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The Tax Publishers Asstt. CIT v. BSR & Co. [ITA No. 1917/Mum/2013, dt. 6-5-2016] : 2016 TaxPub(DT) 2238 (Mum-Trib) Payment for professional consulting whether subject to TDS thus disallowable under section 40(a)(ia) *Facts:* Assessee firm of Chartered Accountants part of the KPMG network group of professional accounting firms, had to pay for various audit, tax, consultancy, IT, background check, VAT advisory services payments to 12 of its KPMG entities worldwide without effecting TDS. Thus they were held to be fee for technical services under section 9(1) (vii) and since no TDS was done disallowance was applied under section 40(a) (ia) which was negated by the Commissioner (Appeals). On further appeal by the department: Held in favour of the assessee that the payments were not fee for technical services thus not warranting any disallowance. The fact of amendment done in section 9(1)(vii) with retrospective effect that the provision of service to be done from India for FTS has been done away with would only apply to test whether the incomes accrue in the hands of the recipient non-residents and not in the realm of TDS deduction was also a view opined by the ITAT. Subsequent retrospective amendment also cannot fasten disallowance on a fait accompli transaction. The countries where remittances were done and the reason why they were out of the TDS scope is listed as under: Payments to KPMG USA, Canada, UK, Malasyia are not fee for technical services but independent personal services taxable only on duration place test being met which was absent here. Make available test also missing. KPMG Singapore, Belgium - held that the nature of service were under the scope of business profits - Article - 7 not taxable in the absence of a PE. KPMG Mauritius, Hassan, Egypt, Dubai, UAE, Srilanka - there is no FTS clause in the DTAA thus fall in the scope of independent personal services not taxable in the absence of the duration place test being met.

The Tax Publishers

Asstt. CIT v. BSR & Co. [ITA No. 1917/Mum/2013, dt. 6-5-2016] : 2016 TaxPub(DT) 2238 (Mum-Trib)

Payment for professional consulting whether subject to TDS thus disallowable under section 40(a)(ia)

Facts:

Assessee firm of Chartered Accountants part of the KPMG network group of professional accounting firms, had to pay for various audit, tax, consultancy, IT, background check, VAT advisory services payments to 12 of its KPMG entities worldwide without effecting TDS. Thus they were held to be fee for technical services under section 9(1) (vii) and since no TDS was done disallowance was applied under section 40(a) (ia) which was negated by the Commissioner (Appeals). On further appeal by the department:

Held in favour of the assessee that the payments were not fee for technical services thus not warranting any disallowance.

The fact of amendment done in section 9(1)(vii) with retrospective effect that the provision of service to be done from India for FTS has been done away with would only apply to test whether the incomes accrue in the hands of the recipient non-residents and not in the realm of TDS deduction was also a view opined by the ITAT. Subsequent retrospective amendment also cannot fasten disallowance on a fait accompli transaction.

The countries where remittances were done and the reason why they were out of the TDS scope is listed as under:

Payments to KPMG USA, Canada, UK, Malasyia are not fee for technical services but independent personal services taxable only on duration place test being met which was absent here. Make available test also missing.

KPMG Singapore, Belgium - held that the nature of service were under the scope of business profits - Article - 7 not taxable in the absence of a PE.

KPMG Mauritius, Hassan, Egypt, Dubai, UAE, Srilanka - there is no FTS clause in the DTAA thus fall in the scope of independent personal services not taxable in the absence of the duration place test being met.