×Latest Case Laws on Income Tax by various Income Tax Appellate Tribunals in India
These are the latest case laws decided by various Income Tax Appellate Tribunals (ITAT) of India on Income Tax which have been published recently. The case laws are open for discussion and we invite expert comments from our members on its applicability and effect on relevant issues.
10-01-2019, Grant Thornton, Section 9, 195, 40(a)(i), Tribunal Delhi
This appeal by the revenue is directed against order dated 30/03/2015 passed by the Ld. Commissioner of Income-tax (Appeals)-18, New Delhi[in short the Ld. CIT(A)] for assessment year 2010-11 raising following grounds:
i. The CIT(A) has erred in deleting the addition of Rs. 1,41,08.805/- without appreciating the fact that the assessee has committed a default u/s 40(a)(i) of the Income-tax Act, 1961 on account of non-deduction of tax by assessee paid to a foreign company.
iii The CIT(A) has erred in deleting the addition without appreciating the fact that Article 15 (Independent Personal Services) is applicable to an individual, whether in his own capacity or as a member of a partnership. In the instant case, the payment has admittedly been made to Grant Thornton LLP which is a Limited Liability Partnership firm and not an individual.
iii) The CIT(A) has erred in deleting the addition without appreciating the fact that the latest explanation to Section 9 applicable to clause (vii) inserted from Finance Act. 2010 w.e.f. 01.06.1976 apply to the present case in the light of payments (Independent Personal Services) made to a non resident entity.
iv) The CIT(A) has erred in deleting the addition of Rs. 57.148/-. without appreciating the fact the interest paid for late deposit of service tax which is not allowable u/s 37( 1).
v) The appellant craves leave to add, alter or amend any/ all the grounds of appeal before or during the course of hearing of appeal.
2. Briefly stated facts of the case are that the assessee, a partnership firm was engaged in providing international accountancy and advisory services to various clients in India and abroad. The assessee filed return of income on 12/10/2010 declaring total income of Rs.6,46,22,387/-. The case was selected for scrutiny and notice under section 143(2) of the Income-tax Act, 1961 (in short ‘the Act’) was issued and complied with. In the scrutiny proceedings, the Assessing Officer noticed certain payments for professional fees to non-residents firms, on which no tax was deducted at source. The services of the foreign firms were obtained to render services to foreign clients of the assessee in UK, USA, Netherland and France etc. It was contended by the assessee that fee paid to these firms was paid for services rendered outside India and same is covered by Article 15 “Independent Personal Services” of respective DTAA and in absence of any fixed base of the recipient in India, income was not chargeable to tax in India and thus no withholding tax was required to deduct on such payments under section 195 of the Act and consequently no disallowance under section 40(a)(i) of the Act was required. The assessee relied on the following decisions to support its claim:
1. Maharashtra State Electricity Board Vs. DCIT (2004) 90 ITD 793 ( Mum).
2. Graphite India Ltd Vs. CIT ( 2003) 86ITR 384 (KOl)
2.1 According to the Assessing Officer, in view of the explanation w.e.f. 01/06/1976 to section 9(i)(vii) of the Act, services rendered by a non-resident ( fee for ‘technical nature’) though having no residence or place of business or business connection in India or rendered outside India shall be deemed to accrue arise in India.
The Assessing Off cer placed reliance on the decisions of the ITAT Mumbai in he case of Linklaters LLP Vs ITO (ITA No. 5085/Mum/2003 and Ashapura Minichem Ltd (ITA not mentioned by the ld. AO). On the issue of Article 15 of the respective DTAAs invoked by the assessee, the Ld. Assessing Officer observed that the said article is applicable to an individual, whether in his own capacity or as a member of a partnership and in the instant case the parties are admittedly
Limited Liability Partnership Firms (LLP) and not an individual, those are not covered by the benefit of Article 15 for “independent personal services” rendered. According to the Assessing Officer