DCIT 6(2), MUMBAI V. KPMG ADVISORY SERVICES P. LTD, MUMBAI

ITA 4556/MUM/2013

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9064 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 4 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-10-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: L
• Next Hearing Date: 14-06-2017
• Assessment Year: 2006-2007
• Appeal Filed On: 07-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M V RAJGURU
• Keywords: Double taxation relief; Non-deduction of tax
• Section: 143(3); 142(1); 133(6); 194C

Judgement Text

1 ITA NO.4567/MUM/2016 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH L, MUMBAI BEFORE SHRI C.N. PRASAD(JUDICIAL MEMBER) AND SHRI G MANJUNATHA (ACCOUNTANT MEMBER) I.T.A NO.4556/MUM/2013 (ASSESSMENT YEAR 2006-07) DY.CIT, CIR.6(2), MUMBAI VS M/S KPMG ADVISORY SERVI CES PVT LTD LODHA EXCELUS, 1 ST FLOOR, APOLLO MILLS COMPOUND, N.M. JOSHI MARG, MAHALAXMI, MUMBAI 400 011 PAN : AABCK2895D APPELLANT RESPONDEDNT I.T.A NO.4862/MUM/2013 (ASSESSMENT YEAR 2006-07) M/S KPMG ADVISORY SERVICES PVT LTD LODHA EXCELUS, 1 ST FLOOR, APOLLO MILLS COMPOUND, N.M. JOSHI MARG, MAHALAXMI, MUMBAI 400 011 VS DY.CIT, CIR.6(2), MUMBAI APPELLANT RESPONDEDNT I.T.A NO.4554/MUM/2013 (ASSESSMENT YEAR 2005-06) DY.CIT, CIR.6(2), MUMBAI VS M/S KPMG INDIA PVT LTD LODHA EXCELUS, 1 ST FLOOR, APOLLO MILLS COMPOUND, N.M. JOSHI MARG, MAHALAXMI, MUMBAI 400 011 PAN : AAACK2138A APPELLANT RESPONDEDNT 2 ITA NO.4567/MUM/2016 I.T.A NO.4918/MUM/2013 (ASSESSMENT YEAR 2005-06) M/S KPMG INDIA PVT LTD LODHA EXCELUS, 1 ST FLOOR, APOLLO MILLS COMPOUND, N.M. JOSHI MARG, MAHALAXMI, MUMBAI 400 011 VS DY.CIT, CIR.6(2), MUMBAI APPELLANT RESPONDEDNT REVENUE BY SHRI M.V. RAJGURU ASSESSEE BY SHRI ANJIT CHAKRAVARTY / SHRI ABHISHEK TILAK DATE OF HEARING 10-10-2017 DATE OF PRONOUNCEMENT -10-2017 O R D E R PER G MANJUNATHA, AM : THESE CROSS APPEALS BY TWO DIFFERENT ASSESSEES AS WELL AS REVENUE ARE DIRECTED AGAINST SEPARATE, BUT IDENTICAL ORDERS OF THE CIT(A|)-12, MUMBAI DATED 20-03-2013 AND 22-03-2013 FOR THE ASSESSMENT YEARS 2005-06 AND 2006- 07. SINCE, COMMON FACTS AND IDENTICAL ISSUES ARE I NVOLVED, THESE APPEALS WERE HEARD TOGETHER AND ARE DISPOSED OF BY THIS COMMON O RDER, FOR THE SAKE OF CONVENIENCE. 2. THE ASSESSEE AS WELL AS REVENUE HAVE RAISED MORE OR LESS COMMON GROUNDS OF APPEAL. FOR THE SAKE OF BREVITY, THE GR OUNDS OF APPEAL RAISED BY THE 3 ITA NO.4567/MUM/2016 ASSESSEE IN ITA NO.4862/MUM/2013 AND THE GROUNDS OF APPEAL RAISED BY THE REVENUE IN ITA NO.4556/MUM/2013 ARE REPRODUCED BELO W:- ITA NO.4862/MUM/2013 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED III UPHO LDING THE DISALLOWANCE OF RS.68,53,700 MADE TINDER SECTION 40 (A)(I) OF THE INCOME TAX ACT, 1961 BY THE ASSESSING OFFICER OUT O F THE REIMBURSEMENT OF SUPPORT SERVICE CHARGES AGGREGATIN G RS.2,02,34,000 MADE TO KPMG. AN INDIAN PARTNERSHIP FIRM. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN UPHOL DING THE ADDITION MADE BY THE ASSESSING OFFICER IN RESPECT O F AMOUNTS AGGREGATING RS. 1 7,20,344 BEING ALLEGED UNDISCLOSE D INCOME FROM PROFESSIONAL SERVICES APPEARING IN ANNUAL INFORMATI ON RETURN ITA NO. 4556/MUM/2013 1. 'ON THE FACTS AND CIRCUMSTANCES OF CASE AND IN LAW, THE LD. CIT(A) ERRED IN HOLDING THAT PAYMENT MADE TO NO N-RESIDENT R-GEN CONSULTANTS LTD., BANGLADESH, OF RS. 1,30,8901- WAS IN THE NATURE OF PROFESSIONAL CHARGES ON WHICH THERE WAS NO LIABILIT Y FOR DEDUCTING TAXES U/ S. 195 R.W.S. 1 95A OF THE I. T. ACT, 1961 .' 2. 'ON THE FACTS AND CIRCUMSTANCES OF CASE AND IN LAW, THE LD. CIT(A) ERRED IN IGNORING THAT RENDERING OF CONS ULTATION SERVICE WHICH REQUIRED HIGH LEVEL OF TECHNICAL AND INDUSTRIAL KNOWLEDGE WOULD BE COVERED BY DEFINITION OF 'ROYALT Y'.' 3. 'ON THE FACTS AND CIRCUMSTANCES OF CASE AND IN LAW, THE LD.CIT(A) ERRED IN HOLDING THAT SUPPORT SERVICE CHA RGES PAYMENT OF RS.2,02,34,0001- (EXCLUDING RENT PAID) BY THE ASSES SEE COMPANY TO KPMG WERE IN THE NATURE OF REIMBURSEMENT AND THEREF ORE NOT LIABLE TO WITHHOLDING OF TAX AT SOURCE.' 4. 'ON THE FACTS AND CIRCUMSTANCES OF CASE AND IN LAW, THE LD. CIT(A) ERRED IN NOT APPRECIATING THAT PAYMENTS MADE BY THE ASSESSEE TO M/S. KPMG ON THE BASIS OF SHARING AGREEMENT WOUL D BE TREATED AS 4 ITA NO.4567/MUM/2016 CONTRACTUAL PAYMENT LIABLE FOR DEDUCTION U/S. 194C. ' 3. FROM THESE GROUNDS OF APPEAL, THE ASSESSEE HAS CHAL LENGED TWO ISSUES, VIZ. (I) DISALLOWANCE OF SUPPORT SERVICE CH ARGES IN RESPECT OF RENT PAYMENT SUSTAINED BY THE CIT(A) U/S 40(A)(I) FOR FA ILURE TO DEDUCT TAX AT SOURCE U/S 194-I OF THE ACT; AND (II) ADDITION TOWA RDS UNDISCLOSED INCOME FROM PROFESSIONAL SERVICES APPEARED IN ANNUAL INFOR MATION REPORT (AIR) BY THE CIT(A). THE REVENUE HAS CHALLENGED TWO ISSU ES, VIZ. (I) DELETION OF ADDITION MADE BY THE AO TOWARDS PROFESSIONAL CHARGE S PAID OUTSIDE INDIA WITHOUT DEDUCTION OF TAX AT SOURCE U/S 195 R.W.S. 1 95A OF THE INCOME-TAX ACT, 1961; AND (II) DELETION MADE BY THE CIT(A) TOW ARDS SUPPORT SERVICE CHARGES EXCLUDING RENT PAID U/S 40(A)(I) OF THE ACT . 4. THE BRIEF FACTS OF THE CASE EXTRACTED FROM ITA NO. 4556/MUM/2013 ARE THAT THE ASSESSEE COMPANY PART OF GLOBAL NETWOR K OF KPMG, ENGAGED IN THE BUSINESS OF CONSULTANCY SERVICES IN THE FIELDS OF S TRATEGY, INFRASTRUCTURE, PERFORMANCE IMPROVEMENTS AND SOFTWARE SERVICES, ETC FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2006-07 ON 23-11-20 06 DECLARING TOTAL INCOME OF RS.334,33,838. THE CASE WAS SELECTED FOR SCRUTI NY AND ACCORDINGLY NOTICES U/S 143(2) AND 142(1) OF THE ACT ALONGWITH DETAILED QUESTIONNAIRE WERE ISSUED. IN RESPONSE TO NOTICES, THE AUTHORIZED REPRESENTAT IVE OF THE ASSESSEE ATTENDED FROM TIME TO TIME AND FILED THE DETAILS. THE ASSES SMENT WAS COMPLETED U/S 5 ITA NO.4567/MUM/2016 143(3) ON 24-12-2008 DETERMINING TOTAL INCOME AT RS 662,32,585, INTERALIA MAKING ADDITIONS ON ACCOUNT OF SUPPORT SERVICE CHAR GES PAYMENTS U/S 40(A)(I) FOR FAILURE TO DEDUCT TAX AT SOURCE U/S 194C AND AD DITION ON THE BASIS OF AIR INFORMATION AS UNDISCLOSED INCOME FROM BUSINESS OR PROFESSION AND DISALLOWANCE OF PROFESSIONAL CHARGES PAID OUTSIDE I NDIA WITHOUT DEDUCTION OF TAX AT SOURCE U/S 195 OF THE ACT. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A). 5. BEFORE THE CIT(A), THE ASSESSEE HAS FILED ELABORATE WRITTEN SUBMISSIONS TO CHALLENGE EACH AND EVERY ADDITIONS M ADE BY THE AO. THE ASSESSEE FURTHER CONTENDED THAT PROFESSIONAL CHARGE S PAID OUTSIDE INDIA ARE NOT COMING UNDER THE PROVISIONS OF SECTION 195 AND HENCE, THE QUESTION OF DEDUCTION OF TAX AT SOURCE DOES NOT ARI SE. THE ASSESSEE ALSO SUBMITTED THAT IT IS PROVIDING PROFESSIONAL SERVICE S IN THE AREAS OF POWER SECTOR, FINANCIAL RE-STRUCTURING AND RECOVERY PLAN FOR BANGLADESH POWER SECTOR DEVELOPMENT THROUGH E-GEN CONSULTANTS LTD, B ANGLADESH AND SUCH SERVICES RENDERED BY E-GEN CONSULTANTS LTD, BANGLAD ESH FELL UNDER THE AMBIT OF ARTICLE 7 OF THE DOUBLE TAXATION AVOIDANCE AGREEMENT (DTAA) BETWEEN INDIA AND BANGLADESH. FURTHER, E-GEN CONSU LTANTS LTD, BANGLADESH DID NOT HAVE A FIXED / PERMANENT ESTABLI SHMENT IN INDIA, THE INCOME FROM THE SERVICES WAS NOT CHARGEABLE TO TAX IN INDIA, CONSEQUENTLY THERE WAS NO REQUIREMENT OF TAX WITHHOLDING FROM TH E REMITTANCES MADE TO E-GEN CONSULTANTS LTD, BANGLADESH. AS REGARDS D ISALLOWANCE MADE BY 6 ITA NO.4567/MUM/2016 THE AO TOWARDS PAYMENT OF SUPPORT SERVICE CHARGES, THE ASSESSEE SUBMITTED THAT IT IS PART OF KPMG GROUP OF COMPANIE S AND ENTERED INTO AN AGREEMENT WITH M/S KPMG FOR SHARING COMMON FACILITI ES SUCH AS INFRASTRUCTURE COST, COMMUNICATION & TECHNOLOGY COS T AND OFFICE SPACE AND SUCH COST HAS BEE SHARED AMONGST GROUP COMPANIES ON COST TO COST BASIS WITHOUT ANY ELEMENT OF PROFIT. THE ASSESSEE FURTHE R SUBMITTED THAT M/S KPMG PROCURES THESE SERVICES FROM VARIOUS VENDORS O N PAYMENT AND SUCH PAYMENT HAS BEEN ALLOCATED TO VARIOUS GROUP COMPANI ES ON THE BASIS OF PRE-DETERMINED RATIO IN ACCORDANCE WITH THE COMMON FACILITIES SHARED BY EACH GROUP COMPANIES. THEREFORE, THE SAID PAYMENTS ARE IN THE NATURE OF RE-IMBURSEMENT OF ACTUAL EXPENDITURE INCURRED BY M/ S KPMG ON BEHALF OF THE ASSESSEE AND HENCE, THE PROVISIONS OF SECTION 1 94C HAS NO APPLICATION AND ACCORDINGLY DISALLOWANCE PROVIDED U/S 40(A)(I) CANNOT BE MADE. AS REGARDS ADDITION MADE BY THE AO TOWARDS UNDISCLOSED INCOME ON THE BASIS OF AIR INFORMATION, THE ASSESSE SUBMITTED THAT IT H AS RE-CONCILED THE DIFFERENCE TO THE EXTENT POSSIBLE WITHIN THE TIME A LLOWED TO GIVE ADDITIONAL INFORMATION. THE PROFESSIONAL CHARGES APPEARED IN THE AIR INFORMATION OF ASSESSEES PAN DOES NOT PERTAIN TO THE ASSESSEE. T HE AO ADDED BACK THE TOTAL AMOUNTS APPEARED IN THE AIR INFORMATION OVER AND ABOVE THE GROSS RECEIPTS ADMITTED BY THE ASSESSEE IN ITS BOOKS OF A CCOUNT AS UNDISCLOSED PROFESSIONAL CHARGES ON THE SOLE BASIS OF LETTER SE NT TO VARIOUS PERSONS U/S 133(6) OF THE ACT. THE ASSESSEE FURTHER SUBMITTED THAT THE INFORMATION IN THE AIR IS ONLY PROVISIONAL WHICH CAN BE CORRECTED LATER STAGE BY THE PARTIES AND HENCE, ADDITION CANNOT BE MADE ONLY ON THE BASIS OF NON- 7 ITA NO.4567/MUM/2016 RESPONSE FROM THE PARTIES TO THE LETTERS ISSUED U/S 133(6) OF THE ACT. 6. THE CIT(A), AFTER CONSIDERING THE RELEVANT SUBMISSI ONS OF THE ASSESSEE, OBSERVED THAT THE ASSESSEE IS NOT LIABLE FOR DEDUCTION OF TAX AT SOURCE U/S 195 OF THE ACT, TO THE PAYMENTS MADE TO E-GEN CONSULTANTS LTD, BANGLADESH SINCE, THE SERVICES RENDERED BY THE FOREIGN ENTITY IS PURELY PROFESSIONAL SERVICES AND NOT FOR SUPPLY OF SCIENTIFIC, TECHNICAL, INDUSTRIAL OR COMMERCIAL KNOWLEDGE OR INFORMATION. INSOFAR AS DISALLOWANCE OF SUPPORT SERVICE CHARGES, THE CIT(A) OBSERVED THAT SUPPORT SERVICE CHARGES PAYMENTS MADE TO KPMG ARE PURELY RE IMBURSEMENTS WITHOUT ANY PROFIT ELEMENT AND, THEREFORE, CANNOT B E TREATED AS INCOME CHARGEABLE TO TAX SO AS TO ATTRACT TAX DEDUCTION AT SOURCE. HOWEVER, THE ONLY EXCEPTION TO THE ABOVE REIMBURSEMENT IS THE PA YMENT OF RENT WHICH IS SPECIFICALLY LIABLE TO TAX AT SOURCE U/S 194-I O F THE ACT, AS THE RENT IS PAID TO OUTSIDE PARTIES FOR A RENTED ACCOMMODATION UTILIZED BY KPMG AND THE GROUP COMPANIES AND AS KIPL WHICH IS A GROUP CO MPANY PAYS PART OF THE RENT OF THE BUILDING FOR WHICH BENEFIT IS TAKEN BY DEBITING IT TO THE P&L ACCOUNT AND HENCE, THE PAYMENT WILL BE LIABLE FOR T DS U/S 194-I OF THE ACT. THE ASSESSEE HAS MADE THE PAYMENT FOR USE OF SPACE WHICH IS A RENTED ACCOMMODATION; THEREFORE, NON DEDUCTION OF T AX ON SUCH RENT PAYMENT WOULD ATTRACT PROVISIONS OF SECTION 40(A)(I ) OF THE ACT, AND ACCORDINGLY, THE AO WAS DIRECTED TO GIVE RELIEF TOW ARDS SUPPORT SERVICE CHARGES PAYMENT OTHER THAN RENT PAYMENT. INSOFAR A S ADDITION MADE BY THE AO TOWARDS UNDISCLOSED PROFESSIONAL INCOME ON T HE BASIS OF AIR 8 ITA NO.4567/MUM/2016 DATABASE, THE CIT(A) OBSERVED THAT DURING THE COURS E OF APPELLATE PROCEEDINGS, THE AO HAS SUBMITTED REMAND REPORT ON REPLIES RECEIVED IN RESPONSE TO NOTICES ISSUED U/S 133(6) ALONGWITH ASS ESSEES EXPLANATION WITH REGARD TO THE ADDITION MADE ON THE BASIS OF AI R INFORMATION. THE AO, IN HIS REMAND REPOT HAS MADE PARTY-WISE COMMENTS ON EACH ITEMS APPEARED IN THE AIR INFORMATION. CONSIDERING THE R EMAND REPORT OF THE AO AND EXPLANATIONS OF THE ASSESSEE, THE CIT(A) DEL ETED THE ADDITION IN RESPECT OF PARTIES EXCEPT FOUR PARTIES LISTED IN HE R ORDER AT PARAGRAPH 7.5 ON PAGE 24 ON THE GROUND THAT THE TRANSACTIONS REPO RTED IN THE AIR COULD NOT BE RECONCILED OR VERIFIED BY THE ASSESSEE. AGG RIEVED BY THE ORDER OF CIT(A), THE ASSESSEE AS WELL AS THE REVENUE ARE IN APPEAL BEFORE US. 7. THE FIRST ISSUE THAT CAME UP FOR OUR CONSIDERATION IN ASSESSEES APPEAL IS ADDITION SUSTAINED BY THE CIT(A) TOWARDS RENT INCLUDED IN SUPPORT SERVICE CHARGES PAYMENT MADE TO KPMG. THE FACTS WHICH LEAD TO THE IMPUGNED ADDITION ARE THAT THE ASSESSEE IS A GR OUP COMPANY OF KPMG INVOLVED IN PROVIDING PROFESSIONAL AND CONSULTANCY SERVICES. M/S KPMG PROCURES VARIOUS SERVICES FROM VENDORS INCLUDING PR EMISES ON RENT, COMMUNICATION EXPENSES, TECHNOLOGY COST AND OFFICE SPACE WHICH HAS BEEN SHARED AMONG GROUP COMPANIES ON THE BASIS OF A GREEMENT ENTERED INTO WITH KPMG. THE ASSESSEE CLAIMS THAT THE INFRA STRUCTURE COST EXCLUDES THE RENT PAYMENT ON PREMISE TAKEN ON RENT AND OTHER RELATED COSTS WHICH HAS BEEN DIRECTLY PAID BY KPMG TO LANDLORDS ON THE BASIS OF SEPARATE RENT AGREEMENTS. THE ASSESSEE FURTHER CONTENDED THAT TH E RENT AGREEMENT 9 ITA NO.4567/MUM/2016 ENTERED INTO BY KPMG WITH VARIOUS LANDLORDS SPECIFI CALLY PROVIDES FOR ALLOWING KPMG TO OCCUPY THE PREMISES JOINTLY WITH O THER GROUP COMPANIES. HOWEVER, DOES NOT PERMIT KPMG TO SUBLET THE PREMISE TO ANY THIRD PARTIES. 8. THE LD. AR REFERRING TO ONE OF THE RENT AGREEMENTS ENTERED INTO WITH M/S KAMALA MILLS LTD SUBMITTED THAT CLAUSE (F) OF T HE AGREEMENT PROVIDES FOR SHARING OF PREMISES WITH OTHER GROUP COMPANIES. HOWEVER, NO SUBLETTING IS ALLOWED TO ANY THIRD PARTY. THE ASSE SSEE HAS PAID SUPPORT SERVICE CHARGES TO M/S KPMG ON THE BASIS OF AGREEME NT, AS PER WHICH THE COST INCURRED BY KPMG SHALL BE SHARED BY OTHER GROU P COMPANIES ON COST TO COST BASIS WITHOUT ANY ELEMENT OF PROFIT. THE L D.AR FURTHER SUBMITTED THAT THE ASSESSEE HAS REIMBURSED ACTUAL COST INCURR ED BY KPMG TOWARDS INFRASTRUCTURE AND OTHER EXPENSES WHICH HAS BEEN DI RECTLY PROCURED BY KPMG THROUGH VARIOUS VENDORS ON PAYMENT AND APPLICA BLE TDS PROVISIONS HAS BEEN COMPLIED WITH BY KPMG, WHEREVER APPLICABLE . SINCE SUPPORT SERVICE CHARGES PAID BY THE ASSESSEE IS ON COST TO COST BASIS AND REIMBURSEMENT OF ACTUAL EXPENDITURE INCURRED BY A G ROUP COMPANY, IT CANNOT COME UNDER THE PURVIEW OF CONTRACTUAL PAYMEN T WITHIN THE MEANING OF SECTION 194C OR 194-I OF THE ACT. 9. THE LD.DR, ON THE OTHER HAND, SUBMITTED THAT THE AS SESSEE HAS PAID RENT FOR USE OF PREMISES WHICH HAS BEEN PAID TO THE LANDLORDS. THEREFORE, THE ELEMENT OF LESSOR AND LESSEE EXISTS AND HENCE, THE ASSESSEE IS REQUIRED TO DEDUCT TDS U/S 194-I ON RENT PAYMENTS. THE LD.DR FURTHER 10 ITA NO.4567/MUM/2016 SUBMITTED THAT THOUGH PAYMENT IS MADE TO KPMG, SUCH AMOUNT IS PAID ON THE BASIS OF CONTRACTUAL OBLIGATION, THEREFORE, THE ASSESSEE OUGHT TO HAVE DEDUCTED TDS AS PER THE PROVISIONS OF SECTION 194-I OF THE ACT. SINCE THE ASSESSEE HAS FAILED TO DEDUCT TAX AT SOURCE, THE AO HAS RIGHTLY MADE DISALLOWANCE U/S 40(A)(I) AND HIS ORDER SHOULD BE U PHELD. 10. WE HAVE HEARD BOTH THE SIDES AND CONSIDERED MATERIA L ON RECORD. THE AO HAS DISALLOWED SUPPORT SERVICE CHARGES PAID TO KPMG ON THE GROUND THAT IMPUGNED PAYMENT IS IN THE NATURE OF CO NTRACTUAL PAYMENTS WHICH ATTRACTS TAX DEDUCTION U/S 194C OF THE ACT. THE ASSESSEE CONTENDS THAT IT HAS ENTERED INTO AN AGREEMENT WITH KPMG, WH EREIN IT HAS AGREED TO SHARE, OFFICE SPACE, INFRASTRUCTURE AND IMMOVABLE A SSETS INCLUDING SOFTWARES, TELEPHONES AND INTERNET CONNECTION AND C ONSUMABLES DATABASE, ETC. THE ASSESSEE FURTHER CONTENDED THAT SUPPORT S ERVICE CHARGES PAID TO KPMG IS ON COST TO COST BASIS WITHOUT ANY PROFIT EL EMENT AND SUCH EXPENDITURE HAS BEEN REIMBURSED ON ACTUAL COST INCU RRED BY M/S KPMG. THEREFORE, THE ASSESSEE IS NOT REQUIRED TO DEDUCT T AX AT SOURCE U/S 194-I OF THE ACT. 11. HAVING HEARD BOTH THE SIDES, WE FIND FORCE IN THE A RGUMENTS OF THE ASSESSEE FOR THE REASON THAT AS PER THE AGREEMENT E NTERED INTO BETWEEN KPMG THE ASSESSEE HAS AGREED TO SHARE COMMON COST L IKE INFRASTRUCTURE COST, COMMUNICATION COST AND TECHNOLOGY COST ON ACT UAL BASIS. WE FURTHER OBSERVE THAT THE ASSESSEE HAS REIMBURSED ACTUAL COS T INCURRED BY KPMG. WE FURTHER OBSERVE THAT KPMG HAS PAID RENT DIRECTLY TO LANDLORDS ON THE BASIS OF RENTAL AGREEMENTS ENTERED INTO BETWEEN THE M. THE SAID RENT 11 ITA NO.4567/MUM/2016 AGREEMENTS ENTERED INTO BETWEEN KPMG AND LANDLORDS PROVIDES FOR SHARING PREMISES WITH OTHER GROUP COMPANIES. M/S K PMG ALSO DEDUCTED TAX AT SOURCE WHEREVER APPLICABLE ON RENTAL PAYMENT S. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT THE IMPUGNED AMOUNT PAI D BY THE ASSESSEE TO M/S KPMG IS A REIMBURSEMENT OF ACTUAL EXPENDITURE I NCURRED ON BEHALF OF THE ASSESSEE. THE ASSESSEE HAS REIMBURSED ACTUAL C OST INCURRED BY KPMG WITHOUT ANY ELEMENT OF PROFIT. THEREFORE, WE ARE O F THE CONSIDERED VIEW THAT THE PROVISIONS OF SECTION 194C OR 194-I HAS NO APPLICATION TO THE IMPUGNED PAYMENTS. THIS VIEW WAS FURTHER SUPPORTED BY THE DECISION OF CO-ORDINATE BENCH OF ITAT, DELHI F BENCH IN THE C ASE OF RESULT SERVICES PVT LTD (2012) 52 SOT 598 (DEL) WHEREIN THE CO-ORDI NATE BENCH UNDER SIMILAR FACTS OBSERVED THAT WHERE HOLDING COMPANY O F ASSESSEE TOOK A PREMISES ON RENT AND ALLOWED TO USE A PART OF IT AN D THERE WAS NO RELATIONSHIP OF A LESSOR-LESSEE BETWEEN THEM, ASSES SEE HAD NO TDS OBLIGATION U/S 194-I OF THE ACT WHILE REIMBURSING A PART OF THE RENT TO THE HOLDING COMPANY. RELEVANT PART OF THE ORDER IS EXT RACTED BELOW:- 6. WE HAVE HEARD BOTH THE SIDES. THE ASSESSEE IS A 100 % SUBSIDIARY OF HOLDING COMPANY OF MCCANN ERICKSON IN DIA PVT. LIMITED. MCCANN ERICKSON INDIA PVT. LTD. HAS TAKEN ON RENT OFFICE PREMISES LOCATED AT DELHI AND MUMBAI. COPIES OF THE SE TWO LEASE AND LICENCE DEEDS ENTERED WITH THE LANDLORDS ARE ON RECORD. THE HOLDING COMPANY, MCCANN ERICKSON INDIA PVT. LTD., HAS PERMITTED ASSESSEE TO USE PART OF THESES PREMIS ES. ASSESSEE HAD REIMBURSED THE AMOUNT TO HOLDING COMPANY WITHOU T DEDUCTING TDS. THE RENT FOR THE WHOLE PREMISES WAS PAID DIRECTLY BY THE HOLDING COMPANY TO THE LESSORS AND THE TAX W AS DEDUCTED AS PER PROVISIONS OF SECTION 194-1 OF THE INCOME-TA X ACT. 1961. 12 ITA NO.4567/MUM/2016 THE CLAUSE 5 OF THE LEASE DEED FOR DELHI PREMISES D ATED 22.10.2007 BETWEEN CEPCO INDUSTRIES PVT. LTD. AND M CCANN ERICKSON INDIA PVT. LTD. READ AS FOLLOWING: '5. THE LESSEE MAY USE THE DEMISED PREMISES OR PART S THEREOF FOR THEIR COMMERCIAL USE AS WELL AS FOR THE OFFICES OF ITS SUBSIDIARIES AND ASSOCIATES AND ALLIED COMPA NIES AND FOR THE PURPOSES OF COMPANIES / FIRMS AND BUSIN ESS IN WHICH THE DIRECTORS OF THE LESSEE ARE INTERESTED OR CONCERNED, HOWEVER, ANY SUCH COMPANIES / SUBSIDIARI ES SHALL NOT ACQUIRE ANY INTEREST IN THL DERNISED PREN J FLIA'TR' UNT C RENT, OTHER OUTGOING, ETC. STICILL REMAIN SO E RESPONSIBILITIES OF THE LESSEE.' SIMILARLY, THE LEASE & LICENCE AGREEMENT BETWEEN NA TIONAL ORGANIC CHEMICAL INDUSTRIES LIMITED AND MAFATLAL IN DUSTRIES LIMITED AND MCCANN ERICKSON INDIA PVT. LTD. ALSO PR OVIDE IN CLAUSE 7 (D) AS UNDER:- 'D. NOT TO SUB-LET OR GIVE ON LEAVE AND LICENSE BAS IS OR ON ANY OTHER BASIS THE LICENSED PREMISES OR ANY PORTIO N THEREOF, NOR PERMIT ANY THIRD PARTY TO USE AND OCCU PY THE LICENSED PREMISES OR ANY PORTION THEREOF SAVE AND E XCEPT TO ITS SUBSIDIARIES, AFFILIATES, GROUP ENTITIES. ASSOC IATES, WHICH SHALL BE WITHOUT ANY PRIOR WRITTEN CONSENT OF THE L ICENSOR.' THE ASSESSEE IS PAYING RENT TO THE HOLDING COMPANY AS REIMBURSEMENT SINCE LAST MANY YEARS. THIS POSITION HAS BEEN ACCEPTED BY THE DEPARTMENT ALL THROUGH AND IT HAS B EEN NEVER DISPUTED EVEN WHEN PROVISIONS FOR TDS WERE ON STATU TE SINCE 1994. SECTION 194-1 OF THE INCOME-TAX ACT, 1961 WAS INSERTED IN ACT W.E.F. 01.06.1994. SIMILARLY, THIS POSITION WAS ALSO NOT DISPUTED EVEN AFTER THE AMENDMENT IN SECTION 40(A)( 1A) OF THE ACT BY THE TAXATION LAW (AMENDMENT) ACT. 2006 W .E.F. 1.4.2006. ON THIS ISSUE, THERE IS NO MATERIAL CHANG E IN THE FACTS AND LAW DURING THE YEAR UNDER CONSIDERATION. THE LEASE DEED PROVIDES FOR USE OF THE PREMISES BY THE SUBSID IARY COMPANIES. THE ACTUAL PAYMENTS MADE BY THE LESSEE ( HOLDING) 13 ITA NO.4567/MUM/2016 COMPAN Y ) TO THE LESSOR AND NECESSARY TAX WAS DEDUCTED THER EFROM. THE HOLDING COMPANY HAS ALSO NOT DEBITED THE WHOLE OF RENT TO ITS BOOKS OF ACCOUNT. IT HAS ONLY DEBITED THE RENT WHIC H PERTAINS TO THE PART OF THE PREMISES OCCUPIED BY IT. THEREFORE. IN OUR CONSIDERED VIEW, THERE WAS NO LESSOR AND LESSEE REL ATIONSHIP BETWEEN THE HOLDING COMPANY AND ASSESSEE WHERE THE PROVISIONS OF SECTION 194-1 ARE ATTRACTED. KEEPING THESE FACTS IN VIEW, WE FIND MERITS IN THE ORDER OF THE CIT (A) IN DELETING THE ADDITION MADE U/S 40(A)(I) OF THE ACT. WE SUSTAIN T HE ORDER OF THE CIT (A) AND DISMISS REVENUE'S APPEAL. 12. IN THIS CASE, THERE IS NO DISPUTE WITH REGARD TO TH E FACT THAT KPMG HAS TAKEN PREMISES ON RENT FROM LANDLORDS. THERE I S NO DISPUTE WITH REGARD TO THE FACT THAT KPMG HAS COMPLIED WITH TDS PROVISIONS ON SUCH RENTAL PAYMENTS. THE ASSESSEE HAS MADE THE PAYMENT ON THE BASIS OF AGREEMENT WITH KPMG WHICH CLEARLY STATES THAT THE C OMMON COST INCURRED BY KPMG SHALL BE SHARED BY GROUP COMPANIES ON COST TO COST BASIS. THEREFORE, CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE AND ALSO RELYING UPON THE RATIO OF CO-ORDINATE BENCH OF DELH I ITAT IN RESULT SERVICES PVT LTD (SUPRA), WE ARE OF THE VIEW THAT T HERE IS NO OBLIGATION ON THE PART OF THE ASSESSEE TO DEDUCT TDS ON REIMBURSE MENT OF SUPPORT SERVICE CHARGES TO KPMG. HENCE, WE DIRECT THE AO T O DELETE THE DISALLOWANCE MADE U/S 40(A)(I) TOWARDS RENT PAYMENT S. 13. THE NEXT ISSUE THAT CAME UP FOR OUR CONSIDERATION I N ASSESSEES APPEAL IS ADDITION SUSTAINED BY CIT(A) TOWARDS UNDI SCLOSED INCOME FROM PROFESSIONAL SERVICES ON THE BASIS OF AIR INFORMATI ON. THE AO MADE ADDITION OF RS.105,97,352 ON THE BASIS OF UNRECONCI LED ENTRIES APPEARED IN 14 ITA NO.4567/MUM/2016 THE AIR INFORMATION. ACCORDING TO THE AO, THE ASSE SSEE HAS FAILED TO OFFER ANY EXPLANATIONS WITH REGARD TO CERTAIN ENTRIES APP EARED IN AIR INFORMATION. THE AO FURTHER OBSERVED THAT THE ASSE SSEE NOT ONLY FAILED TO OFFER EXPLANATIONS, BUT ALSO FAILED TO RECONCILE TH E DIFFERENCE BETWEEN AIR INFORMATION AND ITS BOOKS OF ACCOUNT. THE AO FURTH ER OBSERVED THAT NOTICES ISSUED U/S 133(6) TO VARIOUS PARTIES APPEAR ED IN AIR INFORMATION WHICH WERE NOT ANSWERED BY THE PARTIES. THE ASSESS EE CONTENDS THAT ADDITION CANNOT BE MADE ONLY ON THE BASIS OF AIR IN FORMATION AS THE INFORMATION IN THE AIR IS ONLY PROVISIONAL WHICH CA N BE CORRECTED AT LATER STAGE BY THE PARTIES. THE ASSESSEE FURTHER SUBMITT ED THAT IT HAS FULLY ACCOUNT, ITS PROFESSIONAL RECEIPTS AND ALSO RECONCI LED TO THE EXTENT POSSIBLE THE DIFFERENCE NOTICED BY THE AO. HOWEVER, THE OTH ER ENTRIES, WHICH ARE UNRECONCILED, ARE NOT RECEIVED BY IT. THEREFORE, T HE AO WAS INCORRECT IN MAKING ADDITIONS ONLY ON THE BASIS OF AIR INFORMATI ON. 14. HAVING HEARD BOTH THE SIDES AND CONSIDERED MATERIAL ON RECORD, WE FIND THAT THE AO HAS MADE ADDITIONS OF RS.1,05,97, 352 ON THE BASIS OF UNRECONCILED ENTRIES APPEARED IN AIR INFORMATION. THE AO MADE ADDITION ON THE BASIS OF ASSESSEES LETTER DATED 29-23-2008 WHICH STATES THAT THE ENTRIES TO THE EXTENT OF RSA.1,05,97,352 DID NOT RE LATE TO ASSESSEE AND ALSO NOT ABLE TO RECONCILE WITH ITS BOOKS OF ACCOUN T. THE CIT(A), DURING THE COURSE OF APPELLATE PROCEEDINGS, AFTER CONSIDER ING THE REMAND REPORT SUBMITTED BY THE AO ON THE BASIS OF ADDITIONAL INFO RMATION SUBMITTED BY THE ASSESSEE AND ALSO INFORMATION RECEIVED FROM PAR TIES TO WHOM NOTICES U/S 133(6) WERE ISSUED, DELETED ADDITIONS MADE BY T HE AO EXCEPT IN THE 15 ITA NO.4567/MUM/2016 CASE OF FOUR PARTIES WHERE EITHER THE PARTIES HAVE NOT RESPONDED TO LETTER ISSUED U/S 133(6) OR NO INFORMATION HAS BEEN SUBMIT TED BY THE PARTIES. THE FACTS REMAIN UNCHANGED. THE LD.AR FOR THE ASSE SSEE EXCEPT STATING THAT NO ADDITION CAN BE MADE ONLY ON THE BASIS OF A IR INFORMATION, COULD NOT FURNISH ANY EVIDENCES TO RECONCILE THE DIFFEREN CE BETWEEN AIR INFORMATION AND BOOKS OF ACCOUNT. THE AIR INFORMAT ION APPEARED IN ASSESSEES PAN IN THE DATABASE OF THE INCOME-TAX DE PARTMENT CONTAINS CERTAIN PAYMENTS MADE TO THE ASSESSEE. ONCE THERE IS AN ENTRY IN THE AIR INFORMATION, IT IS INCUMBENT UPON THE ASSESSEE TO RECONCILE THE DIFFERENCE IN AIR WITH ITS BOOKS OF ACCOUNT. THE A SSESSEE NEITHER RECONCILED THE DIFFERENCE NOR FILED ANY EXPLANATION S AS TO HOW ENTRIES APPEAR IN THE AIR DOES NOT BELONG TO THE ASSESSEE. MERELY STATING THAT THE ENTRIES IN THE AIR INFORMATION IS NOT RELATING TO THE ASSESSEE WOULD NOT ABSOLVE THE ASSESSEES RESPONSIBILITY OF EXPLAINING THE ENTRIES APPEARED IN AIR. AT THE SAME TIME, THE AO MADE ADDITIONS ONLY ON THE BASIS OF AIR INFORMATION WITHOUT CONDUCTING ANY FURTHER ENQUIRY WITH REGARD TO THE RECEIPTS APPEARED IN ASSESSEES AIR DATABASE. THOU GH THE AO HAS ISSUED NOTICES U/S 133(6) TO THE PARTIES, COMPLETED THE AS SESSMENT WITHOUT OBTAINING ANY INFORMATION FROM SUCH PARTIES. THERE FORE, WE ARE OF THE CONSIDERED VIEW THAT THE ISSUE NEEDS TO BE RECONSID ERED IN THE LIGHT OF THE EXPLANATIONS OF THE ASSESSEE. HENCE, WE SET ASIDE THE ISSUE TO THE FILE OF THE AO AND DIRECT HIM TO CAUSE NECESSARY ENQUIRY. NEEDLESS TO SAY, THE ASSESSEE IS DIRECTED TO RECONCILE THE DIFFERENCE AP PEARING IN AIR INFORMATION WITH ITS BOOKS OF ACCOUNT WITH NECESSAR Y EVIDENCE. 16 ITA NO.4567/MUM/2016 15. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IN ITA NO. 4862/MUM/2013 IS PARTLY ALLOWED, FOR STATISTICAL PU RPOSE. 16. THE FACTS AND ISSUES INVOLVED IN ITA NO.4918/MUM/20 13 FOR THE ASSESSMENT YEAR 2005-06 ARE IDENTICAL TO THE FACTS AND ISSUES DISCUSSED IN ITA NO.4862/MUM/2013 BUT FOR THE FIGURES. THEREFOR E, FOR THE DETAILED DISCUSSION / REASONS APPENDED IN THE PRECEDING PARA GRAPHS WHILE DECIDING APPEAL IN ITA NO. 4862/MUM/2013, THE APPEAL FILED B Y THE ASSESSEE IN ITA NO.4918/MUM/2013 IS ALSO PARTLY ALLOWED, FOR STATIS TICAL PURPOSE. ITA NOS 4554 & 4556/MUM/2013 17. THE FIRST ISSUE THAT CAME UP FOR OUR CONSIDERATION FROM REVENUES APPEALS IS DELETION OF ADDITION MADE BY THE AO TOWA RDS PROFESSIONAL CHARGES PAID OUTSIDE INDIA WITHOUT DEDUCTION OF TAX AT SOURCE U/S 195 OF THE INCOME-TAX ACT, 1961. THE AO MADE DISALLOWANCE U/S 40A)(I) FOR FAILURE TO DEDUCT TAX AT SOURCE U/S 195 TOWARDS PRO FESSIONAL CHARGES PAID TO NON-RESIDENT, E-GEN CONSULTANTS LTD, BANGLADESH FOR RS.1,30,890. ACCORDING TO THE AO, THE PAYMENT MADE TO E-GEN CONS ULTANTS LTD, BANGLADESH IS IN THE NATURE OF ROYALTY WITHIN THE M EANING OF SECTION 9(1)(VI) AND ARTICLE 13(2) OF THE INDIA BANGLADESH DTAA. 18. THE LD.AR OF THE ASSESSEE AND THE LD.DR AT THE TIME OF HEARING SUBMITTED THAT THE ISSUE IS SQUARELY COVERED IN FAV OUR OF THE ASSESSEE BY THE DECISION OF ITAT IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2003- 04 IN ITA NO.8824/MUM/2004, WHEREIN UNDER SIMILAR C IRCUMSTANCES, THE ITAT OBSERVED THAT PROFESSIONAL CHARGES PAID OUTSID E INDIA DOES NOT FALL IN ANY OF THE TERMS / DEFINITION GIVEN FOR ROYALTY U NDER INDIA AND USA DTAA 17 ITA NO.4567/MUM/2016 OR WITHIN THE MEANING OF ROYALTY AS DEFINED IN SECT ION 9(1)(VI) OF THE INCOME-TAX ACT, 1961. THUS, ON SUCH PAYMENTS, THER E WAS NO LIABILITY TO DEDUCT TAX AT SOURCE AND CONSEQUENTLY, SECTION 40(A )(I) WILL NOT BE APPLICABLE. WE FIND THAT THE CO-ORDINATE BENCH HAS CONSIDERED SIMILAR ISSUE FOR THE ASSESSMENT YEAR 2001-02 IN ASSESSEES OWN CASE. AFTER CONSIDERING THE RELEVANT PROVISIONS OF THE ACT, HAS HELD THAT PROFESSIONAL CHARGES PAID OUTSIDE INDIA DOES NOT FALL UNDER ANY OF THE TERMS OF DEFINITION GIVEN FOR ROYALTY UNDER ARTICLE 12 OF INDO USA DTAA OR SECTION 9(1)(VI) OF THE INCOME-TAX ACT, 1961. THE RELEVANT PORTION OF THE ORDER IS EXTRACTED BELOW:- 18. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS AND ALSO GONE THROUGH THE FINDINGS GIVEN BY THE ASSESSI NG OFFICER AS WELL AS THE CIT(A). THE RELEVANT FACTS ARE THAT THE ASSESSEE COMPANY WAS ENGAGED AS A CONSULTANT BY ESSAR OIL LI MITED TO PROVIDE CONSULTANCY SERVICES IN CONNECTION WITH SAL E OF ITS ENERGY BUSINESS. SUCH A SALE WAS EXPECTED TO REQUIR E APPLICATION OF HIGH LEVEL OFFICE SKILLS BESIDES TEC HNICAL AND INDUSTRY KNOWLEDGE. FOR RENDERING SUCH CONSULTANCY A SIGNIFICANT NUMBER OF SUCH OVERSEAS COMPANIES ARE B ASED IN USA THE ASSESSEE ENGAGED THE SERVICES OF KPMG DALLA S, WHICH IS A FIRM OF INDIVIDUAL AND RESIDENT OF USA, WHICH HAD THE SKILL AND TECHNICAL KNOWLEDGE RELATING TO ENERGY DIVISION BASED INDUSTRY AND TECHNICAL PARAMETERS IN GIVING SUCH CO NSULTATIONS AND CONDUCT NEGOTIATIONS WITH THE POTENTIAL PARTIES . IT WAS IN LIEU OF THIS, THAT A PROFESSIONAL FEE OF USD 46,248 WHICH IN TERMS OF INR COME TO .20,89,906I-, WAS PAID. THE SE COND PAYMENT WAS MADE TO KPMG CONSULTING LP CANADA FOR RENDERING PROFESSIONAL SERVICES FOR THE ESSAR OIL L IMITED FOR RETAIL OIL MARKETING AND OTHER RELATED SERVICES. THE PAYMENT T OWARDS FEE WAS MADE AT USD 30,678/- WHICH IN TERMS OF INR IS .13,37,229/-, WHICH ALSO INCLUDED REIMBURSEMENT OF EXPENSES IN THE NATURE OF TRANSPORTATION, LODGING, MEALS AND OTHER EXPENSES. THE ASSESSING OFFICER HAS GIVEN 18 ITA NO.4567/MUM/2016 CATEGORICALLY FINDING THAT SO FAR AS THE ARTICLE 15 OF DTAJ4 IS CONCERNED, THE SAME DOES NOT APPLY TO KPMG USA AS I T DOES NOT HAVE ANY PE OR BUSINESS BASED IN INDIA AND THE SERVICES WERE NOT RENDERED FOR A PERIOD EXCEEDING 90 DAYS WI THIN THE PERIOD OF 12 MONTHS. HIS ONLY CASE IS THAT THE PROF ESSIONAL FEES PAID TO KPMG USA ARE IN THE NATURE OF ROYALTIES WIT HIN THE MEANINGS OF 'EXPLANATION' TO SECTION 9(1)(VI) AND I S TAXABLE UNDER ARTICLE 12 OF INDO-US DTAA. THE ROYALTIES AND FEES FOR INCLUDED SERVICES IS TAXABLE AS PER ARTICLE 12 IN C LAUSE 3, READS AS UNDER :- '3. THE TERM 'ROYALTIES' AS USED IN THIS ARTICLE ME ANS: (A) PAYMENTS OF ANY KIND RECEIVED AS A CONSIDERATIO N FOR THE USE OF OR THE RIGHT TO USE ANY COPYRIGHT OR A LITER ARY, ARTISTIC OR SCIENTIFIC WORK, INCLUDING CINEMATOGRAPH FILMS OR W ORK ON FILM, TAPE OR OTHER MEANS OF REPRODUCTION FOR USE I N CONNECTION WITH RADIO OR TELEVISION BROADCASTING, A NY PATENT, TRADE MARK, DESIGN OR MODEL, PLAN, SECRET FORMULA O R PROCESS, OR FOR INFORMATION CONCERNING INDUSTRIAL, COMMERCIAL O R SCIENTIFIC EXPERIENCE, INCLUDING GAINS DERIVED FROM THE ALIENATION OF ANY SUCH RIGHT OR PROPERTY WHICH ARE CONTINGENT ON THE PRODUCTIVITY USE OR DISPOSITION T HEREOF: AND' 18.1 LOOKING TO THE NATURE OF PROFESSIONAL SERVICES RENDERED TO THE KPMG USA, IT IS EVIDENT THAT IT DOES NOT FAL L IN ANY OF THE TERMS OF DEFINITION GIVEN FOR ROYALTY UNDER ART ICLE 12 OF INDO US DTAA. IT WAS PURELY A PROFESSIONAL SERVICE FOR CONSULTANCY WHICH WERE RENDERED OUTSIDE INDIA AND N OR FOR SUPPLY OF SCIENTIFIC, TECHNICAL, INDUSTRIAL OR COMM ERCIAL KNOWLEDGE OR INFORMATION. THUS, NATURE OF PAYMENT DO NOT FALL WI THIN THE MEANING OF ARTICLE 12 AND, THEREFORE, THERE WAS NO LIABILITY TO DEDUCT TDS AND CONSEQUENTLY DISALLOWANCE MADE UN DER SECTION 49(LA) IS UNCALLED FOR. SIMILARLY, IN THE C ASE OF PAYMENT MADE TO KPMG, CANADA WERE ALSO PURELY FOR PROFESSIO NAL SERVICES AND REIMBURSEMENT OF EXPENSES, WHICH IN AN Y MANNER DOES NOT FALL UNDER ARTICLE 12. THUS, ON SUCH PAYME NT ALSO THERE WAS NO LIABILITY TO DEDUCT TDS AND CONSEQUENTLY SEC TION 40(IA) WILL NOT BE APPLICABLE. THE FINDING OF THE CIT(A) I S, THUS, UPHELD. ACCORDINGLY, GROUND NO.1 AS RAISED BY THE DEPARTMEN T IS DISMISSED. 19 ITA NO.4567/MUM/2016 19. IN THIS VIEW OF THE MATTER AND BEING CONSISTENT WIT H THE EARLIER DECISION TAKEN BY THE CO-ORDINATE BENCH IN ASSESSEES OWN CA SE FOR THE EARLIER ASSESSMENT YEAR, WE ARE OF THE VIEW THAT THERE IS N O OBLIGATION ON THE PART OF THE ASSESSEE TO DEDUCT TAX AT SOURCE ON PROFESSIONA L CHARGES PAID TO E-GEN CONSULTANTS LTD, BANGLADESH AS SUCH PAYMENT NEITHER FALLS UNDER THE DEFINITION OF ROYALTY UNDER ARTICLE 12 OF INDO-BA NGLADESH DTAA OR UNDER EXPLANATION TO SECTION 9(1)(VI) OF THE INCOME-TAX A CT, 1961. THE CIT(A), AFTER CONSIDERING RELEVANT FACTS, HAS RIGHTLY DELET ED ADDITION MADE BY THE AO. WE DO NOT FIND ANY ERROR IN THE ORDER OF THE C IT(A). HENCE, WE ARE INCLINED TO UPHOLD THE ORDER OF CIT(A) AND REJECT G ROUND RAISED BY THE REVENUE. 20. THE NEXT ISSUE THAT CAME UP FOR OUR CONSIDERATION I S DISALLOWANCE OF SUPPORT SERVICE CHARGES PAID TO KPMG. THE FACTS WI TH REGARD TO THE IMPUGNED DISALLOWANCES ARE THAT THE ASSESSEE HAS MA DE PAYMENT TO KPMG TOWARDS SHARING COMMON FACILITIES LIKE INFRAST RUCTURE COST, COMMUNICATION EXPENSES, TECHNOLOGY COST AND OFFICE SUPPLIES. THE ASSESSEE HAS MADE THE PAYMENT ON THE BASIS OF AGREE MENT ENTERED INTO WITH KPMG. AS PER THE AGREEMENT, THE ASSESSEE HAS AGREED TO USE COMMON FACILITIES AND ALSO AGREED TO SHARE EXPENSES INCURRED IN SUCH FACILITIES ON COST TO COST BASIS. THE AO MADE ADDI TION TOWARDS SUPPORT SERVICE CHARGES ON THE GROUND THAT THE IMPUGNED PAY MENTS ARE IN THE NATURE OF CONTRACTUAL PAYMENTS COMING WITHIN THE DE FINITION OF CONTRACTS AS DEFINED IN SECTION 194C OF THE ACT. ACCORDING T O THE AO, THE ASSESSEE 20 ITA NO.4567/MUM/2016 HAS MADE THE IMPUGNED PAYMENTS AS PER THE SUPPORT S ERVICE AGREEMENT WITH KPMG WHICH IS BASICALLY IN THE NATURE OF CONTR ACT BETWEEN THE ASSESSEE COMPANY AND KPMG. THE AO RELYING UPON THE CBDT CIRCULAR NO.681 DATED 08-03-1994 CAME TO THE CONCLUSION THAT ALL TYPES OF CONTRACTS WHERE CARRYING OUT ANY WORK INCLUDING TRA NSPORT CONTRACTS, SERVICE CONTRACTS AND ADVERTISEMENT CONTRACTS, COME WITHIN THE MEANING OF CONTRACT AS DEFINED IN SECTION 194C. IT IS TH E CONTENTION OF THE ASSESSEE THAT PAYMENT MADE TO KPMG IS REIMBURSEMENT OF ACTUAL EXPENDITURE INCURRED FOR COMMON FACILITIES LIKE COM MUNICATION COST, TECHNOLOGY COST AND OFFICE SUPPLIES. M/S KPMG HAS PROCURED SUCH SERVICE FROM VARIOUS VENDORS ON PAYMENT AND ALLOCATED THE C OST OF PROCUREMENT OF SERVICES TO VARIOUS GROUP COMPANIES ON THE BASIS OF AGREEMENT ENTERED INTO WITH ITS GROUP COMPANIES. KPMG HAS COMPLIED W ITH TDS PROVISIONS WHEREVER APPLICABLE WHILE MAKING PAYMENT TO VENDORS . THEREFORE, THE PAYMENT MADE BY THE ASSESSEE TO KPMG IS ONLY REIMBU RSEMENT OF EXPENSES CANNOT BE CALLED AS PAYMENTS MADE FOR CARR YING OUT ANY WORK. 21. WE HAVE HEARD BOTH THE PARTIES AND CONSIDERED MATER IAL AVAILABLE ON RECORD. THE FACTS WITH REGARD TO SHARING OF COM MON EXPENSES BY KPMG AND ITS GROUP COMPANIES ARE NOT DISPUTED BY TH E AO. THE AO IS ONLY ON THE POINT THAT THE PAYMENT MADE BY THE ASSE SSEE ARE IN THE NATURE OF CONTRACTUAL PAYMENTS COMING UNDER THE DEF INITION OF CONTRACTS AS DEFINED U/S 194C OF THE INCOME-TAX ACT, 1961. W E DO NOT FIND ANY MERIT IN THE FINDINGS OF THE AO FOR THE REASON THAT THERE IS NO CONTRACT 21 ITA NO.4567/MUM/2016 BETWEEN THE ASSESSEE AND KPMG FOR CARRYING OUT ANY WORKS. THE ASSESSEE AS PART OF THE KPMG GROUP OF COMPANIES AGR EED TO SHARE COMMON FACILITIES LIKE INFRASTRUCTURE COST AND OFFI CE SUPPLIES. SUCH COSTS ARE INCURRED BY KPMG ON PAYMENT AND THE SAME HAS BE EN ALLOCATED TO GROUP OF COMPANIES ON COST TO COST BASIS WITHOUT AN Y ELEMENT OF PROFIT. THE ASSESSEE BEING PART OF KPMG GROUP HAS USED COMM ON FACILITIES PROVIDED BY KPMG FOR WHICH IT HAS REIMBURSED EXPEND ITURE INCURRED BY KPMG ON COST TO COST BASIS. THEREFORE, WE ARE OF T HE VIEW THAT THE IMPUGNED PAYMENTS ARE ONLY IN THE NATURE OF REIMBUR SEMENT OF ACTUAL EXPENDITURE INCURRED BY THE ASSESSEE FOR WHICH PROV ISIONS OF SECTION 194C HAS NO APPLICATION. THE ASSESSEE IS NOT UNDER OBLI GATION TO DEDUCT TAX AT SOURCE ON AMOUNT REIMBURSED ON ACTUAL COST BASIS. THE CIT(A), AFTER CONSIDERING RELEVANT SUBMISSIONS HAS RIGHTLY DELETE D ADDITIONS MADE BY THE AO. WE DO NOT FIND ANY ERROR IN THE ORDER OF T HE CIT(A); HENCE, WE ARE INCLINED TO UPHOLD THE ORDER OF CIT(A) ON THIS ISSUE AND REJECT GROUND RAISED BY THE REVENUE. 22. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS D ISMISSED. ITA NO.4554/MUM/2013 23. THE FACTS AND ISSUES INVOLVED IN ITA NO.4554/MUM/20 13 ARE IDENTICAL TO THE FACTS AND ISSUES IN APPEAL NO.4556 /MUM/2013 ALREADY DISCUSSED / DECIDED BY US BUT FOR THE FIGURES. THE REFORE, OUR DECISION IN THE PRECEDING PARAGRAPHS APPLIES MUTATIS MUTANDIS T O THE PRESENT APPEAL ALSO. THEREFORE, WE ARE OF THE VIEW THAT THERE IS NO MERIT IN THE APPEAL 22 ITA NO.4567/MUM/2016 FILED BY THE REVENUE. HENCE, WE DISMISS THE SAME. 26. IN THE RESULT, APPEALS FILED BY THE ASSESSEE ARE PA RTLY ALLOWED AND APPEALS FILED BY THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH OCTOBER, 2017. SD/- SD/- (C.N. PRASAD) (G MANJUNATHA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DT : 13 TH OCTOBER, 2017 PK/- COPY TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR /TRUE COPY/ BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI