RBS EQUITIES (INDIA) LTD, MUMBAI V. ASST CIT RG 4()2)(1), MUMBAI

ITA 2522/MUM/2017

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 4545 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-03-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 07-04-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S K JHA
• Keywords: Transfer pricing; Opportunity of being heard; International transaction; TDS
• Section: 143(3); 40(a)(ia); 201; 144C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL J BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY , JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO. 2522 / MUM . /2017 ( ASSESSMENT YEAR : 20 12 13 ) RBS EQUITIES INDIA LTD. EMPIRE COMPLEX (SOUTH WING) 414, SENAPATI BAPAT MARG LOWER PAREL, MUMBAI 400 013 PAN AAACH1596D . APPELLANT V/S ASSTT. COMMISSIONER OF INCOME TAX RANGE 4(2)(1), MUMBAI . RESPONDENT ASSESSEE BY : SHRI NIRAJ SETH REVENUE BY : SHRI S.K. JHA DATE OF HEARING 1 4 . 03 .201 9 DATE OF ORDER 20.03.2019 O R D E R PER SAKTIJIT DEY. J.M. A FORESAID APPEAL HA S BEEN FILED BY THE ASSESSEE CHALLENGING THE ORDER DATED 2 5 TH JANUARY 201 6 , PASSED UNDER SECTION 143(3) R/W SECTION 144C OF THE INCOME - TAX ACT, 1961 (FOR SHORT 'THE ACT') FOR THE ASSESSMENT YEAR 2012 13, IN PURSUANCE TO THE DIRECTIONS OF THE DISPUTE RESOLUTION PANEL 2 (DRP), MUMBAI. 2 RBS EQUITIES INDIA LTD. 2 . IN GROUND NO.1, THE ASSESSEE HAS CHALLENGED THE ADDITION MADE OF ` 10,19,34,483, ON ACCOUNT OF DETERMINATION OF ARM'S LE NGTH PRICE OF MARKETING SUPPORT SERVICE AND RESEARCH SUPPORT SERVICE. 3 . BRIEF FACTS ARE, THE ASSESSEE , AN INDIAN COMPANY , IS A WHOLLY OWNED SU BSIDIARY OF RBS ASIA HOLDINGS B V. AS OBSERVED BY THE DEPARTMENTAL AUTHORITIES, THE ASSESSEE IS ENGAGED IN THE BUSI NESS OF STOCK BROKING SERVICES AND C ATEGORY 1 MERCHANT BANKING. FOR THE ASSESSMENT YEAR UNDER DISPUTE, THE ASSESSEE FILED ITS RETURN OF INCOME ON 29 TH NOVEMBER 2012, DECLARING TOTAL INCOME OF ` 223,04,31,250. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSIN G OFFICER NOTICING THAT THE ASSESSEE HAS ENTERED INTO INTER NATIONAL TRANSACTION WITH ITS AE MADE A REFERENCE TO THE TRANSFER PRICING OFFICER FOR DETERMINING THE ARM'S LENGTH PRICE OF INTERNATIONAL TRANSACTION . IN COURSE OF PROCEEDINGS BEFORE HIM, THE TRANS FER PRICING OFFICER NOTICED THAT IN THE RELEVANT PREVIOUS YEAR, THE ASSESSEE HAS PAID AN AMOUNT OF ` 10,19,34,483, TO ITS AE VIZ. ROYAL BANK OF SCOTLAND NV , HONG KONG BRANCHES FOR AVAILING MARKETING AND RESE ARCH SERVICE. AS OBSERVED BY THE TRANSFER PRICING OFFICER, THE ASSESSEE CLAIMED TO HAVE AVA ILED SUCH SERVICES FROM ITS AE TO SUPPORT AND GROW ITS EQUITY BUSINESS NOT ONLY IN INDIA BUT ALSO AT THE GLOBAL LEVEL. IT WAS FURTHER CLAIMED BY THE ASSESSEE THAT THE ASIAN EQUITY BUSINESS OF RBS GROUP IS ORGANIZED ON 3 RBS EQUITIES INDIA LTD. AN INTEGRATED BASIS WITH CERTAIN ACTIVITIES CONCENTRATED IN THE HONG KONG HUB. THE MAIN HUB BASED IN HONG KONG IS A CENTRE OF EXPERTISE AND BROAD KNOWLEDGE AND HOME TO LARGEST TEAM OF RE SEARCH AND MARKETING. FURTHER, IT WAS CLAIMED , THE BUSINESS OF RBS GROUP IS AN INTE GRATED BUSINESS IN THE SENSE THAT SALES AND RESEARCH EFFORTS IN ONE JURISDICTION MAY LEAD TO BROKERAGE REVENUES IN OTHER JURISDICTION DUE TO GLOBAL PRESENCE OF CLIENTS. WHILE EXAMINING THE TRANSFER PRICING STUDY REPORT FURNISHED BY THE ASSESSEE , THE TRANSFER PRICI NG OFFICER FOUND THAT FOR BENCH MARKING THE INTER NATIONAL TRANSACTION WITH THE AE , THE ASSESSEE HAS SELECTED TRANSACTIONAL NET MARGIN METHOD ( TNMM ) AS THE MOST APPROPRIATE METHOD WITH PROFIT LEVEL INDICATOR (PLI ) OF OPERATING PROFIT ON TOTAL OPERATING C OST. BY SELECTING THE AE AS THE TESTED PARTY, THE ASSESSEE HAS PROPOSED SIX COM PANIES AS COMPARABLES FOR BENCH MARKING MARKETING SUPPORT SERVICE TRANSACTION AND FIVE COMPANIES AS COMPARABLE S FOR BENCH MARKING THE RES EARCH SUPPORT SERVICE. HE FOUND THAT AS PER TRANSFER PRICING STUDY REPORT THE AVERAGE MARGIN OF THE COMPARABLES WAS 26.50% AS AGAINST NET COST PLUS MARGIN OF 20% CHARGED BY THE A E. WHEREAS, IN RESPECT OF RESEARCH SUPPORT SERVICE, THE AVERAGE MARGIN OF COMP ARABLES IS 15.21% AS AGAINST THE NCP OF 10% CHARGED BY THE A.E. THUS, THE ASSESSEE CLAIMED THAT THE TRANSACTION WITH THE AE IS AT ARMS LENGTH. AFTER CALLING FOR NECESSARY INFORMATION FROM TIME TO TIME INCLUDING THE 4 RBS EQUITIES INDIA LTD. AGREEMENT WITH THE AE AND VERIFYING THEM THE TRANSFER PRICING OFFICER ULTIMATELY CONCLUDED THAT THE ASSESSEE HAS NOT FURNISHED ADEQUATE EVIDENCE TO SHOW THAT THE MARKETING SUPPORT SERVICE AND RESEARCH SUPPORT SERVICES ARE RELATED TO THE BUSINESS OF THE ASSESSEE AND FURTHER , WHETHER THE AE HAS AC TUALLY RENDERED SUCH SERVICES. THEREFORE, HE CONCLUDED THAT THE ARM'S LENGTH PRICE OF THE TRA NSACTIONS RELATING TO PROVISION OF MARKETING AND RES EARCH SUPPORT SERVICES BY THE AE HAS TO BE TREATED AS NIL. ACCORDINGLY, HE PROPOSED AN ADJUSTMENT OF ` 10,19,34 ,483. THE AFORESAID ADJUSTMENT PROPOSED BY THE TRANSFER PRICING OFFICER WAS ADDED BACK TO THE INCOME OF THE ASSESSEE IN THE DRAFT ASSESSMENT ORDER. 4 . THOUGH, THE ASSESSEE CHALLENGED THE AFORESAID ADDITION BY RAISING OBJECTI ONS BEFORE THE DRP, HOWEVER, LEARN ED DRP SIMPLY RELYING UPON THE ORDER PASSED BY THEM ON IDENTICAL ISSUE IN THE PRECEDING YEARS, UPHELD THE ADJUSTMENT MADE BY THE TRANSFER PRICING OFFICER. 5 . THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , IN COURSE OF PROCEEDINGS BEFORE THE TRANSF ER PRICIN G OFFICER AND THE DRP, ASSESSEE HAS PRODUCED VARIOUS EVIDENCES TO SUPPORT THE ARM'S LENGTH PRICE OF THE MARKETING AND RESEARCH SUPPO RT SERVICES RECEIVED FROM THE A E. HE SUBMITTED , MORE OR LESS SIMILAR EVIDENCES WERE FILED BY THE ASSESSEE BEFORE THE DEPARTM ENTAL AUTHORITIES IN THE PRECEDING ASSESSMENT 5 RBS EQUITIES INDIA LTD. YEAR S. HOWEVER, UNDER IDENTICAL FACTS AND CIRCUMSTANCES THE TRANSFER PRICING OFFICER DETERMINED THE ARM'S LENGTH PRICE OF TH E AFORESAID SERVICES RECEIVED FROM THE AE AT NIL WHICH THE DRP ALSO UPHELD. HE SUBMITTED , WHEN THE ISSUES RELATING TO THE AFORESAID ADJUSTMENT IN ASSESSMENT YEAR S 2008 09 TO 2011 12 CAME UP FOR CONSIDERATION BEFORE THE TRIB UNAL, THE TRIBUNAL HELD THAT INTRA GROUP SERVICES RECEIVED BY THE ASSESSEE BEING A SEPAR ATE TRANSACTION HAS TO BE BENCH MARKED SEPARATELY BY THE TRANSFER PRICING OFFICER. HE SUBMITTED , THE BENCH FURTHER HELD THAT THERE IS NO JUSTIFICATION FOR THE TRANSFER PRICING OFFICER TO DETERMINE THE ARM'S LENGTH PR ICE OF MARKETING AND RESEAR CH SUPPORT SERVICES AT NIL. HE SUBMITTED , ULTIMATELY THE TRIBUNAL RESTORED THE ISSUE TO THE ASSESSING OFFICER/ TRANSFER PRICING OFFICER FOR VERIFYING ASSESSEES CLAIM AFTER EXAMINING THE SUPPORTING DOCUMENTARY EVIDENCE S . HE SUBMITTED , WHILE IMPLE MENTING THE AFORESAID DIRECTION OF THE TRIBUNAL IN ASSESSMENT YEAR S 2008 09 TO 2011 12, THE TRANSFER PRICING OFFICER HAS ALLOWED 40% OF THE FEE PAID BOTH TOWARDS MARKET ING SUPPORT SERVICE AND RESEARCH SUPPORT SERVICE AS REASONABLE. HE SUBMITTED , THE AFORESAID DECISIO N OF THE TRANSFER PRICING OFFICER IN THE ASSESSMENT YEAR S 2008 09 TO 2011 12 HAS BEEN ACCEPTED BY THE ASSESSEE. T HE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , IN VIEW OF THE DECISION OF THE TRIBUNAL IN ASSESSMENT YEAR S 2008 09 TO 2011 12 AND THE DECISION OF THE TRANSFER PRICING OFFICER IN ALLOWING 40% OF THE 6 RBS EQUITIES INDIA LTD. FEES PAID , THE ISSUE IN THE IMPUGNED ASSESSMENT YEAR REQUIRES TO BE RESTORED TO THE ASS ESSING OFFICER FOR VERIFYING ASSESSEES CLAIM QUA THE EVIDENCES FILED BEFORE HIM AND FOR ALLOWING REASONABLE QUAN TUM OF EXPENDITURE AS WAS DONE BY THE TRANSFER PRICING OFFICER IN THE PRECEDING ASSESSMENT YEAR S . 6 . THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED , SINCE IN THE PRECEDING ASSESSMENT YEARS IDENTICAL ISSUE WAS RESTORED BACK TO TH E TRANSFER P RICING OFFICER FOR VERIFYING ASSESSEES CLAIM ON THE BASIS OF EVIDENCE S FILED BY THE ASSESSEE , LET THE ISSUE BE RESTORE D BACK TO THE ASSESSING OFFICER/ TRANSFER PRICING OFFICER FOR DECIDING AFRESH ON THE BASIS OF EVIDENCES FILED BY THE ASSESSEE. 7 . WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED MATERIAL ON RECORD. AS COULD BE SEEN , IN COURSE OF PROCEEDINGS BEFORE THE TRANSFER PRICING OFFICER, THE ASSESSEE FURNISHED DOCUMENTARY EVIDENCES FROM TIME TO TIME TO SUPPORT THE ARM'S LENGTH PRICE OF THE MARKETING SUPPORT SERVICE AN D RESEARCH SUPPORT SERVICE FEE PAID TO THE A E. HOWEVER, THE TRANSFER PRICING OFFICER ALLEGING LACK OF COMPLETE EVIDENCE H AS TREATED THE ARM'S LENGTH PRICE OF THE AFORESAID TRANSACTION S AS NIL ON THE REASONING THAT THE ASSESSEE HAS FAILED TO SUBSTANTIATE TH AT SUCH SERVICES WERE REQUIRED FOR ITS BUSINESS AND THEY WERE ACTUALLY RENDERED BY THE A E. IT IS EVIDENT , THE DRP HAS UPHELD 7 RBS EQUITIES INDIA LTD. THE AFORESAID DECISION OF THE TRANSFER PRICING OFFICER BY RELYING UPON ITS DECISION IN ASSESSEES OWN CASE IN THE PRECEDING ASSESSMENT YEARS. NOTABLY, WHILE DECIDING ASSESSEES APPEAL S ON IDENTICAL ISSUE IN ASSESSMENT YEAR S 2008 09 TO 2011 12, VIDE ITA NO.7488/MUM./2012, ITA NO.1102/MUM./2014, ITA NO.1127/MUM./2015 AND ITA NO.38 8/ MUM./2016 RESPECTIVELY, DATED 2 ND JANUARY 2017, THE TRIBUNAL HELD THAT MARKETING SUPPORT SERVICE AND RESEARCH S UPPORT SERVICE HAVE TO BE BENCH MARKED INDEPENDENTLY. FURTHER, THE TRIBUNAL HELD THAT THE ARM'S LENGTH PRICE OF THE AFORESAID TRANSACTION S CANN OT BE DETERMINED AT NIL. HOWEVER, ULTIMATELY, THE TRIBUNAL RESTORED THE ISSUE TO THE ASSESSIN G OFFICER/ TRANSFER PRICING OFFICER FOR DETERMINING THE ARM 'S LENGTH PRICE OF THE SERVICES RENDERED BY THE AE BY VERIFYING THE EVIDENCE S FILED BY THE ASSESSEE. AS C OULD BE SEEN , WHILE IMPLEMENTING THE AFORESAID DIRECTIONS OF THE TRIBUNAL IN THE PRECEDING ASSESSMENT YEAR S , THE TRANSFER PRICING OFFICER HAS ALLOWED 40% OF THE FEES PAID FOR BOTH THE SERVICES AS REA SONABLE. THUS, IN THE PRECEDING ASSESSMENT YEARS, THE TRA NSFER PRICING OFFICER HIMSELF HAS REVISED HIS EARLIER DECISION OF DETERMINING THE ARM'S LENGTH PRICE AT NIL AND HAS QUANTIFIED ALLOWABLE EXPENDITURE @ 40% OF THE AMOUNT PAID ON THE REASONING THAT COMPLETE EVIDENCES WERE NOT FILED. FACTS ARE MORE OR LESS ID ENTICAL IN THE IMPUGNED ASSESSMENT YEAR AS WELL. THEREFORE, FOLLOWING THE DECISION OF THE CO ORDINATE BENCH, AS REFERRED TO ABOVE, WE RESTORE 8 RBS EQUITIES INDIA LTD. THE ISSUE TO THE ASSESSING OFFICER FOR ALLOWING ASSESSEES CLAIM ON THE BASIS OF EVIDENCES FILED. NEEDLESS TO MENT ION, THE ASSESSING OFFICER MUST AFFORD REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE BEFORE DECIDING THE ISSUE. GROUND RAISED IS ALLOWED FOR STATISTICAL PURPOSES. 8 . IN GROUND NO.2, THE ASSESSEE HAS CHALLENGED THE DISALLOWANCE OF ` 10,19,34,483, UNDE R SECTION 40(A)(IA) OF THE ACT. 9 . AS DISCUSSED EARLIER , WHILE DETERMINING THE ARM'S LENGTH PRICE OF THE FEES PAID OF ` 10,19,34,433 TOWARDS MARKETING SUPPORT SERVICE AND RESEARCH SUPPORT SERVICE, THE TRANSFER PRICING OFFICER DETERMINED THEM AT NIL AND PROPOSED ADJUSTMENT OF ` 10,19,34,483. W HILE MAKING THE ADDITION PROPOSED BY THE TRANSFER PRICING OFFICER IN THE DRAFT ASSESSMENT ORDER , THE ASSESSING OFFI CER FURTHER OBSERVED THAT IN ASSESSMENT YEAR 2011 12 THE ASSESSING OFFICER HAD DISALLOWED THE FEES PAID TOWARDS MARKETING SUPPORT SERVICE AND RESEARCH SUPPORT SERVICE , SINCE , A T THE TIME OF SUCH PAYMENT/ REMITTANCES TAX WAS NOT DEDUCTED AT SOURCE. HE OBSERVED , IN THE IMPUGNED ASSESSMENT YEAR, THE ASSESSEE HAS REMITTED THE AMOUNT OF ` 10,19,34,483 TO AB N , HONG KONG BRANCH, WITHOUT DEDUCTING TAX AT SOURCE. THEREFORE, HE HELD THAT THE PAYMENT MADE IS LIABLE TO BE DISALLOWED UNDER SECTION 40(A)(IA) OF THE ACT. HOWEVER, SINCE THE ARM'S LENGTH PRICE OF THE AFORESAID SERVICES 9 RBS EQUITIES INDIA LTD. WERE DETERMINED AT NIL AND THE TRANSFER PRICING ADJUSTMENT ON THAT ACCOUNT WAS ALREADY ADDED , THE ASSESSING OFF ICER MADE NO FURTHER ADDITION ON ACCOUNT OF DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE ACT. THOUGH, THE ASSESSEE OBJECTED TO THE DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE ACT BEFORE THE DRP, HOWEVER, LEARNED DRP UPHELD THE DECISION OF THE ASSESSING OFFI CER. 10 . THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , IDENTICAL DISALLOWANCE WAS ALSO MADE BY THE ASSESSING OFFICER IN ASSESSMENT YEAR S 2008 09 TO 2011 12. HE SUBMITTED , WHILE DECIDING ASSESSEES APPEALS ON THE ISSUE, THE TRIBUNAL IN THE ORDER PASSED CITE D SUPRA , RESTORED THE ISSUE TO THE ASSESSING OFFICER/ TRANSFER PRICING OFFICER AND WHILE IMPLEMENTING THE DIRECTIONS OF THE TRIBUNAL THE ASSESSING OFFICER/TRANSFER PRICING OFFICER H AS ACCEPTED ASSESSEES CLAIM THAT NO DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE ACT CAN BE MADE. THUS, HE SUBMITTED , THE DISALLOWANCE UNDER SECTION 40(A)(IA) SHOULD BE DELETED. 11 . THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED , THE ISSUE MAY BE RESTORED TO THE ASSESSING OFFICER FOR DECIDING AFRESH KEEPING IN VIEW THE ORDER PASSE D BY HIM IN THE PRECEDING ASSESSMENT YEAR S . 12 . WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED MATERIAL ON RECORD. IT IS EVIDENT , WHILE DECIDING SIMILAR ISSUE ARISING IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR S 2008 09 TO 2011 12, THE TRIBUNAL HAS 10 RBS EQUITIES INDIA LTD. RESTORED THE ISSUE TO THE ASSESSING OFFICER FOR FRESH ADJUDICATION. BEFORE THE ASSESSING OFFICER, THE ASSESSEE SUBMITTED THAT AS PER THE PROVISIONS OF THE TAX TREATY BETWEEN INDIA AND NETHERLANDS , FEES PAID TOWARDS MARKETING AND RESEARCH SUPPORT SERVICE CANNOT BE T REATED AS FEES FOR TECHNICAL SERVICES AS NOTHING WAS MADE AVAILABLE AS PER ARTICLE 12(5) OF THE TREATY. THEREFORE, THERE IS NO NECESSITY TO WITHHOLD TAX AT SOURCE. THEREFORE, PROVISIONS OF SECTION 40(A)(IA) OF THE ACT IS NOT APPLICABLE. AS COULD BE SEEN, A CCEPTING THE AFORESAID SUBMISSIONS OF THE ASSESSEE, THE ASSESSING OFFICER HAS NOT MADE ANY DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE ACT IN THE ORDER GIVING EFFECT TO THE TRIBUNAL ORDER PASSED FOR THE ASSESSMENT YEAR S 2008 09 TO 2011 12. IN VIEW OF THE A FORESAID, WE HOLD THAT NO DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE ACT CAN BE MADE IN RESPECT OF FEES PAID TOWARDS MARKET AND RE SEARCH SUPPORT SERVICE TO THE A E. THIS GROUND IS ALLOWED. 13 . IN G ROUND NO.3, THE ASSESSEE HAS CHALLENGED DISALLOWANCE OF PROFESSIONAL FEES PAID OF ` 4,71,240. 14 . BRIEF FACTS ARE, DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS PAID AN AMOUNT OF ` 4,98 ,240, TOWARDS PROFESSIONAL FEES W ITHOUT DEDUC TING TAX . O N VERIFYING AUDITORS CERTIFICATE IN FORM NO.15CA, HE OBSERVED THAT ON SIMILAR PAYMENT S THE ASSESSEE HAD DEDUCTED TAX AT SOURCE. THEREFORE, HE CALLED UPON THE 11 RBS EQUITIES INDIA LTD. ASSESSEE TO EXPLAIN WHY THE AMOUNT OF ` 4,98,240, SHOULD NOT BE DISALLOWED . T HOUGH , TH E ASSESSEE OBJECTED TO THE PROPOSED DISALLOWANCE, HOWEVER, THE ASSESSING OFFICER REJECTING THE EXPLANATION OF THE ASSESSEE DISALLOWED THE AMOUNT OF ` 4,98,240. THE ASSESSEE CHALLENGED THE AFORESAID DISALLOWANCE BEFORE THE DRP. 15 . IN COURSE OF PROCEEDINGS BEF ORE THE DRP, THE ASSESSEE FILED A REVISED FORM NO.15CA TO DEMONSTRATE THAT REMITTANCES OF ` 4,71,240, TO ERNST & YOUNG SHINNIHON TAX, JAPAN, TOWARDS PROFESSIONAL FEE, IN FACT , WAS SUBJECTED TO TDS BUT WHILE UPLOADING FORM NO.15CA, THE ASSESSEE HAD INADVERT ENTLY FAILED TO MENTION THE DETAILS OF TDS MADE BY THE COMPANY. THEREFORE, REVISED FORM NO.15CA INCORPORATING ACTUAL DETAILS OF TDS ON REMITTANCES MADE WAS FILED BEFORE THE DRP. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE DRP DIRECTED THE ASSESS ING OFFICER TO VERIFY THE RE VISED FORM NO.15CA AND ALLOW ASSESSEES CLAIM. 16 . THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , IN THE FINAL ASSESSMENT ORDER THE ASSESSING OFFICER HAS FAILED TO IMPLEMENT THE AFORESAID DIRECTION OF THE DRP. THUS, HE SUBMITTED , THE ASSESSING OFFICER MAY BE DIRECTED TO V ERIFY THE REVISED FORM NO. 15CA AND ALLOW ASSESSEES CLAIM. 12 RBS EQUITIES INDIA LTD. 17 . THE LEARNED DEPARTM ENTAL REPRESENTATIVE AGREED WITH THE AFORESAID SUBMISSIONS OF THE ASSESSEE. 18 . HAVING CONSIDERED RIVAL SUBMISSIONS, WE ARE OF THE VIEW THAT THE DIRECTIONS OF THE DRP TO VERIFY ASSESSEES CLAIM AS PER THE RE VISED FORM NO.15CA WAS REQUIRED TO BE IMPLEMENTED BY THE ASSESSING OFFICER , BUT, WHICH HE HAS FAILED TO DO. THEREFORE, WE DIRECT THE ASSESSING OFFICER TO VERIFY ASSESSEES CLAIM AS PER THE REVISED FORM NO.15CA, AND DECIDE THE ISSUE IN ACCORDANCE WITH LAW. GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 19 . IN GROUND NO.3, THE ASSESSEE HAS CHALLENGED THE DISALLOWANCE OF ` 27,000, TOWARDS PROFESSIONAL FEES PAID TO BLAKE, CASSELS AND GRAYDON LLP, CANADA. 20 . BRIEF FACTS ARE, IN COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICING THAT THE PROFESSIONAL FEES OF ` 27,000, WAS PAID TO A NON RESIDENT WITHOUT DEDUCTING TA X AT SOURCE DISA LLOWED IT UNDER SECTION 40(A)(I ) OF THE ACT. THE ASSESSEE OBJECTED TO THE AFORESAID DISALLOWANCE BEFORE THE DRP 21 . THE DRP, HOWEVER, UPHELD THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. 13 RBS EQUITIES INDIA LTD. 22 . THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , THE ASSESSEE HA PAID PROFESSIONAL FEES TO THE NON RESIDENT TOWARDS LEGAL SERVICES RENDERED. HE SUBMITTED , AS PER ARTICLE 13(4) OF THE INDIA CANADA TAX TREATY, ANY PAYMENT MADE TOWARDS PROFESSIONAL SERVICES WOULD BE TAXABLE ONLY IN THE COUNTRY OF RESIDENCE OF T HE SERVICE PROVIDER SUBJECT TO THE CONDITION THAT SUCH N ON RESIDENT DOES NOT HAVE ANY PE IN INDIA. HE SUBMITTED BEFORE THE DEPARTMENTAL AUTHORITIES THAT THE ASSESSEE HAD FURNISHED DECLARATION TH AT THERE IS NO PE OF THE PAYEE IN INDIA. IN THIS CONTEXT, HE D REW OUR ATTENTION TO THE SAID DECLARATION PLACED AT PAGE 693 OF THE PAPER BOOK. FURTHER, HE SUBMITTED , A CERTIFICATE OF THE AUDITOR IN FORM NO.15CB WAS ALSO FURNISHED WHEREIN THE NATURE OF PAYMENT MADE AND ITS TREATMENT UNDER THE INDIA - CANADA TAX TREATY W AS SPECIFICALLY MENTIONED. HE SUBMITTED , IN SPITE OF SUCH EVIDENCES FURNISHED BEFORE THE ASSESSING OFFICER, THE DRP HAS WRONGLY OBSERVED THAT THE ASSESSEE HAS FAILED TO EXPLAIN THE DETA ILS OF PAYMENT MADE. THUS , HE SUBMITTED , THE PAYMENT MADE TO THE NON RE SIDENT BEING NOT TAXABLE IN INDIA, THERE IS NO REQUIREMENT FOR DEDUCTION OF TAX AT SOURCE. THEREFORE, HE SUBMITTED , THE DISALLOWANCE MADE SHOULD BE DELETED. 23 . THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED , SINCE THE ASSESSEE COULD NOT SUBSTANTIATE ITS CLAIM , THE PAYMENT WAS DISALLOWED. 14 RBS EQUITIES INDIA LTD. HE SUBMITTED , THE ISSUE MAY BE RESTORED BACK TO THE ASSESSING OFFICER FOR ENABLI NG THE ASSESSEE TO ESTABLISH THE CLAIM. 24 . WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED MATE RIAL ON RECORD. UNDISPUTEDLY, THE ASSESSEE HAS PAID THE AMOUNT OF ` 27,000 TO THE NON RESIDENT TOWARDS FEES FOR LEGAL SERVICES RENDERED. AS PER ARTICLE 14(1) OF THE INDIA CANADA T AX TREATY, THE PAYMENT MADE FOR PROFESSIONAL SERVICE TO A RESIDENT OF A CONTR ACTING STATE SHALL BE TAXABLE ONLY IN THAT STATE, OF COURSE, SUBJECT TO THE CONDITION THAT SUCH NON RESIDENT DOES NOT HAVE A PE IN THE OTHER CONTRACTING STATE AND HE HAS NOT STAYED MORE THAN THE SPECIFIED PERIOD, ET C. THEREFORE, AS PER ARTICLE 14(1) OF THE TAX TREAT Y , THE PAYMENT MADE BY THE ASSESSEE TO THE NON RESIDENT IS ORDINARILY TAXABLE IN CANA DA. FURTHER, ARTICLE 14(2) DEFINES THAT PROFESSIONAL SERVICES INCLUDES FEES PAID FOR LEGAL SERVICES. IT IS THE CONTENTION OF THE ASSESSEE THAT THE EXCEPTIONS PRO VIDED UNDER ARTICLE 14(1)(A) , (B) &(C) DO NOT APPLY TO THE PAYEE. IN THIS CONTEXT, LEARNED AUTHORISED REPRESENTATIVE HAS RE LIED UPON A DECLARATION OF NO PE AND CERTIFICATE ISSUED BY THE AUDITOR. IN OUR VIEW, IF THE EXCEPTIONS PROVIDED UNDER ARTICLE 14(1)(A) , (B) & (C) ARE NOT APPLICABLE , THE PAYMENT MADE TO THE PAYEE IS NOT TAXABLE IN INDIA AS PER ARTICLE 14(1)OF THE TAX TREATY. HENCE, THERE IS NO REQUIREMENT FOR DEDUCTION OF TAX ON SUCH PAYMENT. THEREFORE, WE RESTORE THE ISSU E TO 15 RBS EQUITIES INDIA LTD. THE ASSESSING OFFICER FOR THE L IMITED PURPOSE OF VERIFYING WHETHER THE EXCEPTIONS PROVIDED IN ARTICLE 14(1)(A) , (B) &(C) ARE NOT APPLICABLE TO THE NON RESIDENT TO WHOM THE LEGAL FEES WERE PAID. IN CASE, IT IS FOUND TO BE SO, NO DISALL OWANCE UNDER SECTION 40(A)(I) OF THE ACT SHOULD BE MADE . GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 25 . IN THE RESULT, APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 20.03.2019 SD/ RAJESH KUMAR ACCOUNTANT MEMBER SD/ - SAKTIJIT DEY JUDICIAL MEMBER MUMBAI, DATED: 20.03.2019 COPY OF THE ORDER FORWARDED TO : ( 1 ) THE ASSESSEE; ( 2 ) THE REVENUE; ( 3 ) THE CIT(A); ( 4 ) THE CIT, MUMBAI CITY CONCERNED; ( 5 ) THE DR, ITAT, MUMBAI; ( 6 ) GUARD FILE . TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY (SR. PRIVATE SECRETARY) ITAT, MUMBAI