KPMG ASSURANCE AND CONSULTING SERVICES LLP, MUMBAI V. Assistant Commissioner of Income Tax-Circle-16(2), MUMBAI

ITA 2413/MUM/2023

• Counselvise Citation: [2024] 100 COUNSELVISE.COM (IT) 0192 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-08-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Next Hearing Date: 13-05-2024
• Assessment Year: 2016-2017
• Appeal Filed On: 06-07-2023

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL "I" BENCH, MUMBAI SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER SHRI RAHUL CHAUDHARY, JUDICIAL MEMBER ITA No. 2272/MUM/2023 (Assessment Year: 2012-13) Deputy Commissioner of Income Tax, Circle 16(2), Mumbai, Room No. 625, 6 th Floor, Aayakar Bhavan, M.K. Road, Mumbai – 400020 .............. Appellant M/s KPMG Assurance and Consulting Services LLP, 8 th Floor, Tower B, DLF Building No. 10, Gurgaon - 122002, Haryana [PAN: AAAFK1415H] Vs .............. Respondent CO No. 126/MUM/2023 (Arising out of ITA No. 2272/Mum/2023) (Assessment Year: 2012-13) M/s KPMG Assurance and Consulting Services LLP, 2 nd Floor, Block T2 (B Wing), Lodha Excelus, Apollo Mills Compound, N M Joshi Marg, Mahalaxmi - 400011 [PAN: AAAFK1415H] ............. Appellant Deputy Commissioner of Income Tax, Circle 16(2), Mumbai, Room No. 479, 4 th Floor, Aayakar Bhavan, M.K. Road, Churchgate, Mumbai – 400020 Vs ............. Respondent ITA No. 2411/MUM/2023 (Assessment Year: 2012-13) M/s KPMG Assurance and Consulting Services LLP, 2 nd Floor, Block T2 (B Wing), Lodha Excelus, Apollo Mills Compound, N.M. Joshi Marg, Mahalaxmi, Mumbai - 400011 [PAN: AAAFK1415H] ............. Appellant Assistant Commissioner of Income Tax, Circle 16(2), Mumbai, Room No. 625, 6 th Floor, Aayakar Bhavan, M.K. Road, Churchgate, Mumbai – 400020 Vs ............. Respondent ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 2 ITA No. 2273/MUM/2023 (Assessment Year: 2013-14) Deputy Commissioner of Income Tax, Circle 16(2), Mumbai, Room No. 625, 6 th Floor, Aayakar Bhavan, M.K. Road, Mumbai – 400020 .............. Appellant M/s KPMG Assurance and Consulting Services LLP, 8 th Floor, Tower B, DLF Building No. 10, Gurgaon - 122002, Haryana [PAN: AAAFK1415H] Vs .............. Respondent CO No. 125/MUM/2023 (Arising out of ITA No. 2273/Mum/2023) (Assessment Year: 2013-14) M/s KPMG Assurance and Consulting Services LLP, 2 nd Floor, Block T2 (B Wing), Lodha Excelus, Apollo Mills Compound, N.M. Joshi Marg, Mahalaxmi, Mumbai - 400011 [PAN: AAAFK1415H] ............. Appellant Deputy Commissioner of Income Tax, Circle 16(2), Mumbai, Room No. 479, 4 th Floor, Aayakar Bhavan, M.K. Road, Churchgate, Mumbai – 400020 Vs ............. Respondent ITA No. 2410/MUM/2023 (Assessment Year: 2013-14) M/s KPMG Assurance and Consulting Services LLP, 2 nd Floor, Block T2 (B Wing), Lodha Excelus, Apollo Mills Compound, N.M. Joshi Marg, Mahalaxmi, Mumbai - 400011 [PAN: AAAFK1415H] ............. Appellant Assistant Commissioner of Income Tax, Circle 16(2), Mumbai, Room No. 625, 6 th Floor, Aayakar Bhavan, M.K. Road, Churchgate, Mumbai – 400020 Vs ............. Respondent ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 3 ITA No. 2274/MUM/2023 (Assessment Year: 2014-15) Deputy Commissioner of Income Tax, Circle 16(2), Mumbai, Room No. 625, 6 th Floor, Aayakar Bhavan, M.K. Road, Mumbai – 400020 .............. Appellant M/s KPMG Assurance and Consulting Services LLP, 8 th Floor, Tower B, DLF Building No. 10, Gurgaon - 122002, Haryana [PAN: AAAFK1415H] Vs .............. Respondent CO No. 124/MUM/2023 (Arising out of ITA No. 2274/Mum/2023) (Assessment Year: 2014-15) M/s KPMG Assurance and Consulting Services LLP, 2 nd Floor, Block T2 (B Wing), Lodha Excelus, Apollo Mills Compound, N.M. Joshi Marg, Mahalaxmi, Mumbai - 400011 [PAN: AAAFK1415H] ............. Appellant Deputy Commissioner of Income Tax, Circle 16(2), Mumbai, Room No. 479, 4 th Floor, Aayakar Bhavan, M.K. Road, Churchgate, Mumbai – 400020 Vs ............. Respondent ITA No. 2415/MUM/2023 (Assessment Year: 2014-15) M/s KPMG Assurance and Consulting Services LLP, 2 nd Floor, Block T2 (B Wing), Lodha Excelus, Apollo Mills Compound, N.M. Joshi Marg, Mahalaxmi, Mumbai - 400011 [PAN: AAAFK1415H] ............. Appellant Assistant Commissioner of Income Tax, Circle 16(2), Mumbai, Room No. 625, 6 th Floor, Aayakar Bhavan, M.K. Road, Churchgate, Mumbai – 400020 Vs ............. Respondent ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 4 ITA No. 2275/MUM/2023 (Assessment Year: 2015-16) Deputy Commissioner of Income Tax, Circle 16(2), Mumbai, Room No. 625, 6 th Floor, Aayakar Bhavan, M.K. Road, Mumbai – 400020 .............. Appellant M/s KPMG Assurance and Consulting Services LLP, 8 th Floor, Tower B, DLF Building No. 10, Gurgaon - 122002, Haryana [PAN: AAAFK1415H] Vs .............. Respondent CO No. 127/MUM/2023 (Arising out of ITA No. 2275/Mum/2023) (Assessment Year: 2015-16) M/s KPMG Assurance and Consulting Services LLP, 2 nd Floor, Block T2 (B Wing), Lodha Excelus, Apollo Mills Compound, N.M. Joshi Marg, Mahalaxmi, Mumbai - 400011 [PAN: AAAFK1415H] ............. Appellant Deputy Commissioner of Income Tax, Circle 16(2), Mumbai, Room No. 479, 4 th Floor, Aayakar Bhavan, M.K. Road, Churchgate, Mumbai – 400020 Vs ............. Respondent ITA No. 2414/MUM/2023 (Assessment Year: 2015-16) M/s KPMG Assurance and Consulting Services LLP, 2 nd Floor, Block T2 (B Wing), Lodha Excelus, Apollo Mills Compound, N.M. Joshi Marg, Mahalaxmi, Mumbai - 400011 [PAN: AAAFK1415H] ............. Appellant Assistant Commissioner of Income Tax, Circle 16(2), Mumbai, Room No. 625, 6 th Floor, Aayakar Bhavan, M.K. Road, Churchgate, Mumbai – 400020 Vs ............. Respondent ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 5 ITA No. 2276/MUM/2023 (Assessment Year: 2016-17) Deputy Commissioner of Income Tax, Circle 16(2), Mumbai, Room No. 625, 6 th Floor, Aayakar Bhavan, M.K. Road, Mumbai – 400020 .............. Appellant M/s KPMG Assurance and Consulting Services LLP, 8 th Floor, Tower B, DLF Building No. 10, Gurgaon - 122002, Haryana [PAN: AAAFK1415H] Vs .............. Respondent CO No. 128/MUM/2023 (Arising out of ITA No. 2276/Mum/2023) (Assessment Year: 2016-17) M/s KPMG Assurance and Consulting Services LLP, 2 nd Floor, Block T2 (B Wing), Lodha Excelus, Apollo Mills Compound, N.M. Joshi Marg, Mahalaxmi, Mumbai - 400011 [PAN: AAAFK1415H] ............. Appellant Deputy Commissioner of Income Tax, Circle 16(2), Mumbai, Room No. 479, 4 th Floor, Aayakar Bhavan, M.K. Road, Churchgate, Mumbai – 400020 Vs ............. Respondent ITA No. 2413/MUM/2023 (Assessment Year: 2016-17) M/s KPMG Assurance and Consulting Services LLP, 2 nd Floor, Block T2 (B Wing), Lodha Excelus, Apollo Mills Compound, N.M. Joshi Marg, Mahalaxmi, Mumbai - 400011 [PAN: AAAFK1415H] ............. Appellant Assistant Commissioner of Income Tax, Circle 16(2), Mumbai, Room No. 625, 6 th Floor, Aayakar Bhavan, M.K. Road, Churchgate, Mumbai – 400020 Vs ............. Respondent ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 6 ITA No. 2277/MUM/2023 (Assessment Year: 2017-18) Deputy Commissioner of Income Tax, Circle 16(2), Mumbai, Room No. 625, 6 th Floor, Aayakar Bhavan, M.K. Road, Mumbai – 400020 .............. Appellant M/s KPMG Assurance and Consulting Services LLP, 8 th Floor, Tower B, DLF Building No. 10, Gurgaon - 122002, Haryana [PAN: AAAFK1415H] Vs .............. Respondent CO No. 123/MUM/2023 (Arising out of ITA No. 2277/Mum/2023) (Assessment Year: 2017-18) M/s KPMG Assurance and Consulting Services LLP, 2 nd Floor, Block T2 (B Wing), Lodha Excelus, Apollo Mills Compound, N.M. Joshi Marg, Mahalaxmi, Mumbai - 400011 [PAN: AAAFK1415H] ............. Appellant Deputy Commissioner of Income Tax, Circle 16(2), Mumbai, Room No. 479, 4 th Floor, Aayakar Bhavan, M.K. Road, Churchgate, Mumbai – 400020 Vs ............. Respondent ITA No. 2412/MUM/2023 (Assessment Year: 2017-18) M/s KPMG Assurance and Consulting Services LLP, 2 nd Floor, Block T2 (B Wing), Lodha Excelus, Apollo Mills Compound, N.M. Joshi Marg, Mahalaxmi, Mumbai - 400011 [PAN: AAAFK1415H] ............. Appellant Assistant Commissioner of Income Tax, Circle 16(2), Mumbai, Room No. 625, 6 th Floor, Aayakar Bhavan, M.K. Road, Churchgate, Mumbai – 400020 Vs ............. Respondent Appearance For the Appellant/Assessee : Shri Ajit Jain Shri Shabbir Motorwala Shri Siddhesh Chaugule ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 7 For the Respondent/Department : Shri C.S. Amamtja Shri Shailesh Nayampalli Shri Ajay Kumar Sharma Date Conclusion of hearing Pronouncement of order : : 14.05.2024 12.08.2024 O R D E R Per Bench: 1. This is a batch of cross-appeals and cross objections pertaining to Assessment Years 2012-2013 to 2017-2018. The facts, common to all the cross appeals and cross objections are as under. 1.1. The Assessee is engaged in providing business advisory, taxation and audit related services. In the return of income filed for the relevant assessment year(s), the Assessee claimed deduction for professional fee expenses debited to the Profit & Loss Account. The case of the Assessee was selected for regular scrutiny. During the assessment proceedings the Assessing Officer noted that the Assessee has failed to deduct tax on professional fee paid to various non-residents. According to the Assessing Officer, the professional fee paid to various non-residents was liable to tax in India in the hands of such non-residents in terms of the provisions of the Act read with the applicable articles of the corresponding Double Taxation Avoidance Agreement (for short ‘DTAA’) between India and the country of tax resident of the search non-resident(s) as (a) Fee for Technical/Included Services (for short ‘FTS’), or (b) as Other Income (in absence of Article on FTS). Thus, the Assessee was under obligation to withhold tax from professional fee paid to such non-residents in terms of Section 195 of the Act. Since the Assessee had failed to deduct ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 8 tax at source from the professional fee paid to non-residents, the Assessing Officer disallowed the deduction for the same by invoking provisions contained in Section 40(a)(i) of the Act. Further, the Assessing Officer also disallowed deduction claimed by the Assessee for remittance made by the Assessee to KPMG International Co-operative, Switzerland holding that the deduction as claimed by the Assessee could not be allowed in view of Section 40(a)(i) of the Act since the Assessee has failed to deduct tax at source from the aforesaid remittances. Additionally, 25% of advertisement and promotion expenses were also disallowed by the Assessing Officer on ad-hoc basis on the ground that such expenses incurred by the Assessee promoted the brand held by the parent entity which benefitted the parent entity (and not the Assessee). 1.2. In appeal preferred by the Assessee, the CIT(A) granted substantial relief to the Assessee. The CIT(A) deleted substantial amount of disallowance made by the Assessing Officer under Section 40(a)(i) of the Act in respect of professional fee and allowed deduction as claimed by the Assessee holding that the professional fee paid to most of the non-residents was not liable to tax in India as FTS or Other Income. The CIT(A) accepted the contention of the Assessee that the professional fee was in the nature of Business Profits or income from Independent Personal Services (IPS); and in absence of a Permanent Establishment (PE) or fixed base in India, respectively, the same was not liable to tax in India. The Assessee was, therefore, not under obligation to deduct tax from the same and no disallowance under Section 40(a)(i) of the Act was warranted. The CIT(A) also allowed Assessee’s claim for deduction for ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 9 remittance made to KPMG International Co-operative, Switzerland by following, inter alia, the decision of the Mumbai Bench of the Tribunal, dated 07/04/2017, in the case of Assessee for the Assessment Year 2001-2002 [ITA No. 2493/Mum/2012]. The ad-hoc disallowance of advertisement and promotion expenses was also deleted by the CIT(A) by, inter alia, placing reliance on the order passed by the first appellate authority in appeals preferred by the Assessee for the Assessment Years 2009-2010 & 2010-11, and 2011-12. 1.3. Now, both, the Revenue and the Assessee are before us in appeal/cross-objection. 1.4. We note that there is a delay of around 55 days in filing the Cross Objections. We have considered the rival submission on the application seeking condonation of aforesaid delay. It was submitted on behalf of the Assessee that filing of cross objections was necessitated on account of the judgment of the Hon’ble Supreme Court in the case of Assessing Officer (International Taxation) Vs. Nestle SA: [2024] 296 Taxman 580 (SC)/[2023] 458 ITR 756 (SC)[19-10-2023] wherein it was held that the benefit of Most Favoured Nation Clause 1 [for short ‘MFN Clause’] would be available only on notification by the Government. As a result, for the purpose of challenging the disallowance made by the Assessing Officer under Section 40(a)(i) of the Act, the Assessee could no longer claim the shelter of MFN Clause for the purpose of importing into the 1 Most Favoured Nation (MFN) clause is contained in various Indian tax treaties with countries that are members of the Organisation for Economic Cooperation and Development (OECD). This clause provides for lower of rate of taxation at source on dividends, interest, royalties or fees for technical services as the case may be, or restriction of scope of royalty/fee for technical services in the tax treaty, similar to concession given to another OECD country subsequently. ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 10 applicable DTAA the ‘Make Available Clause’ and contend that the professional fee paid/payable to the non-residents were not liable to tax in India as FTS since no technical knowledge, skill, experience, know-how etc. was made available to the Assessee. Therefore, the Assessee was required to set-up alternative plea of the services rendered by non-residents qualified as IPS and therefore, income from the same was not liable to tax in India. Accordingly, soon after the pronouncement of the aforesaid judgment, the Assessee took steps to file the cross objections. It was submitted that the delay in filling the cross objections was not deliberate and was on account of the aforesaid bonafide reasons. We have considered the explanation offered by the Assessee and find the same to be reasonable. In any case, the grounds raised by the Assessee in the cross objections are in the nature of legal plea not requiring examination of any fresh facts. Accordingly, the delay in filing cross objections for all the assessment years is condoned. 1.5. During the course of hearing it was submitted that appeals/cross objections for the Assessment Year 2013-14 could be taken as lead matters, and that the findings/adjudication on issues raised in the appeals/cross objections for Assessment Year 2013-14 would apply mutatis mutandis to other appeals/cross objections for Assessment year 2012-2013, 2014-2015, 2015-2016, 2016- 2017, and 2017-2018. Accordingly, taking note of the fact that the CIT(A) has dealt with the grounds raised in all the 6 appeals pertaining to the Assessment Year 2012-2013 to 2017-2018, we proceed to take up appeals & cross objection for the Assessment Year 2013-14 as lead matters. Assessment Year 2013-14 2. The appeal/cross-appeal/cross-objection for the AY 2013-14 arise from order, dated 09/05/2023, passed by the National ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 11 Faceless Appeal Centre (NFAC), Delhi, [hereinafter referred to as the ‘CIT(A)’], whereby the Ld. CIT(A) had partly allowed 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 Income Tax Act, 1961 (hereinafter referred to as ‘the Act’). 2.1. The Revenue has raised the following grounds of appeal in ITA No. 2273/Mum/2023: “1. On the facts and in the circumstances of the case and in law, whether the Ld. CIT(A) was justified in deleting the disallowance of Rs.11,21,42,029/- under Section 40(a)(i) being professional fees paid outside India without deduction of tax at source. 2. 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. 3. 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. 4. 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. 5. 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 ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 12 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). 6. 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. 7. 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. 8. 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 ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 13 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.” 3. We have heard the both the sides and perused the material on record including the written submission filed by both the sides (though the same have not been reproduced herein for the sake to brevity and to avoid repetition). We have also taken into consideration the Written Submissions, dated 05/02/2024, chart of issues, paper-book and case laws compilation filed on behalf of the Assessee, as well as the Written Submissions, dated 08/02/2024, and case laws compilation filed on behalf of the Revenue to the extent the same were relied upon during the course of hearing. Ground No. 1 to 4 raised by the Revenue; Cross Objection No. 1 raised by the Assessee; Ground No. 1 & 2 raised by the Assessee 4. Ground No. 1 to 4 raised by the Revenue; Cross Objection No. 1 raised by the Assessee; and Ground No. 1 & 2 raised by the Assessee pertain to disallowance made by the Assessing Officer under Section 40(a)(i) of the Act. 5. The Assessee claimed deduction for the following fee paid/payable to the non-residents aggregating to INR 11,21,42,029/-: Sl.No. Name & Country of Tax Residence Status Amount (INR) Note Ref 1. Houthoff Buruma, Netherlands Company 8,89,560/- 2 2. KPMG AB, Sweden Company 19,19,086/- 2 3. KPMG Abogados S.L., Spain Company 1,93,758/- 2 4. KPMG Advisory N.V., Netherlands Company 16,75,488/- 2 5. KPMG Advisory Services, Nigeria LLP 29,50,726/- 3 6. KPMG ASESORES S.L., Spain Company 33,73,980/- 2 ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 14 7. KPMG Audyt Sp. Zoo, Poland LLP 5,62,275/- 3 8. KPMG Hadibroto, Indonesia Company 2,81,781/- 2 9. KPMG IFRG LTD, United Kingdom Company 8,03,238/- 2 10. KPMG LLP, Singapore Firm 43,02,822/- 2 11. KPMG LLP, United Kingdom Firm 2,66,44,228/- 2 12. KPMG LLP, United States of America Firm 2,78,12,989/- 1 13. KPMG Lower Gulf Limited, UAE Company 10,36,145/- 2 14. KPMG Meijburg & Co Special Services B V, Netherlands Company 1,71,131/- 2 15. KPMG Services Pte.Ltd., Singapore Company 2,09,48,526/- 2 16. KPMG Siddharta Advisory, Indonesia Company 4,11,141/- 2 17. KPMG, Tanzania Firm 4,47,678/- 1 18. KPMG United Kingdom Plc United Kingdom Company 74,17,104/- 2 19. KPMG, Ireland Firm 1,20,808/- 1 20. KPMG, Sri Lanka Firm 30,05,238/- 1 21. Manabat Sanagustin & Co. CPAs Philippines Firm 59,15,576/- 1 22. Mr. Philip Baker Q.C, UK Individual 4,07,375/- 1 23. Rahman Rahman Huq, Bangladesh Firm 1,48,076/- 2 24. Simon Mort Reports Limited, UK Company 7,03,300/- 2 Total 11,21,42,029/- 6. The Assessing Officer denied deduction for the entire amount of INR 11,21,42,029/- holding that the Assessee was under obligation to withhold tax from professional fee paid to non- resident under Section 195 of the Act as the same were chargeable to tax in India in terms of Section 9(1)(vii) of the Act read with either Article 12 or Article 22/23 of the corresponding DTAAs as FTS or Other Income, respectively. Since the Assessee had failed to deduct tax from the same in terms of Section 195 of the Act, the Assessing Officer made disallowance of INR 11,21,42,029/- invoking provisions contained in Section 40(a)(i) of the Act. 7. In appeal before the CIT(A), by placing reliance upon the judgments/decision including those in the case of the Assessee and its member concerns, it was contended on behalf of the Assessee that disallowance under Section 40(a)(i) of the Act was ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 15 not warranted since the Assessee was not under obligation to withhold tax in view of the following: (i) In respect of 6 non-resident parties 2 [at Sl.No. 12, 17, 19, 20, 21, 22 and 23 of Table in paragraph 5 above] it was contended that professional fee paid to the parties was in the nature of income from IPS and in absence of a fixed base/physical presence of the said parties in India, the same was not liable to tax in India in terms of Article 14/15 of the corresponding DTAA. [Refer to Note 1 at 65 of impugned order passed by the CIT(A)] (ii) In respect of 2 non-resident parties 3 [at Sl.No. 5 and 7 of Table in paragraph 5 above] it was contended that professional fee were not liable to tax in India in terms of Section 9(1)(vii)(b) of the Act for the reason the same were utilized outside India and/or for earning income from source outside India. [Refer to Note 3 at 65 of impugned order passed by the CIT(A)] (iii) In respect of balance 16 non-resident parties 4 [at Sl.No. 1 to 4, 6, 8 to 10, 13 to 16, 18 and 23 to 24 of Table in paragraph 10.1 above] it was contended that professional fee paid to some parties was in the nature of Business Profits and in absence of a Permanent Establishment of the said parties in India, the same was not liable to tax in India under Article 7 of the corresponding DTAA. [Refer to Note 2 at 65 of impugned order passed by the CIT(A)] 22 Tax Residents of (1) United Stated America, (2) Tanzania, (3) Ireland, (4) Sri Lanka, (5) Philippines and (6) United Kingdom 3 Tax Resident of (1) Nigeria and (2) Poland 4 Tax Residents of (1) United Kingdom [4 non-residents], (2) Singapore [2 non- residents], (3) Spain [2 non-residents], (4) Sweden, (5) Netherlands [3 non-residents], (6) UAE, (7) Indonesia and (8) Bangladesh ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 16 8. Accepting the above submission of the Assessee, the CIT(A) concluded that disallowance under Section 40(a)(i) of the Act was not warranted except for the professional fee aggregating to INR 8,55,053/- consisting of professional fee of INR 4,07,375/- paid/payable to Mr. Phillip Baker [at Sl. No 22 of Table in paragraph 5 above] and professional fee of INR 4,47,678/- paid/payable to KPMG Tanzania [at Sl.No. 17 of Table in paragraph 5 above]. In relation to the aforesaid two professional fee payments, the CIT(A) gave direction to the Assessing Officer to decide the issue after verifying whether the aforesaid non- resident parties had a fixed base or physical in India since it was contended on behalf of the Assessee that the professional fee paid/payable to the aforesaid 2 non-resident parties was not liable to tax in India as IPS in terms of Article 14/15 of the DTAA between India and country of tax residence of such non- residents in absence of a fixed base/physical presence in India. Thus, out of the aggregate disallowance of INR.11,21,42,029/- made by the Assessing Officer under Section 40(a)(ia) of the Act, the CIT(A) deleted the disallowance of INR 11,12,86,976/- 5 . 9. Now, both, the Assessee as well as the Revenue are in appeal against before the Tribunal against the above order passed by the CIT(A). 9.1. The Revenue is aggrieved by the deletion of disallowance made by the Assessing Officer under Section 40(a)(i) of the Act. While the Assessee has challenged, by way of cross-appeal, the directions issued by the CIT(A) to the Assessing Officer in respect of the professional fee of INR 8,55,053/- consisting of INR 4,47,678/- and INR 4,07,375/- paid/payable to KPMG Tanzania and Mr. Phillip Baker, respectively. 5 INR.9,72,62,585 - INR.4,07,375 + INR.5,68,486 – INR.4,47,678 + INR.1,07,97,957 + INR.35,13,001 – INR.8,55,053 ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 17 9.2. 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 40(a)(i) and Section 195 of the Act do not get triggered in case the payments made to tax residents of Sweden [at Sl. No 2 of Table in paragraph 5 above] and Spain [at Sl. No 3 & 6 of Table in paragraph 5 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 IPS. 10. Before summarizing the rival contention, we deem it appropriate to identify the following facts/issues which are not in dispute: (a) There is no dispute regarding the rendition of services or nature of services except to the extent the contention of the Revenue has been that the services under consideration make available technical skill, knowledge, experience etc. to the Assessee and therefore, satisfy the requirement of ‘Make Available Clause’ contained in the FTS Article of the applicable DTAAs. In this regard, it is admitted position that the Tribunal 6 as well as the Hon’ble Bombay High Court 7 has, after examining identical services provided to the Assessee by the non-resident, rejected the aforesaid contention of the Revenue and held that the services provided by the non-residents to the Assessee do not make available any technical skill, knowledge and experience to the Assessee. Accordingly, payments made by the Assessee to the non-resident are 6 Decision of Mumbai Bench of Tribunal in the case of the Assessee for the Assessment Year 2018-19 [ITA No. 1974/Mum/2023]; for the Assessment Year 2009-10 [ITA No.2843/Mum/2017] & for Assessment Year 2011-12 [ITA No. 2845/Mum/2017] 7 Judgment of Hon’ble Bombay High Court in the case of the Assessee for the Assessment Year 2008-09 [Income Tax Appeal No. 690 of 2017; ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 18 not liable to tax in India as FTS in the hands of such non- residents. Therefore, payments made by the Assessee to tax resident of countries having Make Available Clause in the FTS Article, cannot be treated as FTS. (b) It is not the case of the Revenue that the non-resident parties have a permanent establishment in India in terms of Article 5 of the applicable DTAAs. (c) Similarly, the Revenue has also not set up a case that the non-resident service providers have a fixed base or physical presence in India to satisfy the requirements of Article 14/15 of the applicable DTAA dealing with IPS. 11. The contentions of the Revenue can be summarized as under: (a) The professional fee for services paid/payable to the non-resident parties is liable to tax in India as FTS per the provisions of the Act. (b) The services provided by the non-residents satisfy the requirement of Make Available Clause and therefore, the same are in the nature of FTS liable to tax in India in terms of Article 12/13 of the applicable DTAA in the hands of such non-residents. In view of the judgment of the Hon’ble Supreme Court in the case of Assessing Officer (International Taxation) Vs. Nestle SA: [2023] 458 ITR 756 (SC) the benefit of ‘Make Available Clause’ was not available in respect of DTAAs having MFN Clause in absence of a separate notification having been issued by the Government of India in respect of the applicable DTAA. FTS Clause being specific clause shall prevail over other ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 19 general clauses dealing with Book Profits (Article 7) or Independent Personal Services (Article 14/15). (c) Article 14/15 of the DTAAs provides for beneficial treatment only in respect of specified professional services of personal and independent nature provided by individuals. The use of term ‘his’, ‘him’ and ‘his’ clearly shows that the said article was intended to cover only individuals. The provisions contained in Article 14/15 of the applicable DTAAs cannot be interpreted in a manner so as to extend the benefit of the said article to non-residents (other than individuals). The use of expression ‘resident of contracting state’ must be understood as making reference of a resident individual only. The services provided by the non- residents (other than individuals) must, therefore, be considered to be taxable in India in terms of Article 14/15 of the applicable DTAA. (d) Without prejudice (a) & (b) above, the services provided by the non-residents (other than individuals) would fall within the ambit of residuary article dealing with ‘Other Income’ which grants the source state (i.e. India in the present case) to tax such income as per the domestic laws. (e) In the DTAAs where there is no FTS Clause, it cannot be said that there is a conflict between the provisions contained in the domestic tax law and the provisions contained in the DTAA, therefore, the provisions ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 20 contained in the Act must apply/prevail. Accordingly, the payment of professional fee for services made to tax residents of countries not having FTS Clause in the applicable DTAAs, would be liable to tax in India as FTS in terms of Section 9(1)(vii) of the Act. 12. Per Contra, it was contended on behalf of the Assessee that: (a) As per Article 7 of the applicable DTAAs, in absence of Permanent Establishment in India, the payment of professional fee by the Assessee to non-residents could not be brought to tax as ‘Business Profits’. (b) The services provided by the non-residents to the Assessee were did not make available any skill, knowledge, information etc. to the Assessee. The requirement of Make Available Clause not being satisfied, such payments could not be taxed in India as FTS. (c) Where DTAAs do not have FTS Clause, the professional fee payments would fall within the ambit of Article 7 of DTAAs and not residuary article on ‘Other Income’. (d) The services provided by non-residents to the Assessee were not liable to tax in India in terms of Article 14/15 of the applicable DTAA in absence of a fixed base and/or physical presence of such non-resident in India. The expression ‘resident of contracting state’ is wide enough to include in its ambit all resident persons whether individual or company. (e) Where the payments have been made by the Assessee to non-residents for the purpose of earning income from a source outside India, such payments were not liable to tax ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 21 in India in terms of Section 9(1)(vii)(b) of the Act. 13. Before dealing with the specific contentions raised by both the sides, we deem it appropriate to refer to the relevant legal background common to all the contentions. 13.1. Section 40(a)(i) of the Act, inter alia, provides that while computing the income chargeable under the head ‘Profits and Gains of Business or Profession’, deduction shall not be allowed for royalty, fees for technical services or other sum chargeable under the Act paid/payable outside India in case of a default committed by the Assessee in withholding tax from the same. 13.2. Section 195 of the Act, inter alia, casts obligation on person responsible for making payment to a non-resident to withhold tax from amounts paid/payable to non-resident payees in case the same is chargeable to tax in India. 13.3. As per Section 4 of the Act, income tax is chargeable in respect of total income of the previous year of every person (including a non-resident). For a non-resident the total income of a previous year is to be determined as per the scope of total income specified in Section 5(2) of the Act read with deeming provisions contained in Section 9 of the Act. 13.4. As per Section 9(1)(vii) of the Act income by way of fee for technical services payable by person resident in India shall be deemed to accrue or arise in India except where such fee is payable in respect of service utilized, inter alia, for the purpose of earning income from any source outside India. Explanation 2 to Section 9(1)(vii) of the Act defines the expression ‘Fees for Technical Services’ to mean consideration for rendering any managerial, technical or consultancy services (excluding ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 22 consideration chargeable to tax under the head ‘Salaries’). 13.5. Section 90(1) of the Act permits the Government of India to enter into agreement with the government of foreign country, inter alia, for avoidance of double taxation of income [referred to as ‘Double Taxation Avoidance Agreement’ or ‘DTAA’]. Section 90(2) of the Act provides that the provisions of the DTAA shall apply to the extent the same are more beneficial to the assessee. India has entered into a number of DTAAs which contain provisions which are more beneficial to assessee as the same provide for restricted scope of income or lower rate of taxation when compared to the provisions of the Act. For example, in case of Fee for Technical/Included Services (for short ‘FTS’), some of the DTAAs contain FTS Clause which provides that the FTS would be liable to tax in case the services provided by the non-resident make available technical knowledge, skill, experience, know-how etc. [generally referred to as ‘Make Available Clause’]. In such cases, an assessee can opt to be governed by the more beneficial provisions contained in the DTAAs. In case the FTS do not meet the requirement of Make Available Clause, the same cannot be brought to tax in India as per the provisions of the aforesaid DTAAs. 13.6. In order to drive home their respective points, the Assessee and the Revenue had placed reliance on various clauses of the applicable DTAAs dealing with Business Profits, FTS, IPS and Other Income. To bring out the interplay between different clauses and to address some the broad contentions raised by both the sides, we deem it appropriate to consider the model clauses contained in OECD Model Tax Convention 8 [for short ‘OECD MTC’] and United Nation Model Tax Convention [for short 8 Organisation for Economic Co-operation and Development (OECD) Model Convention with respect to Taxes on Income and on Capital Model ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 23 ‘UN MTC’] and related commentaries (even though the DTAAs may have clauses which depart from model tax conventions). 13.7. Article 7 of OECD Model Tax Convention, 1998 [for Short ‘MTC98’] deals with allocation of taxing rights between source state and resident state with respect of Business Profits. Article 7(1) of MTC98 reads as under: “1. The profits of an enterprise of a Contracting State shall be taxable only in that State unless the enterprise carries on business in the other Contracting State through a permanent establishment situated therein. If the enterprise carries on business as aforesaid, the profits of the enterprise may be taxed in the other State but only so much of them as is attributable to that permanent establishment.” 13.8. The term ‘profits’ was not been defined in MTC98 and therefore, had to be given a broad meaning to include all income derived in carrying on an enterprise in a contracting state so that the same could correspond to the use of the term ‘profits’ as made in the domestic tax laws of OECD member countries. Since the term ‘profits’ includes all income derived by an enterprise, it was felt desirable to lay down a rule of interpretation in order to clarify the field of application of Article 7 in relation to the other Articles dealing with a specific category of income. 9 Therefore, Article 7(7) was incorporated which provided as under: “7. Where profits include items of income which are dealt with separately in other Articles of this Convention, then the provisions of those Articles shall not be affected by the provisions of this Article.” 13.9. Article 7(7) of the MTC98, gave first preference to the special articles and provided that in case the ‘Profits’ included income dealt with separately under such special articles, the provisions 9 Refer to OECD Model Commentary 1998 – Para 32 to 37 ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 24 of those special articles shall not be affected by the provisions of Article 7. Thus, Article 7(7) of MTC98 did not exclude any income from the scope of ‘Profits’ but merely provided that in case of an overlap between the scope of Article 7 and special articles, the provisions contained such special articles shall prevail over the provisions contained in Article 7. Thus, in our view, all ‘profits’ of an enterprise including the profits from the FTS and IPS fall within the ambit of Article 7. However, by virtue of Article 7(7), the provisions contained is special articles dealing with FTS or IPS shall be given effect to in priority to provisions contained in Article 7 dealing with ‘Profits’ generally. The corollary being, that in absence of special clauses dealing with FTS and IPS, the same shall continue to be governed by the general provisions contained in Article 7 dealing with profits generally. In the case of Deputy Commissioner of Income Tax, LTU - II, Chennai vs. Ford India Private Ltd. [common order dated 31/01/2017, passed in ITA No. 673 & 840 /CHNY/2015, and 748 & 749/CHNY/2015], the Chennai Bench of the Tribunal had, in the context of India-UK DTAA, concluded that profits earned by rendering FTS are only a species of business profits. The relevant extract of the aforesaid decision of the Tribunal reads as under: “9. To understand the scope of these treaty provisions, which are broadly in pari materia with the provisions of Article 21 of UN Model Convention, we find guidance from the OECD Model Convention Commentary which states that "The Article covers income of a class not expressly dealt with in the preceding articles (e.g. an alimony or a lottery income) as well as income from sources not expressly referred to therein (e.g. a rent paid by a resident of a Contracting State for the use of immovable property situated in a third State). The Article covers income arising in third States as well as income from a Contracting State". In other words, an income is of such a nature as, on satisfaction of conditions specified in the related provision, could be taxed under any of these specific treaty provisions, cannot be covered by this ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 25 residuary clause. Take for example, income earned by a resident of a contracting state by carrying on business in the other contracting state. When, for example, article 5 provides that the income of resident of a contracting state, from carrying on business in the other contracting state, cannot be taxed in the source state unless such a resident has a permanent establishment in the other contracting state, i.e. source state, it cannot be open to the tax administration of source state to contend that even if it cannot be taxed as business income, it can be taxed as 'other income' nevertheless. It is important to bear in mind the import of expression 'not expressly dealt with in the foregoing articles'. Similarly, if independent personal services cannot be taxed in the source state as minimum threshold limit of fixed base is not satisfied, such a treaty concession cannot be nullified by invoking article 21. When a particular nature of income is dealt with in the treaty provisions, and its taxability fails because of the conditions precedent to such taxability and as specified in that provision are not satisfied, that is the end of the road for taxability in the source state. It is also important to bear in mind the fact that article 21 states that it applies to the "items of income of a resident of a Contracting State, wherever arising, which are not expressly dealt with in the foregoing articles of this Agreement". Therefore, it is not the fact of non taxability under the operative articles (i.e. article 6 to 21) which leads to taxability under residuary clause in article 22, but the fact of income of that nature being covered by those articles which can lead to taxability under article 22. There could be many such items of income which are not covered by these specific treaty provisions, such as alimony, lottery income, gambling income, rent paid by resident of a contracting state for the use of an immoveable property in a third state, and damages (other than for loss of income covered by specific provisions of the treaty) etc. This is how UN Model Convention Commentary, which is referred to earlier in this order, also explains the scope of this article. In our humble understanding, therefore, article 22 does not apply to items of income which can be taxed in any situations under article 6-21 whether or not such an income is actually taxable under these articles. The question then arises whether income earned by the recipients in question, i.e. Fuji Asia Co Ltd-Thailand ad Auto Alliance Co Ltd-Thailand, can be said to in the nature of an income which is not expressly dealt with by other operative articles (i.e. article 6 to 21) of the treaty. The income earned by ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 26 these entities was in the regular course of their business, and there is no dispute about this fundamental aspect. There cannot also be dispute about the fact that in the event of these entities satisfying the conditions regarding existence of permanent establishment in India, the amounts so received by these entities would have been taxable as business income. The income in question is thus clearly dealt with by article 7 read with article 5 and the reason why it has not been taxed is that the entities concerned did not have permanent establishments in India. Clearly, therefore, the income in question is covered by the provisions of the Indo Thai tax treaty but is not taxable on the facts of the case before us as the recipients did not have a PE in India. Once we come to the conclusion that the income embedded in the payments in question is of such a nature which is covered by articles 6 to 21 of the treaty but is not taxable in India as the condition precedent for the taxability under the related article is not satisfied, it is an inevitable corollary of this finding that article 22 cannot be pressed into service in respect of the said income. As we hold so, we are alive to the fact that there is no specific taxability provision, under India Thailand tax treaty with respect to taxability of fees for technical services. Profits earned by rendering fees for technical services are only a species of business profits just as the profits any other economic activity. However, without the character of such receipts in the nature of business receipts being altered, the fee for technical services is dealt with separately in some treaties for the reason because, under those treaties the related contracting states proceed on the basis that even in the absence of the permanent establishment or fixed base requirements, the receipts of this nature can be taxed, on gross basis, at the agreed tax rate, and, to that extent, such receipts does not fall in line with the scheme of taxation of business profits under art. 7 and professional income under 14. It is interesting to note that the moment the threshold limits for permanent establishment or fixed base, as the case may be, is satisfied, the taxability shifts on net basis as business profits or professional (independent personal services) income. The business receipts or professional receipts thus cannot be seen in isolation with the fees for technical services. Its only the fact of, and mode of, taxation in the absence of PE or fixed base, which gets affected as a result of the fees for technical services. When there is an FTS clause, the FTS gets taxed even in the absence of the PE or ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 27 the fixed base, but the character of FTS receipt is the same, i.e. business income or professional (independent personal) income, in the hands of the same. When there is no FTS clause, this sub categorization of income becomes irrelevant, because FTS or any other business receipt, the income embedded in such receipts gets taxed only if there is a permanent establishment or fixed base, as the case may be. The scope of business profit and independent personal service completely covers the fees for technical services as well. With FTS article or without FTS article, the income by way of fees of technical services continues to be dealt with the provisions of articles relating to business profits, independent personal services, and additionally, in the event of existence of an FTS article, with the article relating to the fees for technical services. 10. 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 jurisdictional 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 jurisdiction, 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 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. ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 28 1. Ground no. 2 is thus dismissed.” (Emphasis Supplied) 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 ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 29 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. 2. 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 ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 30 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. 2. 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 ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 31 individuals only or whether it is also applicable to legal persons. Another issue is to what extent it applies to partnerships. 14. 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. 15. 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. 16. 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. 17. 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 ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 32 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. 19. 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. 20. 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: “1. Paragraph 1(a) and paragraph 2 of Article 14 of the United Nations Model Tax Convention reproduce the essential provisions of Article 14 of the 1997 version of the OECD Model Tax Convention. The whole of Article 14 and the Commentary thereon were deleted from the OECD Model Tax Convention on 29 April 2000. Paragraph 1(b) allows the country of source to tax income from independent personal services in one additional situation not covered by paragraph 1 of Article 14 of the 1997 OECD Model Tax Convention: while the former OECD Model Tax Convention allowed the source country to tax income from independent personal services only if the income was attributable to a fixed base of the taxpayer, the United Nations Model Tax Convention also allows taxation at ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 33 source if the taxpayer is present in that country for more than 183 days in any twelve-month period commencing or ending in the fiscal year concerned. 2-8 xx xx 9. The former Group of experts discussed the relationship between Article 14 and paragraph 3(b) of Article 5. It was generally agreed that remuneration paid directly to an individual for the performance of activities in an independent capacity was subject to the provisions of Article 14. Payments to an enterprise in respect of the furnishing by that enterprise of the activities of employees or other personnel are subject to Articles 5 and 7. 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. 10. 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 ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 34 concerned. 3. 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. ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 35 Despite the aforesaid difference, there was consensus to the extent that IPS provided by an enterprise did not fall within the ambit of residuary clause dealing with ‘Other Income’. 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 ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 36 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: “1. A treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose.” 13.20. It would be pertinent to note that in the DTAAs’ Article 3 containing ‘Definition’ starts with the expression ‘unless the ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 37 context otherwise requires’, whereas Article 4 giving definition of expression ‘resident of contracting state’ does not provide for such scope for interpretation. 13.21. Further, the issue that arises for consideration is whether the scope/ambit of Article 14/15 dealing with income from IPS should be determined by interpreting the meaning of expression ‘resident of contracting state’ in view of the term ‘him’, ‘his’ etc. used in the conditions specified in Article 14/15, or whether the scope/ambit of Article 14/15 dealing with income from IPS should be determined by reading the conditions for fixed base/physical presence specified in Article 14/15 in harmony with the expression ‘resident of contracting state’ used in Article 14/15. In our considered view, the latter approach should be adopted to determine the scope/ambit of Article 14/15 of the applicable DTAA. 13.22. Having said as above, we find that from the perspective of the Revenue, whether the payments to non-residents fall within the ambit of Article 14/15 dealing with income from IPS or Article 7 dealing with Business Profits, would not make any difference. In either case the provisions of Article 22 on Other Income would not get triggered. Further, since the Revenue has not set up a case that the non-resident payee had a Permanent Establishment or Fixed Base/physical presence in India, the payments to non- residents, whether covered by Article 7 and/or 14/15 of the applicable DTAA, would not be liable to tax in India. We have already concluded that even in case of DTAAs without FTS Article, there would be no change in the above position as the payments to non-residents would continue to fall within the ambit of Article 7 or Article 14/15, as the case may be, and shall not be liable to tax in India for identical reasons. We have also concluded that in case the countries having FTS Article with ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 38 Make Available Clause, in the case of the Assessee for the preceding years, it has been held that the payments for services of similar nature were not liable to tax in India under Article 12 of the applicable DTAA as FTS as the same did not make available any knowledge, skill, experience etc. to the Assessee. In all the aforesaid scenarios, the professional fee paid/payable to non-residents would not be liable to tax in India. As a result the tax withholding requirements contained in Section 195 of the Act would not apply and therefore, provisions of Section 40(a)(i) would not be attracted. 13.23. Thus, what remains to be examined is where the FTS Article of a DTAA, being special Articles having priority over Article 7 of the DTAA by virtue of Article 7(7) or corresponding article of the applicable DTAA, defines the expression ‘Fee for Technical Services’ in a wide manner to include services which do not make available any skill, knowledge, experience etc. In the aforesaid scenario, by virtue of Article 7(7) or the corresponding article, the provisions contained in Article 12 shall apply and the amounts payable to non-resident would become liable to tax in India on gross basis unless such payments are excluded from the scope of Article 12 (by way of operation of Article 14 of the applicable DTAA or otherwise). 14. 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. 15. 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 countries 10 we find that the scope of IPS Article 10 Please refer to Table in Paragraph 5 above for the details ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 39 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) Indonesia 11 [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 Lanka 12 [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 11 Applicable India-Indonesia DTAA [Repealed by Notificaiton No. S.O. 1144(E) [NO. 17/2016 (F.NO. 503/4/2005-FTD-II], DATED 16-3-2016] 12 Applicable India-Sri Lanka DTAA [Repealed by Notificaiton No.23/2014 [F.NO.503/8/2005-FTD-II]/SO 956(E), DATED 28-3-2014] ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 40 countries should be deleted. 16. 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. ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 41 17. 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. ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 42 107. 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 ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 43 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 ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 44 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. 18. 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 ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 45 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 ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 46 provisions of Section 40(a)(i) of the Act cannot be sustained. 19. 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 DTAA 13 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 13 Applicable India-Tanzania DTAA entered into force from 12/12/2011 and came into effect from 01/04/2012. [Notification No. 8/2012-FT&TR-II[F.No.503/02/2005-FTD- II]/S.O.No.303(E), dated 16/02/2012] ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 47 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. 20. 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 ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 48 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. 21. 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 ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 49 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 ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 50 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. Since the remittances were made without withholding tax from the same, the Assessing Officer made disallowance 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: “06. With respect to the remittance made to KPMG International cooperative, Switzerland without deduction of tax at source:- a Assessee has remitted INR 434,019,511 to KPMG International cooperative, Switzerland without deduction of tax at source. It was stated that INR 424,745,561/– is a membership contribution and INR 9,273,950/– is reimbursement of expenses. It was further stated that KPMG International cooperative is a mutual Association of which the assessee is a member therefore, contribution paid to it are not subject to tax. Further the recipient is a resident of Switzerland and the contribution constitutes the business income of the recipient which is not taxable in India under article 7 in absence of any permanent establishment under article 5 of the Double Taxation Avoidance Agreement. ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 51 b The learned AO considered the membership agreement dated 1/1/2007 and thereafter he held that the payment made by the assessee is primarily for the use of name as the assessee derives substantial benefits by being part of the KPMG group and using that name. Therefore, the payment is towards acquiring the right to use the name of KPMG which is certainly in the nature of royalty under article 12 of the agreement. 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. c The learned CIT – A noted that the issue is squarely covered in favour of the assessee by the decision of the coordinate bench in assessee’s own case for assessment year 2001 – 02 vide order dated 7 April 2017 and further the orders of the learned CIT – A for subsequent years following that order of ITAT. It covered the issue. He referred to the decision of the coordinate bench in assessee’s own case for assessment year 2001 – 02 in para number 5.15 and 5.16 wherein it has been held that the KPMG and the assessee is having a relationship of mutual Association and its member respectively and no element of income was embedded in the remittances received by the foreign entity. 07. 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 ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 52 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 ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 53 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 ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 54 justified. The relevant extract of the aforesaid judgment of the Hon’ble Delhi High Court reads as under: “6. Regarding Question No.2, during the course of proceedings in the relevant Assessment Year 2003-04, the AO disallowed 10% from the expenditure on brand enhancement on the ground that it was allocable to the overseas owner/collaborator. The AO reasoned that any enhancement in the brand presence of the assessee invariably had a fall-out vis-a-vis brand value of the overseas IPR proprietor. The AO also recorded the relevant facts that not all brands which belong to the overseas owner were available in the Indian market and in the eventuality of the brand proprietor deciding to wind-up operations, its reputation would still remain intact. The CIT(A), however disagreed with this reasoning. The ITAT confirmed the order but with little or seconded or no reasoning. 7. 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) ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 55 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. ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 56 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/-. 25. 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* ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 57 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 Siddhartha 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 ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 58 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. 28. 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 countries 14 , 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 Lanka 15 [applicable to non-resident party at Sl.No.11]; (e) Indonesia 16 [applicable to non-resident parties at Sl.No.12 & 31]; 14 Please refer to Table in paragraph 26 for details 15 Applicable India-Sri Lanka DTAA [Repealed by Notification No.23/2014 [F.NO.503/8/2005-FTD-II]/SO 956(E), DATED 28-3-2014] 16 Applicable India-Indonesia DTAA [Repealed by Notification No. S.O. 1144(E) [NO. 17/2016 (F.NO. 503/4/2005-FTD-II], DATED 16-3-2016] ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 59 (f) UAR [applicable to non-resident party at Sl.No.13]; (g) Mauritius [applicable to non-resident parties at Sl.No.15, 20, & 25], (h) Malta 17 [applicable to non-resident party at Sl.No.22] (i) Thailand 18 [applicable to non-resident party at Sl.No.23] (j) UAE [applicable to non-resident party at Sl.No.26] (k) Ireland [applicable to non-resident party at Sl.No.27], (l) Italy [applicable to non-resident party at Sl.No.28], (m) Philippines [applicable to non-resident party at Sl.No.30], (n) Bangladesh [applicable to non-resident party at Sl.No.32], (o) Israel [applicable to non-resident parties at Sl.No.39] 28.2. 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. 29. Singapore 29.1. The professional fee paid/payable to tax residents of Singapore 17 Applicable India-Malta DTAA [Repealed by Notification No.34/2014 [F. NO. 504/06/2003-FTD-I], DATED 5-8-2014] 18 Applicable India-Thailand DTAA [Repealed by Notification No.88/2015 [F.NO.503/5/2005-FTD-II] / SO 3244(E), DATED 1-12-2015 ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 60 are listed at Sl. No. 18, & 24 of Table in paragraph 26 above. 29.2. In view of paragraph 16 to 16.2 above, we hold that 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 shall 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. 30. United Stated of America (USA) 30.1. The professional fee paid/payable to tax residents of USA, is listed at Sl. No. 2, 29, 34, 35, 36 & 40 of Table in paragraph 26 above. 30.2. In paragraph 18 to 18.4 above, we have concluded that in absence of fixed base/physical presence in India the income from IPS would not be liable to tax in India in terms of Article 15 of India-USA DTAA in the hands a firm of individuals of tax resident of USA. Similarly, in case of company, being tax resident of USA, having income from IPS not covered by Article 15 and therefore, falling within the ambit of Article 7 of India-USA DTAA, the income from IPS shall not be liable to tax in India in terms of Article 7(1) of the India-USA DTAA in absence of a PE in India. In the present case the Revenue has not set up a case that the tax residents of USA has a PE or fixed base/physical presence in ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 61 India, and therefore, the professional fee paid/payable to tax residents under consideration would not be liable to tax in India either under Article 15 or under Article 7 of India-USA DTAA. Accordingly, we do not find any infirmity in 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 payments made to tax resident USA reflected at Sl.No. 2, 29, 34, 35, 36 & 40 of Table in paragraph 26 above. 31. United Kingdom (UK) 31.1. The professional fee paid/payable to a company, being tax residents of UK, are listed at Sl. No. 14, 19 & 37 of Table in paragraph 26 above. 31.2. In paragraph 17 to 17.7 above, we have concluded that in case of income derived by individual from IPS would be governed by Article 15 of India-UK DTAA whereas income derived by persons (other than those covered by Article 15) shall be governed by Article 5 read with Article 7 of the India-UK DTAA. As per Article 7(1), 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 in case of existence of fixed base or physical presence in India during the relevant previous year. We have noted in paragraph 10 above that the Revenue has not set up a case to show that the tax-resident of UK had a PE in India in terms of Article 5 or a fixed base or physical presence in India in terms of Article 15 of India-UK DTAA 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. Therefore, we concur with the conclusion drawn by the CIT(A) that the Assessee was not required to withhold tax from ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 62 the payments made to tax residents of UK reflected at Sl.No. 14, 19 & 37 of Table in paragraph 26 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. 32. Saudi Arabia 32.1. The professional fee paid/payable to tax residents of Saudi Arabia are listed at Sl. No. 8 of Table in paragraph 26 above. 32.2. On perusal of Article 14 of the India–Saudi Arabia DTAA it becomes clear that the benefit of the said article is available to an individual. Thus, the income from IPS derived by an enterprise carried on by a firm of individual in the source state shall be governed by the provisions contained in Article 5 read with Article 7 of the India-Saudi Arabia DTAA. We note that there is no FTS Clause in the India-Saudi Arabia DTAA. Thus, the provisions of Article 7(7) of the India-Saudi Arabia DTAA shall not be attracted and the professional services provided by 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. As a result, we concur with the conclusion reached by the CIT(A) that the Assessee was not required to withhold tax from the payments made to tax residents of Saudi Arabia reflected at Sl. No. 8 of Table in paragraph 26 above and therefore, disallowance made by the Assessing Officer in respect of the aforesaid payments under ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 63 Section 40(a)(i) of the Act should be deleted. 33. Canada 33.1. The professional fee paid/payable to tax residents of Canada are listed at Sl. No. 17 of Table in paragraph 26 above. 33.2. On perusal of Article 14 of the India–Canada DTAA it can be seen 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 firm of individual in the source state (i.e India) shall be governed by the provisions contained in Article 14 of the India-Canada DTAA. In the present the Revenue has not contended that the tax resident of Canada has a fixed base or physical presence in India. Therefore, income derived by firm of individual could not have been brought to tax in India in terms of Article 14 of the India- Canada DTAA. Thus, the Assessee was not be required to withhold tax from the professional fee paid/payable to tax residents of Canada reflected at Sl. No. 17 of Table in paragraph 26 above. Accordingly, we concur with the conclusion drawn by the CIT(A) and decline to interfere with the order passed by the CIT(A) deleting the disallowance made under Section 40(a)(i) of the Act in respect of aforesaid professional fee. 34. France 34.1. The professional fee paid/payable to firm of individuals being tax residents of France are listed at Sl. No. 33 of Table in paragraph 26 above. 34.2. 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 ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 64 firm of individual in India shall be governed by the provisions contained in Article 15 of the India-France DTAA. Since the Revenue has failed to set up a case that tax resident of France has a fixed base or physical presence in India in terms of Article 15(1)(a) and 15(1)(b) of the India-France DTAA, respectively, such income would not be liable to tax in India. As a result, the Assessee would not be required to withhold tax from the payments made to tax residents of France reflected at Sl. No. 33 of Table in paragraph 26 above. 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 France by invoking provisions of Section 40(a)(i) of the Act cannot be sustained. 35. Australia 35.1. The professional fee paid/payable to firm of individuals being tax residents of Australia are listed at Sl. No. 38 of Table in paragraph 26 above. 35.2. On perusal of Article 14 of the India–Australia 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 firm of individual in India shall be governed by the provisions contained in Article 14 of the India-Australia DTAA. The Revenue has failed to set up a case that tax resident of Australia has a fixed base or physical presence in India in terms of Article 14(1)(a) and 14(1)(b) of the India-Australia DTAA, respectively, and therefore, such income would not be liable to tax in India. As a result, the Assessee would not be required to withhold tax from the payments made to tax residents of Australia reflected at Sl. No. 38 of Table in paragraph 26 above. Therefore, we concur ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 65 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 France 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 36. As regards the professional fee at Sl. No. 1, 3, 10, 28, and 41 of Table in paragraph 26 above are concerned, we note that the CIT(A) has remitted the issue to the file of Assessing Officer for adjudication after verification. The contention of the Assessee before the Tribunal was that the CIT(A) did 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. At the same time, we note that it has been contended by the Revenue that the Assessee has made factual averments/submission which required verification. We are also of the view that the CIT(A) was correct in observing that the factual averments made by the Assessee such as absence of PE/Fixed Base/ physical presence of non-resident(s) in India during the relevant previous year, and the existence of source of income being outside India; required verification. However, the CIT(A) could not have simply set aside the issue to the file of the Assessing Officer. Therefore, we deem it appropriate to set aside the order passed by the CIT(A) to this extent. The CIT(A) is directed 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. The CIT(A) shall grant a reasonable opportunity of being heard to the Assessee. 37. In view of the above, Ground No. 1 to 4 raised by the Revenue ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 66 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 38. Ground No. 5 raised by the Revenue pertains to disallowance of INR 10,89,14,639/- 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). 38.1. 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 so 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 39. Ground No. 7 raised by the Revenue is directed against the order of CIT(A) deleting the ad-hoc disallowance of INR 20,84,662/- made by the Assessing Officer at the rate of 25% of the aggregate advertising and publicity expenses of INR 83,38,649/- claimed as deduction by the Assessee during the relevant previous year. 39.1. 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. ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 67 Assessment Year 2014-15 40. Next, we will take up appeal/cross-appeal/cross-objection pertaining to Assessment Year 2014-15 arising from order, dated 09/05/2023, passed by the CIT(A) partly allowing the appeal of the Assessee against the Assessment Order, dated 30/12/2016, passed by the Assistant Commissioner of Income Tax -16(2), Mumbai under Section 143(3) of the Act. 40.1. For the Assessment Year 2014-15 the Revenue has raised 7 grounds of appeal in ITA No. 2274/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. 40.2. The Assessee has raised cross objections [CO No.124/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. 40.3. The Assessee has raised the 2 grounds of appeal in ITA No. 2415/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 ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 68 40(a)(i) of the of the Act in respect of aggregate professional fee of INR 39,87,237/-. 41. Both the sides had adopted the submission made in relation to issues raised in appeal for the preceding assessment year. 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 2014-15. 42. For the Assessment Year 2014-15, the Assessee claimed deduction for the following professional fee paid/payable to the non-residents aggregating to INR 91,450,086/- . Sl.No. Name & Country of Tax Residence Status Amount (INR) Note Ref 1 KPMG LLP, UK LLP 2,43,99,801/- 2 2 KPMG Services Pte Ltd(Singapore) Company 2,29,03,186/- 2 3 Manabat Sanagustin & Co. CPAs (Philippines) Firm 70,48,006/- 1 4 KPMG Australia Firm 48,89,515/- 1 5 KPMG LLP, Singapore Firm 48,83,324/- 2 6 KPMG United Kingdom Plc Company 37,76,940/- 2 7 Houth of Buruma(Netherlands) Company 30,32,643/- 2 8 Allen & Overy LLP, UK Company 25,65,403/- 2 9 KMPG Siddharta Advisory (Indonesia) Company 22,40,490/- 2 10 KPMG Meijburg & Co. Special Services B.V. (Netherlands) Company 20,38,949/- 2 11 KPMG Advisory N.V. (Netherlands) Company 18,18,740/- 2 12 Rahman Rahman Hug (Bangladesh) Firm 17,59,947/- 2 13 KPMG Abogados S.L. (Spain) Company 13,25,724/- 2 14 KPMG AB (Sweden) Company 12,12,063/- 2 15 KPMG New Caledonia Firm 11,16,295/- 16 KPMG Tax Services Ltd. (Mauritius) Company 8,42,180/- 2 17 KPMG Advisory AE (Greece) Company 6,87,849/- 2 18 Simon Mort Reports Limited Company 5,98,430/- 2 19 First Advantage LNS Screening Company 5,43,747/- 2 ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 69 Solutions Inc, USA 20 KPMG S.A (France) Company 3,25,660/- 2 21 KPMG Hadibroto(Indonesia) Company 3,07,250/- 2 22 KPMG Sri Lanka Firm 2,76,291/- 1 23 KPMG Tax and Advisory Kazaksthan) Company 1,29,841/- 2 24 KPMG Phoomchai Tax Ltd. (Thailand) Company 1,21,711/- 2 25 KPMG IFRG Ltd (UK) Company 1,15,538/- 2 26 KPMG Tax Advisers CVBA, Belgium Company 63,038/- 2 27 KPMG, Malta Firm 59,174/- 1 28 KPMG Safi Al Mutawa & Partners (Kuwait) Firm 43,062/- 3 29 KPMG Tax, Qatar Company 25,091/- 3 30 Exchange Fluctuation loss in respect of amounts debited in A.Y.2013-14 - 23,00,200 - Total 9,14,50,086/- Ground No. 1 to 4 raised by the Revenue; Cross Objection No. 1 raised by the Assessee; 43. 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. ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 70 44. Article 14/15 on IPS containing the expression ‘resident of contracting state’ 44.1. On perusal of Article 14/15 of DTAA entered by India with the following countries 19 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) Indonesia 20 [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) Thailand 21 [applicable to non-resident party at Sl.No.24] (l) Malta 22 [applicable to non-resident party at Sl.No.27]; 19 Please refer to Table in paragraph 42 for details 20 Applicable India-Indonesia DTAA [Repealed by Notificaiton No. S.O. 1144(E) [NO. 17/2016 (F.NO. 503/4/2005-FTD-II], DATED 16-3-2016] 21 Applicable India-Thailand DTAA [Repealed by Notification No.88/2015 [F.NO.503/5/2005-FTD-II] / SO 3244(E), DATED 1-12-2015 22 Applicable India-Malta DTAA [Repealed by Notificaiton No.34/2014 [F. NO. 504/06/2003-FTD-I], DATED 5-8-2014 ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 71 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. 45. 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. 46. 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 ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 72 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 resident 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. 47. 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 ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 73 would be at liberty to furnish such documents/details at the Assessee may deem fit to support its contentions. 48. 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. 49. 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 ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 74 ‘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. 50. 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 ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 75 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. 51. 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 ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 76 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 ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 77 open. The Assessee shall be granted reasonable opportunity of being heard. 52. 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 India- Qatar 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 ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 78 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. 54. 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. 55. 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 22,65,64,370/- 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 ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 79 (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 so 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 13,99,147/- made by the Assessing Officer at the rate of 25% of the aggregate advertising and publicity expenses of INR 55,96,587/- 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 ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 80 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/-. 59. 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 ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 81 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 1,33,35,312 2 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 ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 82 30 Linkedln Ireland Limited. Company 7,79,383 2 31 Manabat Sanagustin & Co., CPAs, Philippines Firm 13,38,975 1 32 R.G Manabat & Co, Philippines Firm 39,60,549 1 33 Rahman Rahman Huq, Bangladesh Firm 8,37,472 2 34 Simon Mort Reports Limited, UK Company 9,23,375 2 35 SJV & Associates, LLC, USA Company 9,70,444 2 36 T R Upadhya & Co,, Nepal Firm 59,21,289 1 37 Exchange Fluctuation in respect of amounts debited in AY 2014-15 - 2,52,313 - Total 13,18,09,731 Ground No. 1 to 4 raised by the Revenue; Cross Objection No. 1 raised by the Assessee; 61. Ground No. 1 to 4 raised by the Revenue 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. Article 14/15 on IPS containing the expression ‘resident of contracting state’ 62.1. On perusal of Article 14/15 of DTAA entered by India with the ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 83 following countries 23 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) Indonesia 24 [applicable to non-resident parties at Sl.No.11 & 24]; (e) Bangladesh[applicable to non-resident party at Sl.No.33]; (f) Spain [applicable to non-resident party at Sl.No.14 & 25]; (g) Sweden [applicable to non-resident party at Sl.No. 8]; (h) Mauritius [applicable to non-resident party at Sl.No.16]; (i) Thailand 25 [applicable to non-resident party at Sl.No.20] (j) Ireland [applicable to non-resident party at Sl.No.29]; 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 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 23 Please refer to Table in paragraph 60 for details 24 Applicable India-Indonesia DTAA [Repealed by Notificaiton No. S.O. 1144(E) [NO. 17/2016 (F.NO. 503/4/2005-FTD-II], DATED 16-3-2016] 25 Applicable India-Thailand DTAA [Repealed by Notification No.88/2015 [F.NO.503/5/2005-FTD-II] / SO 3244(E), DATED 1-12-2015 ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 84 the professional fee paid/payable to tax residents of aforesaid countries cannot be sustained. 63. 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 ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 85 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. 64. 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. 65. 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 ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 86 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. 66. 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 Assessee 26 . 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. 67. Saudi Arabia 67.1 The professional fee paid/payable to tax residents of Saudi 26 Refer to findings/adjudication in Paragraph 36 as well as in Paragraph 53 in relation to professional fee at Sl. No. 17 of Table at Paragraph 42 ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 87 Arabia, being a firm of individuals, 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.13 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. 68. 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 ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 88 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. 69. 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. 22 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. ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 89 70. Australia 70.1. The professional fee paid/payable to firm of individuals being tax residents of Australia are listed at Sl. No. 28 of Table in paragraph 60 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 the aforesaid countries 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 Ground No. 1 & 2 raised by the Assessee - Remand to Assessing Officer 71. As regards the professional fee aggregating to INR 68,04,160/- [at Sl. No. 1, 30 & 36 of Table at Paragraph 60 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. 72. Foreign Exchange Fluctuation 72.1. We note that the Assessing Officer had disallowed loss in account of foreign exchange fluctuation of INR 2,52,313/- which was deleted by the CIT(A) as being consequential in nature. The ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 90 aforesaid amount is included in amount of INR 13,18,09731/- specified in Ground No. 1 raised by the Revenue. As per the chart furnished by the Assessee that the foreign exchange fluctuation loss pertains to professional fee paid/payable to tax residents of UK, Sweden, Indonesia and Bangladesh. Since we have confirmed the order passed by the CIT(A) in respect of the professional fee paid to the tax residents aforesaid countries. The order passed by CIT(A) deleting the disallowance of the aforesaid loss on account of foreign exchange fluctuation is confirmed. 72.2. 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 73. Ground No. 5 raised by the Revenue pertains to disallowance of INR 22,65,64,370/- 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). 73.1. 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 so 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 74. Ground No. 7 raised by the Revenue is directed against the order ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 91 of CIT(A) deleting the ad-hoc disallowance of INR 13,99,147/- made by the Assessing Officer at the rate of 25% of the aggregate advertising and publicity expenses of INR 55,96,587/- claimed as deduction by the Assessee during the relevant previous year. 74.1. 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 75. 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. 75.1 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. 75.2 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 ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 92 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. 75.3 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/-. 76. 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 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 ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 93 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/- Ground No. 1 to 4 raised by the Revenue; Cross Objection No. 1 raised by the Assessee; 78. 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 ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 94 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. 79. United Kingdom (UK) 85.1 The professional fee paid/payable to a company, being tax residents of UK, are listed at Sl. No. 1 & 12 of Table in paragraph 77 above. 85.2 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. 1 & 12 of Table in paragraph 77 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. 80. 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 countries 27 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], 27 Please refer to Table in paragraph 77 above for details ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 95 (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) Thailand 28 [applicable to non-resident party at Sl.No.15] (g) Indonesia 29 [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. 28 Applicable India-Thailand DTAA [Repealed by Notification No.88/2015 [F.NO.503/5/2005-FTD-II] / SO 3244(E), DATED 1-12-2015 29 Applicable India-Indonesia DTAA [Repealed by Notificaiton No. S.O. 1144(E) [NO. 17/2016 (F.NO. 503/4/2005-FTD-II], DATED 16-3-2016] ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 96 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. 82. 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. 83. 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 ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 97 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 made by the Assessing Officer under Section 40(a)(i) of the Act in respect of professional fee listed at Sl. No. 16 of Table in paragraph 77 above. 84. 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 ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 98 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. 86. 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 34,47,89,133/- 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 ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 99 (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 7,52,310/- made by the Assessing Officer at the rate of 25% of the aggregate advertising and publicity expenses of INR 30,09,241/- 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. We next 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. 89.2 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 ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 100 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. 89.3 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. 89.4 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/-. 90. 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/-. ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 101 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 ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 102 30 KPMG Llp, Usa Firm 11,07,38,026 31 KPMG Ifrg Ltd, United Kingdom Company 66,600 2 32 KPMG Meijburg& Co, Netherlands Company 3,59,158 2 Total 18,05,48,835 Ground No. 1 to 4 raised by the Revenue; Cross Objection No. 1 raised by the Assessee; 92. Ground No. 1 to 4 raised by the Revenue 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. Article 14/15 on IPS containing the expression ‘resident of contracting state’ 93.1. On perusal of Article 14/15 of DTAA entered by India with the following countries 30 we find that the scope of IPS Article contained in the applicable DTAA covers income derived by ‘resident of a contacting state’ from IPS: 30 Please refer to Table in Paragraph 91 for details ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 103 (a) Singapore [[applicable to non-resident party at Sl. No. 1], (b) Sweden [applicable to non-resident party at Sl. No. 4]; (c) Netherlands [applicable to non-resident parties at Sl. No. 7,16,17 & 32], (d) Indonesia 31 [applicable to non-resident party 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], 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, in the present case the Assessee was not under obligation to withhold tax from the same 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. 31 Applicable India-Indonesia DTAA [Repealed by Notificaiton No. S.O. 1144(E) [NO. 17/2016 (F.NO. 503/4/2005-FTD-II], Dated 16-3-2016] ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 104 94. United Stated 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 of 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 ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 105 regard. 96. 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. 97. United Kingdom (UK) 97.2 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. 97.3 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. 98. Thailand 98.1. The professional fee paid/payable to company, being tax ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 106 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 DTAA 32 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. 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 32 Existing India-Thailand DTAA ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 107 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 ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 108 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. 104. In result: (a) all the Appeals preferred by the Revenue are partly allowed; ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 109 (b) all the Cross Objections filed by Assessee are allowed (c) all the Appeals preferred by the Assessee are allowed for statistical purposes. Order pronounced on 12.08.2024 Sd/- Sd/- (Prashant Maharishi) Accountant Member (Rahul Chaudhary) Judicial Member मुंबई Mumbai; िदनांक Dated : 12.08.2024 ITA No.2272-2276/Mum/2023 & CO No.123-128/Mum/2023 ITA No.2410-2415/Mum/2023 AYs 2012-2013 to 2017-2018 110 आदेश की े /Copy of the Order forwarded to : 1. / The Appellant 2. / The Respondent. 3. आयकर आय / The CIT 4. आयकर आय / Pr.CIT 5. िवभ ग य ि ि ि , आयकर य ि करण, म ंबई / DR, ITAT, Mumbai 6. ग फ ई / Guard file. आदेश स र/ BY ORDER, स ि ि //True Copy// उ /सह यक ंज क र /(Dy./Asstt. Registrar) आयकर य ि करण, म ंबई / ITAT, Mumbai