised cross objections [CO No.123/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. 104. 3. The Assessee 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/-.

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 KPMG AB, Sweden Company 1,611,010/- 2 2 KPMG Advisors AE, Greece Company 1,029,256/- 2 3 KPMG Advisory N.V. Netherlands Company 2,510,649/- 2 4 KPMG Advisory Services Ltd. Mauritius Company 2,344,775/- 5 KPMG Auditores & Consultores, SA, Mozambique Company 468,241/- 2 6 KPMG Australia Firm 2,560,224/- 1 7 KPMG LLP, United Kingdom LLP 21,289,238/- 2 8 KPMG LLP, USA Firm 65,319,561/- 1 9 KPMG Meijburg & Co, Netherlands Company 2,197,222/- 2 10 KPMG PHOOMCHAI TAX LTD, Thailand Company 1,855,273/- 2 11 KPMG S.A., France Company 47,061/- 2 12 KPMG Safi Al Mutawa & Partners, Kuwait Firm 576,109/- 3 13 KPMG Services Pte.Ltd. Singapore Company 16,200,770/- 2 14 KPMG Siddharta Advisory, Indonesia Company 981,691/- 2 15 KPMG Spain (KPMG Assesores S.L.) Company 1,735,530/- 2 16 KPMG Tax and Advisory LLC, Kazakhstan Company 29,123/- 17 KPMG Tax Services Ltd. Mauritius Company 1,762,800/- 2 18 KPMG, Kenya Firm 3,122,626/- 1 19 KPMG, Mauritius Firm 471,438//- 1 20 R.G Manabat & Co. Philippines Firm 4,063,956/- 1 21 Rahman Rahman Huq. Bangladesh Firm 1,152,942/- 2 Total 13,69,99,679/- 99. France 99. 1. The professional fee paid/payable to company being tax residents of France are listed at Sl. No. 20 of Table in paragraph 91 above. 99. 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 ambit of Article 13 of the DTAA and therefore, the tax withholding provisions contained in Section 195 of the Act would be attracted. Since the Assessee had failed to comply with tax withholding requirements contained in Section 195 of the Act, deduction claimed by the Assessee in respect of professional fee paid/payable to tax resident of France has been correctly disallowed by the Assessing Officer 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 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 raised by the Assessee are allowed for statistical purposes. Ground No. 5 & 6 raised by the Revenue 102. Ground No. 5 raised by the Revenue pertains to disallowance of INR 40,54,71,001/- 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). 102.1 In view of paragraph 22 to 22.6 above, we do not find any reason to interfere with the order passed by the CIT(A) on this issue. There is nothing on record to persuade us to take a view different from the view taken by the Tribunal while deciding the above appeal for the Assessment Years 2018-19. Accordingly, Ground No. 5 & 6 raised by the Revenue are dismissed. Ground No. 7 raised by the Revenue 103. Ground No. 7 raised by the Revenue is directed against the order of CIT(A) deleting the ad-hoc disallowance of INR 5,79,772/- made by the Assessing Officer at the rate of 25% of the aggregate advertising and publicity expenses of INR 23,109,087/- claimed as deduction by the Assessee during the relevant previous year. 103. 1. In view of paragraph 23 to 23.5 above, we do not find any infirmity in the order passed by the CIT(A) and therefore, Ground No. 7 raised by the Revenue are dismissed. Order pronounced on 12.08.2024 (Prashant Maharishi) (Rahul Chaudhary) Accountant Member Judicial Member मुंबई Mumbai; िदनांक Dated : 12.08.2024 आदेश की ितिलिप अ ेिषत/Copy of the Order forwarded to : 1. अपीलाथ / The Appellant 2. थ / The Respondent. 3. आयकर आयु/ The CIT 4. धान आयकर आयु / Pr.CIT 5. िवभागीय ितिनिध, आयकर अपीलीय अिधकरण, मुंबई / DR, ITAT, Mumbai 6. गाडफाईल / Guard file. आदेशानुसार/ BY ORDER, सािपत ित //// उप/सहायक पंजीकार /(Dy./Asstt.