ACIT 11(2), MUMBAI V. DELOITE HASKINS & SELLS, MUMBAI

ITA 4844/MUM/2011

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 9827 (ITAT-MUMBAI)
• Duration Of Justice: 6 year(s) 9 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-03-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: L
• Next Hearing Date: 17-01-2017
• Assessment Year: 2006-2007
• Appeal Filed On: 16-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P V RAJGURU
• Assessee Lawyers: P J PARDIWALA
• Keywords: Business income; Business expenditure; Residential status; Double taxation relief; Diversion of income; Retrospective amendment; Additional evidence; Permanent establishment; Tax effect
• Section: 244A

Judgement Text

INCOME-TAX AP PELLATE TRIBUNAL LBENCH MUMBAI , , BEFORE S/SH. RAJENDRA,ACCOUNTAN T MEMBER & RAVISH SOOD, JUDICIAL MEMBER ./I.T.A./4844/MUM/2011, /ASSESSMENT YEAR: 2006-07 ./I.T.A./2768/MUM/2013, /ASSESSMENT YEAR: 2008-09 THE ASTT. CIT-11(2) ROOM NO.479, 4 TH FLOOR AAYAKAR BHAVAN, M.K. ROAD MUMBAI-400 020. VS. M/S. DELOITTE HASKINS & SELLS 264-265, VASWANI CHAMBERS DR. ANNIE BESANT ROAD,WORLI MUMBAI-400 030. PAN:AACFD 4815 A ( /APPELLANT ) ( / RESPONDENT ) ./I.T.A./5095/MUM/2011, /ASSESSMENT YEAR: 2006-07 ./I.T.A./6786/MUM/2011, /ASSESSMENT YEAR: 2007-08 ./I.T.A./2221/MUM/2013, /ASSESSMENT YEAR: 2008-09 M/S. DELOITTE HASKINS & SELLS MUMBAI-400 030. VS. THE ASTT. CIT-11(2) MUMBAI-400 020. ( /APPELLANT ) ( / RESPONDENT ) REVENUE BY: SHRI P.V. RAJGURU- SR. DR ASSESSEE BY: SHRI P.J. PARDIWALA AND MS. VASANTI PATEL / DATE OF HEARING: 03/01/2018 / DATE OF PRONOUNCEMENT: 23/03/2018 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) , - PER RAJENDRA, AM - CHALLENGING THE ORDERS OF THE CIT (A)-3,MUMBAI, THE ASSESSEE AND THE ASSESSING OFFICER(AO) HAVE FILED ABOVE APPEALS.FOR THE AY.S 2006-07 AND 2 008-09 THERE ARE CROSS APPEALS,WHEREAS FOR THE AY.2007-08,ONLY THE ASSSESSEE HAS FILED THE APP EALS.AS THE ISSUES INVOLVED IN ALL THESE APPEALS ARE ALMOST COMMON,SO,WE ARE ADJUDICATING TH EM TOGETHER. ASSESSEE IS A FIRM OF CHARTERED ACCOUNTANTS.THE DET AILS OF DATES OF FILING OF RETURNS OF INCOME, RETURNED INCOMES, DATES OF ASSESSMENT AND ASSESSED INCOMES AND DATES OF THE ORDERS OF THE CIT(A) ETC. CAN BE SUMMARISED AS UNDER: A.Y. ROI FILED ON RETURNED INCOME ASSESSMENT DT. ASSESSED INCOME CIT(A) ORDER DATE 2006-07 19/10/2006 RS.4.62 CRORES 30/12/2008 RS.5.4 3 CRORES 30/03/2011 2007-08 27/10/2007 RS.10 CRORES 30/12/2009 RS.11.14 CRORES 01/08/2011 2008-09 30/09/2008 RS.8.99 CRORES 31/12/2010 RS.21. 29 CRORES 17/01/2013 ITA/4484/MUM/2011-AY.2006-07: 4844/MUM/2011,(06-07)&2768/MUM/2013,(08-09)+3 , DELOITTE 2 2. THE DEPARTMENTAL REPRESENTATIVE(DR)AND THE AUTHORIS ED REPRESENTATIVE(AR) AGREED THAT THE TAX EFFECT IN THE CASE UNDER CONSIDERATION WAS BELO W THE TAX LIMIT,PRESCRIBED BY THE CBDT FOR FILING APPEALS BEFORE THE TRIBUNAL.THEREFORE,WE DIS MISS THE APPEAL,FILED BY THE AO,FOR THE AY. 2006-07,CONSIDERING THE LOW TAX EFFECT INVOLVED. ITA/5095/MUM/2011,AY.2006 - 07: 3. DURING THE COURSE OF HEARING BEFORE US,THE AR STATE D THAT ASSESSEE WAS NOT INTERESTED IN PRESSING GROUND NUMBER FOUR,CONSIDERING THE SMALLNE SS OF THE TAX EFFECT.IT DEALS WITH DISALLOW- ANCE MADE U/S.40(I)(A)OF THE ACT FOR SPONSORSHIP FE E PAID TO DELOITTE TOUCHE TOHMATSU,SWITZER- LAND(DTT SL).WE DISMISS THE GROUND,AS NOT PRESSED. 4. FIRST EFFECTIVE GROUND OF APPEAL(GS.AO.1-3),RAISED BY THE ASSESSEE,IS ABOUT CONFIRMING THE DISALLOWANCE OF PROFESSIONAL FEES PAID BY IT TO D ELOITTE & TOUCHE,SINGAPORE(DTS), DELOITTE & TOUCHE,LLP USA(DTL US),DELOITTE TOUCHE TOHMATSU LTD .,AUSRALIA(DTTL AUS)AMOUNTING TO RS. 22.83 LAKHS,RS.1.56 LAKHS,RS.1.64 LAKHS RESPECT IVELY. 4.A. DURING THE ASSESSMENT PROCEEDINGS,THE AO FOUND THAT ASSESSEE HAD MADE PAYMENT OUTSIDE INDIA,UNDER THE HEAD SUBSCRIPTION FEESOF RS.36.31 LAKHS,THAT IT HAD NOT DEDUCTED TAX AT SOURCE FOR SUCH PAYMENT,THAT OUT PAYMENT MADE TO DTT SL OF RS. 31.33 LAKHS IT HAD MADE TDS FOR PAYMENT OF RS.27.23 LAKHS,THAT FOR BALANCE PAYMENT OF RS.4.10 LAKHS TAX WAS NOT DEDUCTED BEFORE MAKING THE PAYMENT,HE DIRECTED IT TO EXPLAIN AS TO WHY THE SAID PAYMENTS SHOULD NOT BE DISALLOWED FOR NON DEDUCTION OF TDS.IN RESPONSE,THE ASSESSEE FILED DETAILED REPLY ON 26.12.2008. AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE,HE RELIED UPON THE ORDER OF THE THEN AO FOR THE AY.S 2004-05 AND 2005-06 AND HELD THAT THE FACTS AN D CIRCUMSTANCES PERTAINING TO THE ISSUE REMAINED THE SAME.HE MADE A DISALLOWANCE OF RS. 41. 36 LAKHS TO THE INCOME OF THE ASSESSEE. 4.1. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE PREF ERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY(FAA)AND MADE ELABORATE SUBMISSIONS. AFTER CONSIDERING THE AVAILABLE MATERIAL, THE FAA HELD THAT WHILE DECIDING THE APPEAL FOR THE AY. 2003-04 THE THEN FAA HAD DELIBERATED UPON THE ISSUE AT LENGTH,THAT THE PAYMENT OF FEE BY THE ASSESSEE WAS COVERED UNDER THE PROVISIONS OF SECTION 9(1) OF THE ACT,THAT PAYMENTS MADE BY IT WE RE LIABLE FOR DEDUCTION OF TAX AT SOURCE,THAT THE DISPUTED AMOUNTS DEEMED TO ACCRUE/ARISE IN INDI A UNDER SECTION 9 OF THE ACT. 4844/MUM/2011,(06-07)&2768/MUM/2013,(08-09)+3 , DELOITTE 3 4.1.A. THE FAA DIRECTED THE ASSESSEE TO FILE THE COMPLETE DETAILS OF NATURE OF SERVICES RENDERED BY DTS.AFTER CONSIDERING THE SUBMISSION,SHE HELD THAT THE ASSESSEE HAD MADE TWO PAYMENTS (RS. 33,117/-AND RS.1.32 LAKHS)TO SINGAPORE ENTITY IN RE SPECT OF WHICH NO SPECIFIC DETAILS WERE FURNISHED, THAT THE ASSESSEE HAD CHOSEN TO WITHHOLD THE NAMES OF THE CLIENTS AND THE DETAILS OF THE BUSINESS ARRANGEMENTS, THAT IT WAS NOT POSSIBLE TO ASCERTAIN WHAT WAS THE NATURE OF SERVICES PROVIDED,THAT IN ABSENCE OF THE DETAILS IT WAS NOT CLEAR AS TO WHETHER ARTICLE 12 OF THE INDIA- SINGAPORE TREATY WOULD BE APPLICABLE FOR THE PAYMEN TS MADE TO DTS.SHE CONFIRMED THE ADDITION MADE BY THE AO IN THAT REGARD.ABOUT THE PAYMENT OF RS. 10.93 LAKHS AND RS. 10.24 LAKHS,SHE OBSERVED THAT DTS WAS APPOINTED REPORTING ACCOUNTAN T FOR ONE INDIAN PARTY, NAMELY ALOK INDUSTRIES LTD.(ALOK),THAT THE SERVICES PROVIDED BY DTS WOULD SQUARELY FALL UNDER THE PROVISIONS OF ARTICLE 14 OF THE INDIA-SINGAPORE DTAA,THAT THE SINGAPORE ENTITY WAS THE REPORTING ACCOUNT- TANT OF ALOK,THAT IT WAS REQUIRED TO ISSUE AN AUDIT OPINION IN RESPECT OF VARIOUS MATTERS PERTAINING TO ALOK,THAT FOR ISSUING FINANCIAL STATEMENTS PARTN ERS OF SINGAPORE ENTITY WOULD HAVE VISITED INDIA,THAT ASSESSEE DID NOT FILE DETAILS IN THAT RE GARD, THAT IT WAS NOT EXPLAINED AS TO HOW DTS PERFORM THE JOB OF AUDITING WITHOUT ACCESS TO THE B OOKS OF ACCOUNTS, THAT ALOK HEAD A FIXED PLACE IN INDIA,THAT THE PAYMENT WAS ATTRIBUTABLE TO THE A CTIVITIES CARRIED OUT BY ALOK,THAT THE PAYMENT WAS TAXABLE IN INDIA,THAT THE AO WAS JUSTIFIED IN D ISALLOWING THE AMOUNT. WITH REGARD TO PAYMENT OF TWO SUMS(RS.44,841/-AND RS.1.54 LAKHS),THE FAA H ELD THAT THE SAID AMOUNTS HAD NOT FALL WITHIN THE PURVIEW OF ARTICLE 12/14 OF THE DTAA, TH AT THE DISPUTED PAYMENTS COULD NOT BE CONSIDERED BUSINESS INCOME/PROFIT,THAT THE CONDITIO N OF EXISTENCE OF PERMANENT ESTABLISHMENT (PE)WAS NOT SATISFIED.ACCORDINGLY,SHE DELETED THE D ISALLOWANCE OF THE SAID TWO SUMS. 4.1.B. WITH REGARD TO PAYMENTS(RS.9.83 LAKHS)MADE BY THE A SSESSEE TO DTL US,IT WAS SUBMITTED BEFORE THE FAA THAT PAYMENTS WERE MADE ON SEVEN COU NTS(RS.1.56 LAKHS +RS.1.45 LAKHS + RS. 2. 93 LAKHS +RS.62,457/-+ RS. 49,966/-+ RS.2.31 LAKHS+ RS.45,051/-),THAT THE USA ENTITY HAD RENDERED PROFESSIONAL SERVICES OUTSIDE INDIA,THAT N O TAX WAS DEDUCTED AT SOURCE ON THE BASIS OF THE CERTIFICATE OBTAINED FROM A CHARTERED ACCOUNTAN T,THAT PAYMENT OF PROFESSIONAL FEE WAS NOT LIABLE TO TAXED IN INDIA IN VIEW OF ARTICLE XV OF T HE INDIA-USA TAX-TREATY.IT ALSO MADE A REFERENCE TO ARTICLE 12 OF THE DTAA. AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE,TH E FAA HELD THAT RS. 1.45 LAKHS, RS.2.19LAKHS, RS.62,457/-,RS.49,966/-AND RS. 45,051/- WERE PAID T O REVIEW OF FORM NUMBER F3 FOR HDFC 4844/MUM/2011,(06-07)&2768/MUM/2013,(08-09)+3 , DELOITTE 4 BANK LTD, REVIEW OF FORMS NUMBER 20F, 6K AND F3 FOR REDIFF.COM AND REVIEW OF STC LETTER FOR REDDIF.COM. RESPECTIVELY,THAT THE PAYMENTS WERE NOT MADE FOR TECHNICAL SERVICES OR INDEPENDENT PERSONAL SERVICES, AS ENVISAGED BY ARTICLES 12 OR 1 4 OF THE TAX-TREATY,THAT THERE WAS NO LIABILITY TO DEDUCT TAX WHILE MAKING REMITTANCES.WITH REGARD TO PAYMENT OF PROFESSIONAL SERVICES OF RS. 1.56 LAKHS IN CONNECTION WITH REVIEW OF MAILLIE FALCONIE RO AND ZENTA INC,SHE OBSERVED THAT THE AO WAS JUSTIFIED IN DISALLOWING THE SAID PAYMENTS,INVO KING THE PROVISIONS OF 40(A)(I) OF THE ACT. 4.1.C. THE ASSESSEE,DURING THE APPELLATE PROCEEDINGS BEFOR E THE FAA,SUBMITTED THAT DTLL AUS HAD RENDERED PROFESSIONAL SERVICES OUTSIDE INDIA,TH AT IT MADE THE PAYMENT WITHOUT DEDUCTING TAX AT SOURCE ON THE BASIS OF THE CERTIFICATE OBTAINED FROM A CHARTERED ACCOUNTANT,THAT THE PAYMENT WAS NOT TAXABLE INDIA AS PER THE PROVISIONS OF ARTI CLE XII OF THE INDIA-AUSTRALIA TEXT TREATY.IT REFERRED TO ARTICLE VII(1) OF THE DTAA. THE FAA,AFTER CONSIDERING THE DETAILS FURNISHED BEF ORE HER,HELD THAT AUSTRALIAN ENTITY HAD RENDERED SERVICES IN CONNECTION WITH PROVIDING TAX ADVISES ON ASSIGNEE OF AVAYA GLOBALCONNECT, WORKING IN AUSTRALIA,THAT THE PERSON IN RESPECT OF HOME ENQUIRY WAS MADE WAS NOT DISCLOSED BY THE ASSESSEE.REFERRING TO THE PROVISIONS OF ARTICLE XII(3)(C)AND(D)OF THE INDIA AUSTRALIA DTAA, SHE HELD THAT THE AO HAD RIGHTLY MADE THE DISALLOWA NCE OF RS. 1.64 LAKHS. 4.2. BEFORE US,THE AR ARGUED THAT THE ASSESSEE HAD MADE PAYMENTS TO GROUP COMPANIES,THAT IN CASE OF DTT AUS,ONE OF THE FOUR,NON-RESIDENT ENTITI ES,IDENTICAL ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL VIDE ITS ORDER DTD.30. 11.2016 (ITA.S/5096,5097 AND 5094/MUM/ 201,AY.S 2003-04 TO 2005-06).. 4.2.A. WITH REGARD TO THE PAYMENTS MADE TO DTS AND DTL US, HE STATED THAT THE DTAA.S ENTERED INTO WITH BOTH THE COUNTRIES CONTAINED MAKE AVAILAB LE CLAUSE,THAT UNDER THE ACT THE PAYMENTS WERE NOT TAXABLE,THAT SERVICES RENDERED BY BOTH THE ENTITIES WERE PROFESSIONAL SERVICES AND NOT TECHNICAL SERVICES,THAT BOTH OF THEM DID NOT HAVE P ERMANENT ESTABLISHMENT IN INDIA,THAT THE FAA PUT NEGATIVE ONUS ON THE ASSESSEE WITH REGARD TO DI SALLOWANCE CONFIRMED IN THE CASE OF DTL US.HE REFERRED TO PAGE 140 OF THE PB AND ARTICLE XI I OF THE DTAA AND STATED THAT NOTHING WAS MADE AVAILABLE TO THE ASSESSEE,THAT NO TECHNICAL SE RVICES WERE RENDERED BY DTL US TO THE ASSESSEE. 4844/MUM/2011,(06-07)&2768/MUM/2013,(08-09)+3 , DELOITTE 5 ABOUT DTS,HE STATED THAT THE ASSESSEE HAD FURNISHED ALL THE NECESSARY DETAILS DURING THE ASSESSMENT PROCEEDINGS,THAT OUT OF FOUR BILL TWO BI LLS DID NOT CARRY THE NAMES,THAT UNDER THE PROVISIONS OF THE ACT THE DISPUTED PAYMENTS WERE NO T TAXABLE,THAT SAME WERE NOT TAXABLE UNDER THE DTAA ,THAT THE SERVICES RENDERED WERE NOT EXCLU SIONARY,HE REFERRED TO ART.XII OF THE TAX- TREATY AND STATED THAT BURDEN WAS ON THE AO TO PROV E THAT INCOME WAS CHARGEABLE TO TAX UNDER THE DTAA.HE RELIED UPON THE CASE OF MOTORALA INC.(95 IT D 269),DELIVERED BY THE SPECIAL BENCH OF THE TRIBUNAL.THE DR RELIED UPON THE ORDERS OF THE D EPARTMENTAL AUTHORITIES. 4.3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT IN CASE OF DTT AUS,IDENTICAL ISSUE WAS DELIBERATED UPON AND DECIDED BY THETRIBUNAL,WHILE ADJUDICAT- ING THE APPEAL FOR THE AY.S 2003-04 TO 2005-06 (SUP RA).WE ARE REPRODUCING THE RELEVANT PORTION OF THE ORDER,DEALING WITH PAYMENT MADE TO AUSTRALIA N ENTITY AND SAME READS AS UNDER: 25.AS REGARDS SECOND ISSUE RAISED IN GROUND NO.2 TH E ASSESSEE HAS CHALLENGED THE DISALLOWANCE OF RS.1,16,693/- MADE U/S 40(A) (I) IN RESPECT OF P AYMENT OF PROFESSIONAL FEES MADE TO DTT AUSTRALIA ON THE GROUND THAT THE ASSESSEE SHOULD HA VE DEDUCTED TDS. ADMITTEDLY, HERE IN THIS CASE ALSO, THE OBSERVATION AND FINDING OF THE AO AS WELL AS CIT(A) ARE EXACTLY THE SAME. REGARDING RENDERING OF PROFESSIONAL SERVICES BY DTT AUSTRALIA, IT WAS SUBMITTED THAT THE ASSESSEE HAD SOUGHT PROFESSIONAL SERVICE IN RESPECT OF SYDNEY STRAT. OS SERVICE CENTRE AUDIT FOR ONE OF THE ASSESSEE S CLIENT NAMELY, VATICO INDIA (MUMBAI) FOR THE YEAR ENDING 31ST DECEMBER, 2002. THE ENTIRE PROFESSIONAL SERVICES WE RE RENDERED OUTSIDE INDIA. DTT AUSTRALIA RAISED INVOICE FOR RS.1,60,693/- WHICH WAS REMITTED WITHOUT DEDUCTION OF TAX AT SOURCE BASED ON CERTIFICATE OBTAINED FROM CHARTERED ACCOUNTANT. SIM ILAR SUBMISSION WAS MADE BY THE ASSESSEE WITH REGARD TO THIS PAYMENT. OUR FINDING GIVEN IN R ESPECT OF DTT CANADA AS WELL AS DTT NEW ZEALAND WILL APPLY MUTATIS MUTANDIS QUA THIS PAYMEN T ALSO. IN VIEW OF OUR FINDING GIVEN ABOVE, THE PAYMENT OF PROFESSIONAL FEE TO DTT AUSTRALIA IS HELD NOT TO BE TAXABLE U/S 9(1)(I) OR 9(1)(VII) OR IN TERMS OF ARTICLE 12(4) OF DTAA, WHICH HAS MA KE AVAILABLE CLAUSE AND IS SIMILAR TO INDIA CANADA DTAA. THUS, THE DISALLOWANCE MADE BY THE AO AND AS CONFIRMED BY THE CIT (A) IS DIRECTED TO BE DELETED. ACCORDINGLY, GROUND NO.2 IS ALLOWED. RESPECTFULLY,FOLLOWING ABOVE,WE HOLD THAT THE PROFE SSIONAL FEES PAID BY THE ASSESSEE TO DTLL AUS WAS NOT TAXABLE IN INDIA,THAT THE FAA AND THE A O WERE NOT JUSTIFIED IN INVOKING THE PROVISIONS OF 40(A)(I)OF THE ACT.GOA.3 IS DECIDED I N FAVOUR OF THE ASSESSEE. 5.1. WE WOULD ALSO LIKE TO REPRODUCE THE FINDINGS GIVEN BY THE TRIBUNAL,IN THE ORDER FOR THE AY. 2003-04 TO 2005-06(SUPRA),FOR PAYMENTS MADE TO THE CANADIAN AND NEW ZEALAND ENTITIES,UNDER THE HEAD PROFESSIONAL SERVICES.THE TRIBUNAL HAS MEN TIONED ABOUT BOTH THE ENTITIES IN THE PRECEDING PARAGRAPHS AND THE ORDER IS VERY RELEVANT FOR DECIDING THE FIRST TWO GROUNDS.THE ORDERS OF THE AO AND FAA FOR THE YEAR UNDER CONSIDERATION ARE ALMOST SAME THAT OF THE EARLIER YEARS.THE 4844/MUM/2011,(06-07)&2768/MUM/2013,(08-09)+3 , DELOITTE 6 AR AND THE DR HAD ADVANCED THE IDENTICAL ARGUMENTS BEFORE THE TRIBUNAL.WE ARE REPRODUCING THE ORDER OF THE TRIBUNAL FOR THE EARLIER YEARS(SUP RA)AND IT READS AS UNDER: 16. NOW,WE SHALL ADVERT TO THE SECOND ISSUE OF DISA LLOWANCE OF PAYMENT OF PROFESSIONAL FEES IN RESPECT OF TWO PARTIES UNDER 40(A)(I)(A)(I); NAM ELY: (I) DTT (DELOITTE TOUCHE TOHMATSU) CANADA OF RS.2,90,000/-; AND (II) DTT (DELOITTE TOU CHE TOHMATSU) NEW ZEALAND OF RS.1,45,290/- .REGARDING PAYMENT TO DTT CANADA, IT WAS SUBMITTED THAT, THE ASSESSEE WAS APPOINTED BY PUNJAB AGRO INDUSTRIAL CORPORATION LTD., A GOVERNMENT OF P UNJAB ENTERPRISE TO CARRY OUT A STUDY OF THE DAIRY SECTOR AND ASSIST THE GOVERNMENT IN DEVELOPME NT OF ITS BUSINESS PLAN. IN THE PROCESS OF PROVIDING THE ABOVE SERVICES, THE APPELLANT AVAILED SERVICES OF DTT, CANADA, WHO HAD RENDERED THE PROFESSIONAL SERVICES IN RESPECT OF PROVIDING INFORMATION OF THE GLOBAL ENVIRONMENT IN THE DAIRY SECTOR IN RESPECT OF THE MARKETS, COMPETITION , TECHNOLOGY AND REGULATIONS AND OTHER BEST PRACTICES FOLLOWED BY THE GLOBAL PLAYERS. THE ENTIR E SERVICES IN RELATION TO THIS JOB WERE PERFORMED OUTSIDE INDIA BY THE DTT AND IN RESPECT O F THE AFORESAID SERVICES IT RAISED THE INVOICE DATED 23 OCTOBER 2002 FOR AN AMOUNT OF USD 6,000. T HE ASSESSEE MADE REMITTANCE TO THE DTT, CANADA WITHOUT DEDUCTION OF TAX AT SOURCE BASED ON THE CERTIFICATE OBTAINED FROM A CHARTERED ACCOUNTANT IN A PRESCRIBED FORM. THE LD. COUNSEL BE FORE US HAD STATED THAT, RELATIONSHIP BETWEEN THE ASSESSEE AND DTT CANADA WAS OCCASIONAL AND THER E IS ABSOLUTELY NO BUSINESS CONNECTION OF DTT CANADA IN INDIA IN TERMS OF SECTION 9(1)(I) AND SINCE SERVICES HAVE BEEN RENDERED OUTSIDE INDIA, THEREFORE, IT CANNOT BE TAXED IN INDIA. THE ASSESSING OFFICER HAS MADE DISALLOWANCE UNDER 40(A)(I)(A)(I) ON THE GROUND THAT, IN SOME OF THE C ASES, THE ASSESSEE ITSELF HAS DEDUCTED TDS AND IN SOME IT DOES NOT. WITH REGARD TO THIS ALLEGATION, I T HAS BEEN CLARIFIED BEFORE US THAT IN RESPECT OF OTHER DTT ENTITIES, THE PROFESSIONAL PEOPLE HAD COM E TO INDIA FOR RENDERING OF THE SERVICES AND THAT IS WHY THE ASSESSEE HAD DEDUCTED THE TDS. BUT IN THESE TWO CASES, SERVICES WERE RENDERED OUTSIDE INDIA, THEREFORE, SAME IS NOT LIABLE TO BE TAXED IN INDIA. HERE AGAIN, THE ALLEGATION OF THE ASSESSING OFFICER HAS BEEN THAT, ASSESSEE SHOULD HA VE SOUGHT APPROVAL UNDER SECTION 195 WITHOUT GIVING ANY COGENT REASON AS WHY AND HOW SUCH PROFES SIONAL FEES PAYABLE TO NON-RESIDENT ENTITY IS TAXABLE EITHER UNDER THE ACT OR IN TERMS OF DTAA. T HE LD. CIT(A), CAME TO DIFFERENT CONCLUSION AND FINDING THAT IT IS IN THE NATURE OF FEES FOR T ECHNICAL SERVICES , WHICH WAS NOT THE CASE OF AO. SHE REFERRED TO THE DECISION OF ITAT MUMBAI BENCH I N THE CASE OF ASHAPURA MINICHEM VS. ADIT, REPORTED IN [2010] 5 TAXMAN.COM 57 AND AFTER QUOTIN G THE SAID DECISION, SHE OBSERVED THAT, IF FEE FOR TECHNICAL SERVICESIS RENDERED OUTSIDE IND IA THE SAME IS TAXABLE IN VIEW OF RETROSPECTIVE AMENDMENT TO SECTION 9(1)(VII) BROUGHT BY FINANCE A CT, 2010, WHICH ENVISAGES/CLARIFIES THAT IT IS NOT NECESSARY THAT SERVICES SHOULD HAVE BEEN RENDER ED IN INDIA. ACCORDINGLY, SHE CONCLUDED THAT, THE PAYMENT HAS TO BE RECKONED UNDER SECTION 9(1)(V II) BEING FEE FOR TECHNICAL SERVICES . NOT ONLY THAT, SHE FURTHER HELD THAT THE PAYMENT MADE T O DTT CANADA ALSO FALLS UNDER ARTICLE 12(3)(A) AND ARTICLE 12(4)(A). 17. FROM THE PERUSAL OF THE IMPUGNED ORDERS AND MAT ERIAL ON RECORD, FIRST OF ALL, WE ARE UNABLE TO APPRECIATE THE APPROACH OF THE ASSESSING OFFICER F OR THE REASON THAT HE HAS NOT GIVEN ANY FINDING AS TO HOW THE PAYMENT OF FEES FOR PROFESSIONAL SER VICES WHICH HAS BEEN PAID TO DTT CANADA IS TAXABLE IN INDIA EITHER IN TERMS OF THE PROVISIONS OF THE ACT OR UNDER ANY ARTICLE OF THE DTAA. IF THE PAYMENT HAS BEEN MADE TO NON-RESIDENT, THEN IT HAS TO BE SEEN FIRSTLY, WHETHER UNDER THE TERMS OF DTAA SUCH A FEE OR PAYMENT IS TAXABLE IN INDIA O R NOT AND IF NOT, THEN WHETHER IT IS TAXABLE IN TERMS OF INCOME TAX ACT.WITHOUT ANY FINDING QUA THE TAXABILITY OF THE PAYMENT, HOW DISALLOWANCE U/S40(A)(I) CAN BE MADE.THE LD. CIT(A) TOO WITHOUT ANALYZING THE FACTUAL ASPECT AND ASCERTAINING THE NATURE OF PAYMENT HAS SIMPLY CAME TO A CONCLUSI ON SANS ANY FINDING BY THE AO THAT THE IMPUGNED PAYMENT IS TAXABLE AS FEE FOR TECHNICAL S ERVICES . SHE SIMPLY REFERRED TO A DECISION OF TRIBUNAL AND H ELD THAT RETROSPECTIVE AMENDMENT WHICH HAS BEEN BROUGHT IN SECTION 9(1)(VII) BY THE FINANCE AC T, 2010, WHEREBY IT HAS BEEN CLARIFIED THAT, IF THE TECHNICAL SERVICES HAVE BEEN RENDERED OUTSIDE I NDIA THEN ALSO SAME IS TAXABLE IN INDIA. BEFORE 4844/MUM/2011,(06-07)&2768/MUM/2013,(08-09)+3 , DELOITTE 7 COMING TO THIS CONCLUSION, SHE HAS NOT GIVEN ANY FI NDING WHATSOEVER HOW SUCH A PAYMENT OF FEES FOR RENDERING OF PROFESSIONAL SERVICES FALLS WITHIN THE AMBIT OF FEES FOR TECHNICAL SERVICES. SHE HAS ALSO FAILED TO TAKE THE NOTE OF THE FACT THAT, UNDE R THE DTAA WITH CANADA, THERE IS MAKE AVAILABLE CLAUSE, IF THIS KIND OF PAYMENT IS TO BE RECKONED AS FEES FOR INCLUDED SERVICES . FOR THE SAKE OF READY REFERENCE ARTICLE 12(4) FEES FOR TECHNICAL SERVICES IS REPRODUCED HEREUNDER:- 4. FOR THE PURPOSES OF THIS ARTICLE, 'FEES FOR INCL UDED SERVICES' MEANS PAYMENTS OF ANY KIND TO ANY PERSON CONSIDERATION FOR THE RENDERING OF ANY TECHNICAL OR CONSULTANCY SERVICES (INCLUDING THROUGH THE PROVISION OF SERVIC ES OF TECHNICAL OR OTHER PERSONNEL) IF SUCH SERVICES: (A) ARE ANCILLARY AND SUBSIDIARY TO THE APPLICATION OR ENJOYMENT OF THE RIGHT, PROPERTY OR INFORMATION FOR WHICH A PAYMENT DESCRIBED IN PARAGR APH 3 IS RECEIVED; OR (B) MAKE AVAILABLE TECHNICAL KNOWLEDGE, EXPERIENCE, SKILL, KNOW-HOW, OR PROCESSES OR CONSIST OF THE DEVELOPMENT AND TRANSFER OF A TECHNI CAL PLAN OR TECHNICAL DESIGN. THUS, TO FALL WITHIN THE MEANING OF FEE FOR INCLUD ED SERVICES OR FOR RENDERING OF ANY TECHNICAL OR CONSULTANCY SERVICES IT IS SINE-QUA-NON THAT SUC H SERVICES SHOULD MAKE AVAILABLE TECHNICAL KNOWLEDGE, EXPERIENCE, SKILL, KNOWHOW OR PROCESSES OR CONSIST OF DEVELOPMENT AND TRANSFER OF TECHNICAL PLAN OR TECHNICAL DESIGN. HERE IN THIS CA SE, THE PROFESSIONAL SERVICE HAS BEEN RENDERED BY DTT CANADA ONLY FOR PROVIDING INFORMATION ABOUT THE DIARY SECTOR AND NOT FOR THE PURPOSE OF ANY TECHNICAL SERVICES AS DEFINED. IN ANY CASE THERE IS NOMAKE AVAILABLEOF ANY OF THE TERMS AS MENTIONED IN THE SAID ARTICLE. THEREFORE, IN TERMS OF ARTICLE 12(4) THE PAYMENT DOES NOT FALL WITHIN THE REALM OF FEE FOR INCLUDED SERVICES. IF IT IS A PAYMENT FOR INDEPENDENT PERSONAL SERVICES IN TERMS OF ARTICLE 14, THEN SAME CAN BE TAXED ONLY WHEN IN THE HANDS OF NON-RESIDENT, IF HE HAS SOME KIND OF FIXED BASE OR IS REGULARLY AV AILABLE IN INDIA OR HIS STAY FOR RENDERING OF PROFESSIONAL SERVICES HAS EXCEEDED 183 DAYS OR THER E IS SOME KIND OF PE IN INDIA. THE TERM PROFESSIONAL SERVICES HAS BEEN DEFINED IN PARA 2 OF ARTICLE 14, WHICH DEALS WITH INDEPENDENT PERSONAL SERVICES.THE ARTICLE READS AS UNDER:- ARTICLE 14: INDEPENDENT PERSONAL SERVICES 1. INCO ME DERIVED BY AN INDIVIDUAL OR A FIRM OF INDIVIDUALS (OTHER THAN A COMPANY) WHO IS A RESIDENT OF A CONTRACTING STATE IN RESPECT OF PROFESSIONAL SERVICES OR OTHER INDEPENDE NT ACTIVITIES OF A SIMILAR CHARACTER SHALL BE TAXABLE ONLY IN THAT STATE. HOWEVER, IN THE FOLL OWING CIRCUMSTANCES, SUCH INCOME MAY BE TAXED IN THE OTHER CONTRACTING STATE, THAT IS TO SAY (A) IF HE HAS OR HAD A FIXED BASE REGULARLY AVAILAB LE TO HIM IN THE OTHER CONTRACTING STATE FOR THE PURPOSE OF PERFORMING HIS ACTIVITIES; IN TH AT CASE ONLY SO MUCH OF THE INCOME AS IS ATTRIBUTABLE TO THAT FIXED BASE MAY BE TAXED IN THA T OTHER CONTRACTING STATE; OR (B) IF HIS STAY IN THE OTHER CONTRACTING STATE IS F OR A PERIOD OR PERIODS AMOUNTING TO OR EXCEEDING IN THE AGGREGATE 183 DAYS IN THE RELEVANT FISCAL YEAR; OR (C) IF THE REMUNERATION FOR THE SERVICES IN THE OTH ER CONTRACTING STATE IS EITHER DERIVED FROM RESIDENTS OF THAT OTHER CONTRACTING STATE OR I S BORNE BY A PERMANENT ESTABLISHMENT WHICH A PERSON NOT RESIDENT IN THAT OTHER CONTRACTI NG STATE HAS IN THAT OTHER CONTRACTING STATE AND SUCH REMUNERATION EXCEEDS TWO THOUSAND FI VE HUNDRED CANADIAN DOLLARS ($2,500) OR ITS EQUIVALENT IN INDIAN CURRENCY IN TH E RELEVANT FISCAL YEAR. 2. THE TERM 'PROFESSIONAL SERVICES' INCLUDES INDEPE NDENT SCIENTIFIC, LITERARY, ARTISTIC, EDUCATIONAL OR TEACHING ACTIVITIES AS WELL AS THE INDEPENDENT A CTIVITIES OF PHYSICIANS, SURGEONS, LAWYERS, ENGINEERS, ARCHITECTS, DENTISTS AND ACCOUNTANTS. HE RE IN THIS CASE, EVEN IF THE PAYMENT IS SAID TO BE MADE TOWARDS PROFESSIONAL SERVICES THEN ALSO SAME C ANNOT BE TAXED BECAUSE, DTT CANADA DOES NOT HAVE ANY FIXED BASE, PE OR ANY OF ITS EMPLOYEE HAVE STAYED IN INDIA FOR MORE THAN 183 DAYS. THUS, UNDER THE DTAA, THE SAID PAYMENT IS NOT TAXAB LE AS FEE FOR PROFESSIONAL SERVICES BECAUSE NONE OF THE CONDITIONS AS MENTIONED IN THE AFORESAI D PARA OF ARTICLE 14 IS SATISFIED. ONCE,THEPROFESSIONAL FEE IS NOT TAXABLE UNDER DTA A,THEN, NO DISALLOWANCE UNDER 40(A)(I)(A)(I) CAN BE MADE. ON THIS GROUND ALONE, THE DISALLOWANCE MADE BY THE AO AND CONFIRMED BY THE CIT (A) STANDS DELETED. 4844/MUM/2011,(06-07)&2768/MUM/2013,(08-09)+3 , DELOITTE 8 18. EVEN OTHERWISE, UNDER THE INCOME TAX ACT THE PA YMENT OF PROFESSIONAL FEE TO THE NON- RESIDENT CANNOT BE TAXED IN INDIA IN TERMS OF SECTI ON 9 (1) (I), BECAUSE SUCH AN INCOME SHOULD BE RECEIVED OR DEEMED TO BE RECEIVED IN INDIA OR ACCRU E OR ARISE IN INDIA TO THE NON-RESIDENT THROUGH OR FROM ANY BUSINESS CONNECTION IN INDIA, OR THROUG H OR FROM ANY PROPERTY IN INDIA, OR THROUGH OR FROM ANY ASSET, OR SOURCE OF INCOME IN INDIA. HERE, IN THE PRESENT CASE ONE HAS TO SEE WHETHER THE NON-RESIDENT, I.E. DTT CANADA HAS ANY KIND OF BUSI NESS CONNECTION IN INDIA IN TERMS OF EXPLANATION 2 TO SECTION 9(1)(I). THE RELATIONSHIP BETWEEN DTT CANADA AND THE ASSESSEE IS ON PRINCIPAL-TO-PRINCIPAL BASIS AND THERE IS NO PERSON WHO IS ACTING ON BEHALF OF DTT CANADA IN INDIA. THUS, IN TERMS OF SECTION 9(1) (I) NO INCOME OF DTT CANADA HAS BEEN RECEIVED OR ACCRUED OR DEEMED TO HAVE BEEN RECEIVED OR ACCRUED IN INDIA AS IT DOES NOT HAVE ANY KIND OF BUSINESS CONNECTION IN INDIA AND, THEREFORE, THERE WAS NO LIABILITY FO R DEDUCTING TDS ON PAYMENT MADE TO DTT CANADA. 19. NOW, WHETHER SUCH A PAYMENT CAN BE SAID TO BE I N THE NATURE OF FEES FOR TECHNICAL SERVICES IN TERMS OF SECTION 9(1) (VII). EXPLANATION 2 TO SE CTION 9 (1) (VII) DEFINES FEES FOR TECHNICAL SERVICES AS ANY CONSIDERATION FOR RENDERING OF ANY MANAGERIAL, TECHNICAL OR CONSULTANCY SERVICES.THESE SERVICES ARE DISTINCT FROM PROFESSI ONAL SERVICES WHICH HAS BEEN SEPARATELY DEFINED UNDER THE INCOME TAX ACT IN CLAUSE (A) TO E XPLANATION BELOW SECTION 194J WHICH FOR THE SAKE OF READY REFERENCE IS REPRODUCED HEREUNDER:- (A)PROFESSIONAL SERVICES MEANS SERVICES RENDERED BY A PERSON IN THE COURSE OF CARRYING ON LEGAL, MEDICAL, ENGINEERING OR ARCHITECTURAL PROFES SION OR THE PROFESSION OF ACCOUNTANCY OR TECHNICAL CONSULTANCY OR INTERIOR DECORATION OR ADV ERTISING OR SUCH OTHER PROFESSION AS IS NOTIFIED BY THE BOARD FOR THE PURPOSE OF SECTION 44 AA OR OF THIS SECTION. CLAUSE (B) OF THE SAME EXPLANATION DEFINES FEE FOR TECHNICAL SERVICES AS HAVING THE SAME MEANING GIVEN IN EXPLANATION 2 TO SECTION9(1)(VII). SEPARATE DEFINITIONS OFPROFESSIONAL SERVICES AND TECHNICAL SERVICES UNDER THE ACT INTER-ALIA I NDICATES THAT THE STATUTE MAKES CLEAR DISTINCTION BETWEEN THESE TWO TERMS. THE TERM PROF ESSION ALLUDES TO SOME KIND OF VOCATION OR OCCUPATION WHICH REQUIRES SPECIAL, ADVANCED EDUCATI ON, KNOWLEDGE OR SKILL ETC. A PERSON PROFESSING ANY KIND OF PROFESSION REQUIRES EXTENSIV E TRAINING AND STUDY AND MASTERY OF SPECIALIZED KNOWLEDGE.A PROFESSIONAL PERSON HAS TO CONDUCT HIMS ELF WITHIN SPECIFIED CODE OF CONDUCT OR ETHICAL CONDUCT WHICH IS REQUIRED FROM HIS FIELD OF PROFESSION LIKE LEGAL, MEDICAL, ACCOUNTANCY ETC. IN THE CASE OF RENDERING OF TECHNICAL SERVICES, THE EMPHASIS IS MORE ON GIVING SERVICES WHICH ARE TECHNICAL IN NATURE AND ALLUDES TO SOME KIND OF GIV ING ADVICE OR CONSULTANCY IN THE FIELD OF TECHNOLOGY OR IMPARTING OF TECHNICAL SKILLS,KNOWLED GE, EXPERIENCE, KNOWHOW ETC.HERE CONSULTANCY ALSO MEANS SOME KIND OF TECHNICAL CONSULTANCY BECA USE IT IS PRECEDED BY THE WORD TECHNICAL .THE TERMMANAGERIAL IS INDICATIVE OF MANAGEMENT OF BUSINESS OR SOMETHI NG LIKE WHICH IS DISTINCT FROM PROFESSION OR RENDERING OF P ROFESSIONAL SERVICES. HERE IN THIS CASE, PROFESSIONAL SERVICES WERE RENDERED BY DTT CANADA I N RESPECT OF PROVIDING INFORMATION OF THE GLOBAL ENVIRONMENT IN DAIRY SECTOR IN RESPECT OF TH E MARKETS, COMPETITION, REGULATIONS AND OTHER BEST PRACTICES FOLLOWED BY GLOBAL PLAYERS. THUS, TH E IMPUGNED PAYMENT CANNOT BE RECKONED AS FEES FOR RENDERING OF TECHNICAL SERVICES IN TERMS O F SECTION 9 (1) (VII). 20.AS REGARDS THE PROFESSIONAL FEES PAID TO DTT N EW ZEALAND, THE SAME TOO WERE AKIN TO PAYMENT MADE TO DTT CANADA.THE EXPLANATION OF THE A SSESSEE BEFORE THE AUTHORITIES BELOW QUA THIS PAYMENT WAS AS UNDER:- WE WERE APPOINTED BY PUNJAB AGRO INDUSTRIAL CORPORA TION LTD., A GOVERNMENT OF PUNJAB ENTERPRISE TO CARRY OUT A STUDY OF THE AQUA SECTOR AND ASSIST THE GOVERNMENT IN DEVELOPMENT OF ITS BUSINESS PLAN. IN THE PROCESS OF PROVIDING THE ABOVE SERVICES, WE AVAILED SERVICES OF DELOITTE TOUCHE TOHMATSU, NEW Z EALAND. DELOITTE TOUCHE TOHMATSU, NEW ZEALAND IS A FIRM OF CERTIFIED PUBLIC ACCOUNTAN TS. DELOITTE TOUCHE TOHMATSU, NEW ZEALAND RENDERED PROFESSIONAL SERVICES OF PROVIDING INFORMATION ON THE GLOBAL ENVIRONMENT IN THE AQUA SECTOR IN RESPECT OF THE MA RKETS, COMPETITION, TECHNOLOGY AND REGULATIONS AND OTHER BEST PRACTICES FOLLOWED BY TH E GLOBAL PLAYERS. THE ENTIRE SERVICES IN 4844/MUM/2011,(06-07)&2768/MUM/2013,(08-09)+3 , DELOITTE 9 RELATION TO THIS JOB WERE PERFORMED OUTSIDE INDIA B Y DELOITTE TOUCHE TOHMATSU, NEW ZEALAND. IN RESPECT OF THE AFORESAID SERVICES, DELO ITTE TOUCHE TOHMATSU, NEW ZEALAND RAISED THE INVOICE DATED 9 OCTOBER 2002 FOR AN AMOU NT OF USD 3,000. A COPY OF THE INVOICE IS ENCLOSED AT PAGE 72 OF THE COMPILATION. WE HAVE MADE REMITTANCE TO THE DELOITTE TOUCHE TOHM ATSU, NEW ZEALAND WITHOUT DEDUCTION OF TAX AT SOURCE BASED ON THE CERTIFICATE OBTAINED FROM A CHARTERED ACCOUNTANT. WITH REGARD TO THIS PAYMENT ALSO THERE IS NO SPECIF IC FINDING BY THE AO OR THE CIT (APPEAL) AS TO HOW IT IS TAXABLE IN INDIA AND UNDER WHICH PROVISION OF THE ACT. IN THIS CASE ALSO THE LEARNED CIT (A) HAS RECKONED THE PAYM ENT AS FEES FOR TECHNICAL SERVICES WITHOUT ELABORATING OR ELUCIDATING THE NATURE OF PA YMENT. SO FAR AS THE BENEFIT UNDER INDIA-NEW ZEALAND DTAA, THE PAYMENT OF PROFESSIONAL FEE IS NOT TAXABLE UNDER ARTICLE 14, WHICH DEALS WITH INDEPENDENT PERSONAL SERVICES . THE LANGUAGE OF ARTICLE 14 IS SIMILAR TO THE LANGUA GE OF INDIA-CANADA DTAA WHICH HAS BEEN REPRODUCED HEREINABOVE. HERE ALSO DTT NEW ZEALAND N EITHER HAS ANY FIXED BASE/ PE NOR HAD ANY OF ITS EMPLOYEES/PROFESSIONALS STAYED IN INDIA FOR THE PERIOD EXCEEDING 183 DAYS IN ANY CONSECUTIVE TWELVE MONTHS PERIOD. ACCORDINGLY, UNDE R THE DTAA THE PROFESSIONAL FEE PAID TO DTT IS NOT TAXABLE IN INDIA. HOWEVER, ARTICLE 12(4) OF INDIA-NEW ZEALAND DTAA DEALING WITH FEES FOR TECHNICAL SERVICES IMBIBES SAME DEFINITI ON AS HAS BEEN GIVEN UNDER THE INCOME TAX ACT. OUR FINDING GIVEN ON THE ISSUE OF FTS UNDER SE CTION 9 (1) (VII) WILL APPLY MUTATIS MUTANDIS HERE ALSO. THEREFORE, IN VIEW OF OUR FINDING GIVEN THEREIN, THE SAID PAYMENT CANNOT BE HELD TO BE TAXABLE IN INDIA EITHER UNDER SECTION 9 (1) (VII) O R UNDER SECTION9(1)(I). ACCORDINGLY,DISALLOWANCE MADE BY THE AO U/S 40(A) ( I) IS DIRECTED TO BE DELETED. CONSIDERING THE ABOVE,WE HOLD THAT THE PROFESSIONAL FEES PAID BY THE ASSESSEE TO DTS AND DTL WERE NOT TAXABLE IN INDIA NOR WERE SUBJECT TO TDS P ROVISIONS OF CHAPTER XVII OF THE ACT . REVERSING THE ORDER OF THE FAA,WE DECIDE GS.OA 1 AN D 2 IN FAVOUR OF THE ASSESSEE. 6 .FIFTH GROUND OF APPEAL IS ABOUT INTEREST PAYMENT A S PER THE PROVISIONS OF SECTION 244A OF THE ACT.DURING THE COURSE OF HEARING,THE AR STATED THAT THE AO HAD GRANTED THE INTEREST FOR THE PERIOD 01-04.2006 TO 21-11-2007,THAT HE SHOULD HAVE CALCULATED THE INTEREST UP TO 18.12.2007, THAT INTIMATION U/S.142(1)WAS ISSUED ON 18.12.2007. HE REFERRED TO THE CIRCULAR 200(XXII-II.DTD. 20.08.1968)ISSUED BY THE BOARD.THE DR LEFT THE ISSU E TO THE DISCRETION OF THE BENCH. CONSIDERING THE ABOVE,WE DIRECT THE AO TO FOLLOW TH E CIRCULAR OF THE BOARD, REFERRED TO BY THE AR BEFORE US.LAST GROUND OF APPEAL IS DECIDED ACCOR DINGLY. ITA/6786/MUM/11,AY.2007-08: 9 .BEFORE US,THE AR OF THE ASSESSEE STATED THAT GROU ND NO.2 WAS INFRUCTUOUS.HENCE, WE ARE NOT ADJUDICATING THE SAME. 10. GROUND NO.1 IS ABOUT CONFIRMING THE ADDITION OF RS .51.06 LAKHS OUT OF ADDITION OF RS.58.46 LAKHS MADE BY THE AO,ON THE BASIS OF DIFFERENCE BET WEEN INFORMATION GATHERED FROM ANNUAL INFORMATION RETURN(AIR)AND THE PROFESSIONAL RECEIPT S AS PER THE BOOKS OF ACCOUNT.DURING THE ASSESSMENT PROCEEDINGS,THE AO FOUND THAT THERE WAS DIFFERENCE IN THE PROFESSIONAL RECEIPTS AS PER 4844/MUM/2011,(06-07)&2768/MUM/2013,(08-09)+3 , DELOITTE 10 THE AIR INFORMATION BOOKS OF ACCOUNT.HE DIRECTED T HE ASSESSEE TO RECONCILE THE DIFFERENCE.AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE,THE AO H ELD THAT NO SUBSTANTIAL EVIDENCE/ SUBMISSION WERE MADE.SO HE ADDED AN AMOUNT OF RS.58,46,445/-T O THE TOTAL INCOME OF THE ASSESSEE. 10.1. AGGRIEVED BY THE ORDER OF THE AO THE ASSESSEE PREF ERRED AN APPEAL BEFORE THE FAA AND MADE DETAILED SUBMISSIONS .HE CALLED FOR A REMAND R EPORT IN THAT REGARD FROM THE AO. FINALLY, HE HELD THAT AMOUNT OF RS.51.06 LAKHS REMAINED UNRECO NCILED. 10.2. DURING THE COURSE OF HEARING BEFORE US,THE AR STATE D THAT IN THE ABSENCE OF ANY CONTRARY MATERIAL BROUGHT ON RECORD NO ADDITION COULD BE MAD E, THAT THE ASSESSEE HAD NOT RECEIVED MORE THAN THE PROFESSIONAL FEE REFLECTED IN THE AIR,THAT NO OPPORTUNITY WAS PROVIDED TO THE ASSESSEE TO EXAMINE OR REBUT THE REPLIES MADE BY THE PARTIES IN RESPONSE TO THE NOTICE ISSUED U/S. 133(6)OF THE ACT,THE ASSESSEE WAS ABLE TO RECONCILE THE ENTIRE A LLEGED UNDISCLOSED PROFESSIONAL FEE.HE REFERRED TO THE AMOUNTS ATTRIBUTABLE TO ENCORN WIN FARMS (IN DIA) LTD. (RS.19.09 LAKHS+28.41 LAKHS) AND STATED THAT THAT THE PAYEE VIDE ITS LETTER DTD.29/2 /12 HAD CONFIRMED THAT THE ASSESSEE HAD NOT ISSUED ANY INVOICE, THAT NO PAYMENT WAS MADE TO THE ASSESSEE TOWARDS PROFESSIONAL FEE. HE ALSO REFERRED TO THE CASE OF SRI VALLABH LOHIA(ITA/4120/ MUM/2011,DTD.8/8/12) AND STATED THAT THE ASSESSEE WAS FOLLOWING CASH METHOD OF ACCOUNTING A ND THAT ALL THE RECEIPTS WERE BY CHEQUE. DR STATED THAT MATTER SHOULD BE SENT TO AO FOR FURTHER VERIFICATION. 10.3. WE HAVE HEARD THE RIVAL SUBMISSIONS.WE FIND THAT MA JOR AMOUNT UNDER THE HEAD PROFESSION- AL FEE RECEIVED IS FROM ENCORN WIN FARMS (INDIA) L TD.,THAT THE PAYER HAD, IN RESPONSE TO SECTION 13(6)NOTICE,ADMITTED(PG-53 OF THE PB)THAT IT HAD NO T PAID ANY AMOUNT TO THE ASSESSEE, THAT IT ALSO ASCERTAINED THAT NO PROFESSIONAL SERVICES WERE AVAI LED FROM THE ASSESSEE.WE FIND THAT THE FAA HAD BRUSHED ASIDE SUCH AN IMPORTANT PIECE OF EVIDEN CE ONLY ON THE GROUND THAT THE FIGURE WAS APPEARING IN THE AIR.MISTAKES IN THE INFORMATION IN AIR IS NOT UNCOMMON.IN THESE CIRCUMSTAN- CES AND AFTER CONSIDERING THE PG-53 OF THE PB,WE AR E OF THE OPINION THAT WE ARE OF THE OPINION THE FAA WAS NOT THE JUSTIFIED IN CONFIRMING THE ADD ITION OF RS.51.06 LAKHS.WE WOULD ALSO LIKE TO REFER TO THE CASE OF SRI VALLABH LOHIA(SUPRA)WHEREI N THE ISSUE OF NON RECONCILIATION OF AIR INFORMATION HAS BEEN DELIBERATED UPON.WE ARE REPROD UCING THE RELEVANT PORTION OF THE ORDER AND IT READS AS UNDER: 5. IN GROUND NOS.3 & 4 OF APPEAL, ASSESSEE HAS DIS PUTED THE ORDER OF LD CIT(A) IN CONFIRMING THE ADDITION OF RS.2,66,916 MADE BY THE AO AS INTER EST RECEIVED FROM RAJVAIBHAV ENTERPRISES PVT LTD., BASED ON AIR INFORMATION. 6. THE AO STATED THAT AS PER AIR INFORMATION, ASSES SEE RECEIVED INTEREST FROM RAJVAIBHAV 4844/MUM/2011,(06-07)&2768/MUM/2013,(08-09)+3 , DELOITTE 11 ENTERPRISES PVT LTD., AMOUNTING TO RS.2,66,916. FUR THER, ASSESSEE VIDE LETTER DATED 18.12.2009 STATED THAT NO INTEREST PAYMENT WAS RECEIVED NOR TH E ASSESSEE CLAIMED ANY TDS IN RESPECT OF THE ALLEGED INTEREST. HOWEVER, AO DID NOT CONCUR WITH T HE CONTENTION OF THE ASSESSEE AND MADE THIS ADDITION TO THE INCOME OF THE ASSESSEE. IN THE FIRS T APPEAL, LD CIT(A) CONFIRMED THE ACTION OF AO. HENCE, THIS APPEAL BY THE ASSESSEE. 7. DURING THE COURSE OF HEARING, LD A.R. REITERATE D THE FACTS AS STATED BEFORE THE AUTHORITIES BELOW. HE REFERRED TO PAGES 41 -43 OF PB, WHICH IS A COPY OF LEDGER ACCOUNT OF M/S. STEEL WORLD AND SUBMITTED THAT ASSESSEE HAS NOT RECEIVED ANY IN TEREST FROM RAJVAIBHAV ENTERPRISES (P) LTD.,. HE SUBMITTED THAT MERELY ON THE BASIS OF AIR INFORM ATION AND WITHOUT ANY EVIDENCE THAT ASSESSEE HAS RECEIVED ANY INTEREST FROM IT, HENCE THE AMOUNT COULD NOT BE ADDED TO THE INCOME OF THE ASSESSEE. LD D.R. MERELY RELIED ON ORDERS OF AUTHOR ITIES BELOW. 8. WE HAVE CONSIDERED SUBMISSIONS OF LD REPRESENTATIVES OF PARTIES AND OR DERS OF AUTHORITIES BELOW. 9. WE OBSERVE THAT AO HAS MADE THIS ADDITION MERELY ON THE BASIS OF AI R INFORMATION AND WITHOUT BRINGING ANY EVIDENCE ON RECORD THAT THE ASSESSEE HAS ACTUALLY R ECEIVED THE SAID INTEREST OF RS.2,66,916. IT IS NOT THE CASE OF THE DEPARTMENT THAT THE SAID PARTY WAS PUT TO CROSS EXAMINATION OR THE LEDGER ACCOUNT OF THE ASSESSEE IN THE BOOKS OF ACCOUNT OF THE SAID PARTY WERE GIVEN TO THE ASSESSEE AND ASSESSEE WAS CONFRONTED THEREON. WE AGREE WITH LD A .R. THAT MERELY ON THE BASIS OF AIR INFORMATION AND WITHOUT BRINGING ANY EVIDENCE ON RE CORD, IT CANNOT BE HELD THAT INTEREST INCOME HAS BEEN RECEIVED BY THE ASSESSEE FROM RAJVAIBHAV E NTERPRISES (P)LTD. THEREFORE, THE SAID ADDITION IS NOT JUSTIFIED. ACCORDINGLY, WE DELETE T HE ADDITION OF RS.2,66,916 BY ALLOWING GROUND NOS.3 & 4 OF APPEAL TAKEN BY THE ASSESSEE. FOLLOWING THE ABOVE ,WE DECIDE GROUND NO.1 IN FAVOU R OF THE ASSESSEE. 11. GOA.3 IS ABOUT CONFIRMING THE DISALLOWANCE U/S.40( A)(IA) OF THE ACT OF RS.24.04 LAKHS IN RESPECT OF PROFESSIONAL FEE PAID.DURING THE ASSESSM ENT PROCEEDING,THE AO FOUND THAT THE ASSESEE HAD PAID RS.5.36 LAKHS TO DTS,THAT RS. 8.45 LAKHS A ND RS.9.15 LAKHS WERE PAID TO DTLL US AND DELOITTE TAX LLP RESPECTIVELY,THAT IT HAD ALSO MADE PAYMENTS TO DELOITTE BELASTINGA DVISEIRS B.V.,NETHERLANDS(RS.59,008/-); SJMS ASSOCIATES,SRI LANKA (RS.48,145/-).THE AO DIRECTED THE ASSESSEE TO EXPLAIN AS TO WHY THE PAYMENT MADE TO A BOVE ENTITIES SHOULD NOT BE DISALLOWED FOR NON DEDUCTION OF TAX AT SOURCE.RELYING UPON THE ORD ERS OF THE EARLIER AY.S,HE MADE A DISALLOW- ANCE OF RS.24,04,395/-,INVOKING THE PROVISIONS OF S ECTION 40(A)(I) OF THE ACT. 11.1 .DURING THE APPELLATE PROCEEDINGS,THE ASSESSEE MAD E DETAILED SUBMISSION BEFORE THE FAA AND RELIED UPON CERTAIN CASE LAWS.AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE,HE HELD THAT THE ASSESSEE HAD PAID PROFESSIONAL FEES RS.24.04 LA KHS TO ITS NON-RESIDENT ENTITIES,THAT IT HAD REMITTED AMOUNT WITHOUT DEDUCTING THE TAX AT SOURCE ,THAT THE TAX WAS NOT DEDUCTED ON THE BASIS OF CERTIFICATE OBTAINED FROM CA,THAT THE ASSESSEE HAD NOT APPROACHED THE AO FOR TAKING NO OBJECTION OR NIL CERTIFICATES UNDER THE PROVISIONS OF SECTION 195 OF THE ACT, THAT THE SERVICES RENDERED BY THE NON-RESIDENT ENTITIES WERE OF THE NATURE OF MANAGER IAL/CONSULTANCY SERVICES,THAT SAME WERE COVERED BY THE PROVISIONS OF SECTION 9 (1) (VII) OF THE ACT.THE FAA REFERRED TO THE CASE OF TATA 4844/MUM/2011,(06-07)&2768/MUM/2013,(08-09)+3 , DELOITTE 12 IRON & STEEL CO. (34SOT83); ASHAPURA MINICHEM LTD.( 5TAXMANN. COM.57) AND HELD THAT FEES FOR TECHNICAL SERVICES, IS OMITTED BY THE ASSESSEE WITH OUT DEDUCTION OF TAX AT SOURCE, WERE TAXABLE IN VIEW OF THE PROVISIONS OF SECTION 9(1)(VII). WITH REGARD TO PAYMENT MADE TO DTS (RS. 5.36 LAKHS) HE HELD THAT THE NATURE OF THE PAYMENT WAS CLAIMED TO BE SUMMARY VIEW AND ADVICE ON THE WITHHO LDING OF TAX,THAT THE ASSESSEE DID NOT FILE DETAILS IN THAT REGARD, THAT IT DID NOT DISCLOSE TH E NAMES OF THE CLIENTS HOME SUCH SERVICES WERE RENDERED AND ALSO THE DETAILS OF SERVICES AND ADVIC E GIVEN, THAT IT WAS NOT POSSIBLE TO ASCERTAIN WHAT WAS THE NATURE OF SERVICES PROVIDED AND AS TO WHETHER THE SERVICES WERE SAME AS CONSIDERED IN THE TAX-TREATY AS TECHNICAL SERVICES INCLUDING M ANAGERIAL, TECHNICAL OR CONSULTANCY NATURE AS PER THE PROVISIONS OF ARTICLE 12 (4) (B) (C) OF THE DTAA/9 (1) OF THE ACT.HE FURTHER HELD THAT SERVICES AVAILED BY THE ASSESSEE WERE IN THE NATURE OF CONSULTANCY SERVICES, THAT SAME BOAT SQUARELY FELL UNDER THE PROVISIONS OF ARTICLE 14 OF THE INDIA-SINGAPORE DTAA WHICH PERTAIN TO INDEPENDENT PERSONAL SERVICES, THAT SERVICES RENDER ED BY DTS WERE SPECIFIC SERVICES, THAT SAME WERE UTILISED IN INDIA, THAT THE PROVISIONS OF SECT ION 9(1)(VII) WERE APPLICABLE, THAT THE SERVICES RENDERED BY DTS WERE NOT COVERED BY ANY EXCLUSION C LAUSE.FINALLY,HE UPHELD THE ORDER OF THE AO. WITH REGARD TO PAYMENT TO DTLL US,THE FAA OBSERVED THAT TECH MAHINDRA LTD WANTED TO LIST THE SECURITIES IN US MARKET,THAT THE US ENTITY REVI EWED THE GAAP FINANCIAL INFORMATION PREVAILING IN US SO THAT TECH MAHINDRA COULD COMPLY WITH THE US REGULATIONS,THAT REDIFF WAS AN AUDIT CLIENT OF THE ASSESSEE, THAT IT HAD MADE PAYM ENT TO ITS US ENTITY IN CONNECTION WITH REDIFF, THAT ASSESSEE DID NOT FILE NECESSARY DETAILS IN THA T REGARD,THAT IT WAS NOT EXPLAINED AS TO HOW THE US ENTITY CARRIED OUT THE AUDIT WORK WITHOUT ACCESS TO THE BOOKS OF ACCOUNTS, THAT SERVICES WERE AVAILED IN INDIA, THAT IT WAS TAXABLE AS PER THE PR OVISIONS OF SECTION 9(1)(VII) OF THE ACT. ABOUT THE PAYMENT OF RS.9.15 LAKHS TO DELOITTE TAX LLP,USA,THE FAA OBSERVED THAT THE PAY- MENTS WERE MADE FOR RENDERING THE PROFESSIONAL SERV ICES IN THE FIELDS OF RESEARCH,THAT PAYMENTS WERE MADE IN CONNECTION WITH CONSULTANCY ON TRANSFE R PRICING ANALYSIS OF MICRO INKS CORPORA - TION FOR THE FISCAL YEAR ENDED ON 31/03/2005,THAT T HE SERVICES WERE IN THE NATURE OF CONSULTANCY SERVICES. HE FURTHER OBSERVED THAT PAYMENT TO NETHERLANDS ENT ITY WAS MADE FOR SERVICES AVAILED IN CONNECTION WITH PROVIDING TAX ADVICE ON NETHERLAND TAX LAWS, THAT THE PAYMENT WAS IN THE NATURE 4844/MUM/2011,(06-07)&2768/MUM/2013,(08-09)+3 , DELOITTE 13 OF CONSULTANCY SERVICES AND THAT SAME WAS COVERED B Y THE PROVISIONS OF SECTION 9(1)(VII) OF THE ACT AS WELL AS ARTICLE 15 (A) OF THE TAX-TREATY, TH AT ARTICLE 15 INCLUDED CONSULTANCY SERVICES UNDER THE DEFINITION OF FEES FOR TECHNICAL SERVICES ,THAT THE ASSESSEE HAD UTILISED SERVICES IN INDIA. WITH REGARD TO PAYMENT MADE TO SRI LANKAN ENTITY,HE OBSERVED THAT PAYMENT WAS MADE IN CONNECTION WITH CONSULTANCY ON VAT PROVISIONS APPLI CABLE IN THAT COUNTRY, THAT THE SERVICES WERE COVERED BY SECTION 9(1)(VII) OF THE ACT, BEING IN T HE NATURE OF CONSULTANCY, MANAGERIAL SERVICES, THAT THE SERVICES AVAILED BY THE ASSESSEE WERE NOT COVERED BY THE PROVISIONS OF ARTICLE 14 OF THE TAX-TREATY, THAT TAX-TREATY BETWEEN INDIA AND SRI L ANKA DID NOT HAVE ARTICLE FOR FEES FOR TECHNICAL SERVICES/PROFESSIONAL SERVICES,THAT THE P ROVISIONS OF ACT WOULD PREVAIL, THAT THE PAYMENT WAS MADE BY THE RESIDENT TO THE NON-RESIDEN T, THAT THE INDIAN RESIDENT WAS SUPPOSED TO DEDUCT TAX AT SOURCE.IN SHORT, THE FAA UPHELD THE D ISALLOWANCE,MADE BY THE AO, IN RESPECT OF THE PAYMENTS MADE TO 5 NON-RESIDENT ENTITIES. 11.2. BEFORE US,THE AR STATED THAT ISSUE OF PAYMENT OF FE ES TO DTS AND TWO US ENTITIES STANDS ALLOWED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF T HE TRIBUNAL FOR THE EARLIER YEARS. HE FURTHER CONTENDED THAT REMITTANCES MADE BY THE ASSESSEE WER E BASED ON THE CERTIFICATES OBTAINED FROM THE CHARTERED ACCOUNTANTS, THAT THE CA.S HAD CERTIFIED THAT NO TAX WAS REQUIRED TO BE DEDUCTED AT SOURCE FROM THE AFORESAID REMITTANCES, THAT IF SUM WAS NOT CHARGEABLE TO TAX IN THE HANDS OF THE NON-RESIDENT NO TAX WAS REQUIRED TO BE DEDUCTED, TH AT ASSESSEE WAS NOT REQUIRED TO OBTAIN ORDER UNDER SECTION 195 (2) OF THE ACT.HE RELIED UPON THE CASE OF GE INDIA TECHNOLOGY CENTRE PRIVATE LTD. (327 ITR 456) AND REFERRED TO CIRCULAR NUMBER 10/2002 DATED 910 2002, ISSUED BY THE CBDT AND STATED THAT PROVISIONS OF SECTION 9(1)(VII) WER E APPLICABLE IN RESPECT OF INCOME BY WAY OF FTS, THAT THE SECTION WAS NOT APPLICABLE IN RESPECT OF THE FEES PAID FOR PROFESSIONAL SERVICES. HE REFERRED TO THE PROVISIONS OF SECTION 194J OF THE A CT AND STATED THAT THE EXPLANATION TO THE SECTION DEFINES THAT PROFESSIONAL SERVICES AND FEE FOR TECH NICAL SERVICES SEPARATELY, THAT THE ACT RECOGNISED DIFFERENCE BETWEEN THE PROFESSIONAL SERVICES AND TE CHNICAL SERVICES, THAT THE ASSESSEE HAD AVAILED PROFESSIONAL SERVICES,THAT PAYMENT MADE FOR THE SAM E WAS NOT COVERED BY THE PROVISIONS OF SECTION 9(1). HE ALSO MADE REFERENCE TO CASE OF NQA QUALITY SYSTEM REGISTRAR LTD (92TTJ 946) AND STATED THAT PROVISION FEES PAID TO THE NON-RESI DENT ENTITIES WERE NOT TAXABLE IN INDIA IN VIEW OF THE TAX TREATIES ENTERED INTO BETWEEN INDIA AND THOSE COUNTRIES. 11.2.A. WITH REGARD TO PAYMENT TO THE NETHERLAND ENTITY,HE ARGUED THAT THE NON-RESIDENT ENTITY HAD 4844/MUM/2011,(06-07)&2768/MUM/2013,(08-09)+3 , DELOITTE 14 RENDERED PROFESSIONAL SERVICES IN CONNECTION WITH P ROVIDING TAX ADVICE ON NETHERLANDS TAX LAWS, THAT ARTICLE 12 OF THE TAX-TREATY PROVIDED PAYMENT FOR ROYALTIES AND FEES FOR TECHNICAL SERVICES, THAT SUB-CLAUSE 5(A) OF THE ARTICLE COVERED THE PAY MENT FOR SERVICES WHICH WERE ANCILLARY AND SUBSIDIARY TO THE ROYALTY PAYMENT,THAT ARTICLE 12(5 )(B) COVERED THOSE SERVICES WHICH WOULD MAKE AVAILABLE TECHNICAL KNOWLEDGE, EXPERIENCE, SKILL, K NOW-HOW, THAT ARTICLE 12 (5)(B) CONTAINED THE CONDITION REGARDING MAKE AVAILABLE,THAT THE NETHERL ANDS ENTITY HAD NOT MADE AVAILABLE TECHNICAL KNOWLEDGE/EXPERIENCE/SKILL ETC., THAT THE PROFESSIO NAL SERVICES RENDERED COULD NOT BE CATEGORISED AS FTS UNDER ARTICLE 12 OF THE TAX-TREATY THAT AS P ER ARTICLE 14 OF THE DTAA PROFESSIONAL FEES RECEIVED BY THE NETHERLANDS ENTITY WAS TAXABLE IN T HAT COUNTRY ONLY.HE REFERRED TO PGS.109 AND 274-280 OF THE PB. 11.2.B. WITH REGARD TO PAYMENT MADE TO SRI LANKAN ENTITY,HE STATED THAT THE TAX-TREATY BETWEEN INDIA AND SRI LANKA DID NOT HAVE ARTICLE REGARDING FEE FOR TECHNICAL SERVICES,THAT AS PER ARTICLE 14 OF THE DTAA PROFESSIONAL FEES RECEIVED BY SRI LA NKAN TAX RESIDENT WAS TAXABLE IN THAT COUNTRY,THAT IN THE NEW TREATY OF 2014 FTS WAS BROU GHT IN THE PROVISIONS OF THE DTAA, THAT SRI LANKAN ENTITY DID NOT HAVE ANY PRESENCE IN INDIA. H E REFERRED TO CASE OF BANGKOK GLASS INDUSTRIES CO. LTD.(257 CTR 326).THE DR SUPPORTED T HE ORDER OF THE FAA. 12. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERSUED THE MATERIAL BEFORE US.WE FIND THAT WHILE DECIDING THE APPEAL FOR EARLIER YEAR WE HAVE HELD T HAT PROVISIONS OF SECTION 40(A)(IA)OF THE ACT WERE NOT APPLICABLE TO PAYMENTS MADE BY THE ASSESSE E TO DTS AND THE US ENTITIES,THAT WE HAVE REFERRED TO THE ORDERS OF THE TRIBUNAL DELIVERED FO R EARLIER YEARS.THEREFORE,WE REVERSE THE ORDER OF THE FAA AS FAR AS DTS AND TO NON-RESIDENT ENTITIES OF US ARE CONCERNED. WITH REGARD TO NETHERLAND ENTITY WE WOULD LIKE TO M ENTION THAT THE SERVICES AVAILED BY THE ASSESSEE WERE PROFESSIONAL SERVICES AND NOT TECHNIC AL SERVICES.THE NON-RESIDENT ENTITY HAD PROVIDED SOME INFORMATION ABOUT TAX LAWS OF THAT CO UNTRY.NATURALLY,IT CANNOT BE HELD ROYALTY.FOR APPLYING PROVISIONS OF ARTICLE 12(5)(B)OF THE DTAA, THE FIRST PRE CONDITION IS THAT THE NON- RESIDENT SHOULD HAVE MADE AVAILABLE TECHNICAL KNOWL EDGE/EXPERIENCE/SKILL ETC. TO THE ASSESSEE. THERE IS NO EVIDENCE TO PROVE THAT ANY KNOWLEDGE WA S MADE AVAILABLE TO THE ASSESSEE THAT WAS USED BY IT.BESIDES, THE PROFESSIONAL SERVICES ARE T O BE TAXED IN THE COUNTRY OF RECEIPT,AS PER THE ARTICLE 14 OF THE TREATY.AS THE NON-RESIDENT WAS N OT HAVING ANY PE IN INDIA,SO,THE PROFESSIONAL FEES RECEIVED BY THE NETHERLAND WOULD NOT BE TAXABL E IN INDIA.WE WOULD LIKE TO DEAL WITH THE 4844/MUM/2011,(06-07)&2768/MUM/2013,(08-09)+3 , DELOITTE 15 LIABILITY OF DEDUCTING TAX AT SOURCE FOR SUCH PAYME NT.IN THE CASE OF GE INDIA TECHNOLOGY CENTER P.LTD. (SUPRA),THE HONBLE APEX COURT HAS HELD AS U NDER: THE MOST IMPORTANT EXPRESSION IN SECTION 195(1) OF THE INCOME-TAX ACT, 1961, DEALING WITH DEDUCTION OF TAX AT SOURCE CONSISTS OF THE WORDS C HARGEABLE UNDER THE PROVISIONS OF THE ACT. A PERSON PAYING INTEREST OR ANY OTHER SUM TO A NON-RE SIDENT IS NOT LIABLE TO DEDUCT TAX IF SUCH SUM IS NOT CHARGEABLE TO TAX UNDER THE ACT. SECTION 195 CO NTEMPLATES NOT MERELY AMOUNTS, THE WHOLE OF WHICH ARE PURE INCOME PAYMENTS ; IT ALSO COVERS COM POSITE PAYMENTS WHICH HAVE AN ELEMENT OF INCOME IMBEDDED OR INCORPORATED IN THEM. THE OBLIGA TION TO DEDUCT TAX AT SOURCE IS, HOWEVER, LIMITED TO APPROPRIATE PROPORTION OF INCOME CHARGEA BLE UNDER THE ACT FORMING PART OF THE GROSS SUM OF MONEY PAYABLE TO THE NON-RESIDENT. IT IS FOR THIS REASON THAT THE CBDT HAS CLARIFIED IN CIRCULAR NO. 728 DATED OCTOBER 31, 1995, THAT THE T AX DEDUCTOR CAN TAKE INTO CONSIDERATION THE EFFECT OF THE DTAA IN RESPECT OF PAYMENTS OF ROYALT IES AND TECHNICAL FEES WHILE DEDUCTING TAX AT SOURCE. THE EXPRESSION CHARGEABLE UNDER THE PROVISIONS OF THE ACT IN SECTION 195(1) SHOWS THAT THE REMITTANCE HAS GOT TO BE OF A TRADING RECEIPT, THE WHOLE OR PART OF WHICH IS LIABLE TO TAX IN INDIA. I F TAX IS NOT SO ASSESSABLE, THERE IS NO QUESTION OF T AX AT SOURCE BEING DEDUCTED. CONSIDERING THE ABOVE DISCUSSION,WE HOLD THAT THE A SSESSEE WAS NOT LIABLE TO DEDUCT TAX AT SOURCE FOR THE PAYMENT MADE TO THE NETHERLAND ENTITY AND T HAT PROVISIONS OF SECTION 40(A)(IA)OF THE ACT WERE NOT APPLICABLE. 12.A. NOW,WE WOULD LIKE TO TAKE UP THE ISSUE OF PAYMENT M ADE BY THE ASSESSEE TO SRI LANKAN ENTITY.WE FIND THAT BEFORE SIGNING OF THE DTAA OF 2014 THERE WAS NO PROVISIONS IN THE INDO-SRI LANKAN DTAA FOR CHARGING FTS.THE NON-RESIDENT ENTIT Y HAD NO PE IN INDIA AND PROFESSIONAL FEES WAS TO TAXED AS PER ARTICLE 14 OF THE TREATY.C ONSIDERING THE FACTS OF THE MATTER,WE HOLD THAT THE FAA WAS NOT JUSTIFIED IN UPHOLDING THE ORDER OF THE AO WITH REGARD TO THE PAYMENTS MADE TO SRI LANKAN ENTITY. IN LIGHT OF THE ABOVE DISCUSSION,WE DECIDE GROUND N O.3 IN FAVOUR OF THE ASSESSEE. ITA/2768/MUM/2013,AY.2008-09. 13 .IN HIS APPEAL FOR THE YEAR UNDER CONSIDERATION,THE AO HAS RAISED ONLY ONE GROUND OF APPEAL AND IT DEALS WITH DELETING THE ADDITION OF RS. 3.58 LAKHS ON ACCOUNT OF PAYMENT TO RETIRED PARTNERS. DURING THE ASSESSMENT PROCEEDINGS, THE AO FOUND THAT THE ASSESSEE HAD MADE PAYMENT OF RS.3, 58,14,436/- TO 23 EX-PARTNERS.AFTER CONSID ERING THE EXPLANATION FILED BY THE ASSESSEE IN THAT REGARD,HE HELD THAT FEES WERE RECEIVED BY THE ASSESSEE DUE TO THE PROFESSIONAL ACTIVITIES OF INDIVIDUAL PERSON IN THE CAPACITY OF THE PARTNERS O F THE FIRM AND SUCH FEES WERE OF THE ASSESSEE FIRM,THAT SAME BY ANY STRETCH OF IMAGINATION COULD NOT BE THE RECEIPT OF INCOME OF THE INDIVIDUAL PARTNERS,THAT IT WAS MAINTAINING ITS BOOKS OF ACCOU NT AND WAS DECLARING THE FEES AS RECEIPTS OF THE 4844/MUM/2011,(06-07)&2768/MUM/2013,(08-09)+3 , DELOITTE 16 FIRM AND NOT AS THE RECEIPT OF THE INDIVIDUAL PARTN ERS,THAT IT HAD DECIDED TO FOLLOW THE PARTICULAR SYSTEM OF ACCOUNTING,THAT AFTER RETIREMENT FROM THE PARTNERSHIP HE COULD NOT HAVE ANY CLAIM OR RIGHT IN THE RECEIPTS OR ASSETS OF THE PARTNERSHIP EXCEPT TO THE EXTENT OF THE BALANCE IN HIS CAPITAL ACCOUNT AND THE SHARE OF THE INCOME OF THE FIRM TIL L HIS RETIREMENT AS PER THE CLAUSES IN THE PARTNERSHIP DEED,THAT THAT THE EX-PARTNERS OR THEIR LEGAL HEIRS WERE NOT PARTY TO THE AGREEMENT I.E. THE PARTNERSHIP DEED,THAT THEY COULD NOT SUE THE FI RM OR THE PARTNERS OF THE ASSESSEE FIRM FOR VIOLATION AND INFRACTION OF ANY OF THE TERMS OF THE PARTNERSHIP DEED,THAT THEY HAD NO LOCUS STANDEE,THAT ALL THE RECEIPTS HAD REACHED TO IT WIT HOUT ANY INTERRUPTION/HINDRANCE,THAT IT WAS A CASE OF APPLICATION OF MONEY.THE AO FURTHER OBSERVED THA T THE DECISION IN THE CASE OF V. G. KRISHNAMURTHY (203 ITR 249)WAS SQUARELY APPLICABLE TO THE FACTS OF THE CASE.ACCORDINGLY,HE HELD THAT DISPUTED AMOUNT OF RS.3,58,14, 436/- WAS LIABLE TO BE DISALLOWED AS AN EXPENDITURE.HE FURTHER HELD THAT AT THE MOST IT WAS A GRATUITOUS P AYMENT,WHICH COULD NOT BE TREATED AS BUSINESS EXPENDITURE. 13.1. DURING THE COURSE OF HEARING BEFORE THE FAA,THE ASS ESSEE FURNISHED THE DETAILS IN RESPECT OF NAMES OF THE RETIRED PARTNERS AND SPOUSE OF DECEASE D PARTNER COVERED UNDER CLAUSE 10.M OF THE PARTNERSHIP DEED ALONG WITH THE AMOUNTS PAID TO THE M.AFTER CONSIDERING THE AVAILABLE MATERIAL,THE FAA STATED THAT THE ASSESSEE WAS OBLIG ED TO PAY THE AMOUNT COMPUTED UNDER CLAUSE 23 BEFORE DISTRIBUTION OF THE SAME UNDER CLAUSE 28 OF THE PARTNERSHIP DEED,THAT IT WAS NOT AN APPLICATION OF THE INCOME BY THE ASSESSEE-FIRM,THAT AS PER THE LEGAL OBLIGATION THE INCOME WAS DIVERTED BEFORE IT REACHED THE ASSESSEE,THAT THE AS SESSEE WAS IN FACT IN THE POSITION OF A COLLECTOR OF INCOME ON BEHALF OF THE PERSONS TO WHOM IF WAS P AYABLE AND WAS ONLY PAYING THE AMOUNT SUBSEQUENTLY,THAT THE PAYMENT TO RETIRED PARTNERS A ND WIVES OF THE DECEASED PARTNERS WAS MADE AS PER PROVISIONS OF CLAUSE 10.M OF THE PARTNERSHIP DE ED,THAT THE SAID PAYMENT HAD A PRIOR AND OVERRIDING CHARGE ON THE RECEIPTS OF THE ASSESSEE - FIRM AS PER THE PROVISIONS OF CLAUSE 7.E. OF THE PARTNERSHIP DEED.HE FURTHER STATED THAT IT COULD NO T BE SAID THAT IT WAS A CASE OF DIVERSION OF INCOME BY OVERRIDING TITLE.REFERRING TO THE ORDER O F C.C. CHOKSHI & CO. FOR A.YRS. 1995-96 TO 1997-98 OF MUMBAI TRIBUNAL WHICH WAS UPHELD BY THE HON'BLE HIGH COURT BY ORDERS DATED 15.07.2008 AND 25.07.2008,HE FURTHER OBSERVED THAT SIMILAR DISALLOWANCES MADE IN THE CASE OF C.C. CHOKSHI & CO. WERE DELETED BY THE BOMBAY HIGH COURT FOR AYS. 2003-04 AND 2004-05 ALSO. FOLLOWING THE ABOVE JUDGMENTS, HE DELETED THE ADDITION MADE BY THE AO. 4844/MUM/2011,(06-07)&2768/MUM/2013,(08-09)+3 , DELOITTE 17 13.2. BEFORE US,THE DR SUPPORTED THE ORDER OF THE AO.THE AR SUBMITTED THAT THE PROFESSIONAL FEES OF RS.3,58,14,4367- WAS DIVERTED TO THE RETIRE D PARTNERS OR TO THE LEGACY FIRM OR TO THE SPOUSES/ NOMINEE OF THE DECEASED PARTNERS BY OVERRI DING TITLE,THAT THE SAID SUM WAS REDUCED FROM THE GROSS RECEIPTS OF THE FIRM IN THE P & L ACCOUNT ,THAT THE AMOUNT PAYABLE TO RETIRED PARTNERS OR THEIR SPOUSES WAS DETERMINED AS PER THE PROVISIONS OF THE PARTNERSHIP DEED,THAT THE AMOUNT PAID TO RETIRED PARTNERS WAS DETERMINED AS PER CLAUSE 10 .N.I TO CLAUSE 10.N.V.OF THE PARTNERSHIP DEED, DATED 01.04.2007,THAT CLAUSE 7.E. OF THE PARTNERSHI P DEED CREATED PRIOR AND OVERRIDING CHARGE ON RECEIPT OF THE APPELLANT FIRM,THAT PAYMENT TO THE E XTENT OF RS.3.58 CRORES WAS DIVERSION OF INCOME BY AN OVERRIDING TITLE PURSUANT TO CLAUSE 7.E. OF T HE PARTNERSHIP DEED,THAT THE SAME WAS NOT INCLUDED IN THE PROFESSIONAL RECEIPT OF THE FIRM,TH AT TAX OUGHT TO BE CHARGED ON THE REAL INCOME OF THE ASSESSEE,THAT ALL THE SUMS RECEIVED BY THE ASSE SSEE,DURING THE YEAR,WOULD NOT REPRESENT INCOME AND CANNOT BE BROUGHT TO TAX,THAT THE AMOUNT PAID TO RETIRED PARTNER AND SPOUSES OF DECEASED PARTNERS WAS NOT THE INCOME OF THE APPELLA NT AND THEREFORE OUGHT NOT BE TAXED,THAT PROFESSIONAL FEES RECEIVED BY THE APPELLANT BELONGE D TO THE RETIRED PARTNERS OR SPOUSES OF DECEASED PARTNERS BY VIRTUE OF CLAUSE 10.M OF THE P ARTNERSHIP DEED,THAT A COPY OF THE PARTNERSHIP DEED,DATED 01.04.2007, WAS PROVIDED TO THE AO VIDE LETTER DATED 28.12.2010.HE RELIED UPON THE CASE OF C C CHOKSI DECIDED BY THE ITAT AND APPROVED BY THE HONBLE BOMBAY HIGH COURT. 13.3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT THE AO HAD HELD THAT PAYMENT MADE BY THE ASSESSEE TO TH E EX PARTNERS OR TO THE SPOUSES/LEGAL HEIRS OF DECEASED PARTNERS WAS APPLICATION OF MONEY,THAT THE DISPUTED AMOUNT WAS TO BE TAXED IN THE HANDS OF THE ASSESSEE,THAT THE PAYMENT TO EX-PARTNE RS WAS MADE IN PURSUANCE OF THE VARIOUS CLAUSES OF THE PARTNERSHIP DEED,THAT DURING THE ASS ESSMENT PROCEEDINGS A COPY OF THE DEED WAS SUBMITTED,THAT HE DID NOT TOOK COGNIGANCE OF CLAUSE S 7 AND 10 OF THE DEED,THAT THE DEED CLEARLY PROVIDED THAT THE EX PARTNERS OR THE SPOUSES OF DEC EASED PARTNERS WOULD BE PAID PART OF THE INCOME OF THE ASSESSEE FOR THE SERVICES RENDERED BY THEM,THAT THE FAA HAD TAKEN NOTE OF THE RELEVANT CLAUSES OF THE PARTNERSHIP DEED,THAT HE FO LLOWED THE JUDGMENTS OF THE HONBLE JURISDICTIONAL HIGH COURT DELIVERED IN THE CASE OF C C CHOKSI(ITA 193 OF 2008,DTD.25.07. 2008), THAT IN THAT MATTER THE HONBLE COURT HAD,IN THE ID ENTICAL SITUATION,HELD THAT THE PAYMENT MADE TO EX-PARTNERS OR TO THE SPOUSES OF THE DECEASED PARTN ERS WAS NOT APPLICATION OF MONEY,THAT THE FAA HAD FOLLOWING THE JUDGMENTS HAD HELD THAT IT WAS A CASE OF DIVERSION OF INCOME BY AN OVERRIDING 4844/MUM/2011,(06-07)&2768/MUM/2013,(08-09)+3 , DELOITTE 18 TITLE.IN OUR OPINION,THE ORDER OF THE FAA DOES NOT SUFFER FROM ANY LEGAL OR FACTUAL INFIRMITY.SO, CONFIRMING THE SAME,WE DECIDE THE EFFECTIVE GROUND OF APPEAL AGAINST THE AO. ITA/2221/MUM/2013,AY.2008-09: 14. FIRST GROUND OF APPEAL,FILED BY THE ASSESSEE,IS ABO UT CONFIRMING THE ADDITION OF RS.1.17 CRORES ON THE BASIS OF DIFFERENCE BETWEEN INFORMATION GATH ERED FROM THE ANNUAL INFORM RETURN (AIR) AND PROFESSIONAL RECEIPTS AS PER BOOKS OF ACCOUNT.D URING THE ASSESSMENT PROCEEDINGS,THE AO ASKED THE ASSESSEE TO RECONCILE THE PROFESSIONAL F EE RECEIVED AS PER AIR INFORMATION WITH BANK STATEMENTS.AS PER THE AO,THE ASSESSEE DID NOT RECON CILE A SUM OF RS.7.54 CRORES INSPITE OF THE FACT THAT IT WAS GIVEN SUFFICIENT OPPORTUNITY FOR R ECONCILIATION. 14.1. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE PREF ERRED AN APPEAL BEFORE THE FAA.BEFORE HIM,IT FILED ADDITIONAL EVIDENCES TO RECONCILE THE DIFFERENCE.THE FAA CALLED FOR A REMAND REPORT. AFTER CONSIDERING THE REMAND REPORT AND SUBMISSION OF ASSESSEE THE FAA HELD THE ASSESSEE COULD RECONCILE THE DIFFERENCE OF RS.6.36 CRORE ONL Y,THAT FOR RS.1.17CRORES (RS.71.06 LAKHS+ RS. 46.13 LAKHS) NO EXPLANATION WAS FILED,THAT IT HAD F ILED AN AFFIDAVIT ABOUT DIFFERENCE OF RS.46.13 LAKHS,THAT AFFIDAVIT WAS A SELF SERVING DOCUMENT,TH AT SAME WAS NOT BACKED BY ANY DOCUMENTARY EVIDENCES,THAT IT WAS NOT ABLE TO FURNISH THE COMPL ETE DETAILS EVIDENCING THAT DISPUTED TRANSAC- TIONS WERE PROFESSIONAL RECEIPTS ONLY,THAT FOR THE BALANCE DIFFERENCE OF RS.71.06LAKHS THE ASSESSEE HAD FILED A LETTER DT.05/07/2011 FROM M/S. CUMMINS RESEARCH AND TECHNOLOGY INDIA LTD. (CRPIL) AND CUMMINS EXHAUST INDIA LTD. (CEIL)CLAIMI NG THAT THE PROFESSIONAL FEE OF RS. 68. 93 LAKHS WAS WRONGLY SHOWN AS PAYABLE BY THEM IN TH EIR BOOKS OF ACCOUNT, THAT THE ASSESSEE HAD NOT FILED ADDITIONAL EVIDENCES IN THAT REGARDS, WHE N THE MATTER WAS REMANDED TO THE AO,THAT THE ADDITIONAL EVIDENCES COULD NOT BE ADMITTED AT THAT STAGE OF APPELLATE PROCEEDINGS.FINALLY, HE CONFIRMED THE ADDITION OF RS.1,17,19, 880/-. 14.2. BEFORE US,THE AR CONTENDED THAT THE OBSERVATION OF THE DEPARTMENTAL AUTHORITIES THAT THE ASSESSEE HAD NOT FILED RECONCILIATION WAS FACTUALLY INCORRECT,THAT IT HAD SUBMITTED ALL THE DETAILS,THAT THE FAA WAS NOT JUSTIFIED IN REJECTING THE ADDITIONAL EVIDENCES FILED BEFORE HIM.HE REFERRED TO PAGES 246-250 OF THE PAPER BOOK.THE DR SUPPORTED THE ORDER OF THE FAA. 14.3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US. WE FIND THAT THE ASSESSEE HAD FILED RECONCILIATION,THAT THE FAA HAD PARTLY ALLOWED THE APPEAL,THAT HE HAD REJECTED 4844/MUM/2011,(06-07)&2768/MUM/2013,(08-09)+3 , DELOITTE 19 THE CLAIM OF THE ASSESSEE ABOUT TWO ENTRIES,THAT HE DID NOT ADMIT THE ADDITIONAL EVIDENCE FILED BY IT IN THE CASE OF CRPIL AND CEIL,THAT BOTH THE PART IES HAD CATEGORICALLY STATED THAT THERE WERE MISTAKES IN THEIR BOOKS OF ACCOUNTS.IN OUR OPINION, THE FAA WAS NOT JUSTIFIED IN REJECTING SUCH A VITAL PEIECE OF EVIDENCE,EVEN IF IT WAS FILED BELAT EDLY.IT IS SAID THAT TECHNICALITIES AND PROCEDURES SHOULD NOT GET PREFERENCE OVER THE SPIRIT OF THE AC T I.E. TO TAX REAL INCOME AND TO COLLECT DUE TAXES ONLY.AS A REPRESENTATIVE OF THE SOVEREIGN,TH E FAA SHOULD ENSURE THAT ONLY TAXABLE INCOME, AND NOT HYPOTHETICAL INCOME,IS TAXED.HE HAS DISCARD ED THE RELEVANT EVIDENCE ON TECHNICAL GROUND, SO,WE ARE REMANDING BACK THE MATTER TO THE FILE OF THE AO FOR FRESH ADJUDICATION,AS IT WOULD BE IN THE INTEREST OF JUSTICE.THE AO WOULD AFFORD A REASO NABLE OPPORTUNITY OF HEARING TO THE ASSESSEE BEFORE DECIDING THE TAXABILITY OF THE DISPUTED SUMS .GROUND NO.1 IS PARTLY ALLOWED. 15. SECOND GROUND OF APPEAL,AS PER THE AR,WAS INFRUCTUO US.THREFORE,WE ARE NOT ADJUDICATING THE SAME. 16 .NEXT GROUND OF APPEAL DEALS WITH DISALLOWANCE MADE U/S. 40(A)(I) OF THE ACT AMOUNTING TO RS.87.85 LAKHS PAID UNDER THE HEAD PROFESSIONAL FEE .DURING THE ASSESSMENT PROCEEDINGS THE AO FOUND THAT THE ASSESSEE HAD MADE PAYMENT TO DELOITT E TAX LL, USA (RS.9.2 LAKHS), DELOITTE & TOUCHE LLP,USA-(RS.28.56 LAKHS), DELOITTE CONSULTIN G LLP-USA (RS.23.23 LAKHS), DELOITTE & TOUCHE S.P.A. ITALY (RS.10.48 LAKHS), D&T MANAGEMEN T SERVICES PTE LTD. SINGAPORE (RS.10.08 LAKHS), DELOITTE AND TOUCHE LLP, PUERTO RICO (RS.1 .07 LAKHS) AND DELOITTE BELASTINGCONSULENTEN -CONSEILS,BELGUIM (RS.5.16 LAKHS), THAT THE ASSESSE E HAD CLAIMED THAT NON-RESIDENT ENTITIES HAD RENDERED PROFESSIONAL SERVICES TO THE ASSESSEE THA T THE SERVICES WERE RENDERED OUTSIDE INDIA, THOSE ENTITIES RAISED INVOICES FOR THEIR SERVICES, THAT THE ASSESSEE HAD REMITTED THE AMOUNT WITHOUT DEDUCTING TAX AT SOURCE BASED ON CERTIFICATES OBTAI NED FROM CHARTERED ACCOUNTANTS. HE DIRECTED IT TO FILE EXPLANATION IN THAT REGARD. AFTER CONSIDERI NG THE SUBMISSION OF THE ASSESSEE DATED 28/12/2010,THE AO REFERRED TO THE ASSESSMENT ORDERS FOR THE EARLIER YEARS. HE DISALLOWED THE PAYMENT OF RS.87,85,076/- U/S. 40(A)(I) ON THE GROU ND THAT NO APPROVAL U/S.195 OR SECTION 197 OF THE ACT WAS OBTAINED BEFORE THE REMITTANCE MADE. 16.1. DURING THE APPELLATE PROCEEDINGS,THE FAA CONSIDERED THE DETAILED SUBMISSION OF THE ASSESSEE AND HELD THAT THE ASSESSEE WAS RESIDENT OF INDIA AND THAT PAYMENT WAS MADE FOR THE SERVICES REND -ERED OUTSIDE INDIA,THAT AS PER ORDER OF THE TRIBUNAL IN THE CASE OF TATA IRON & STEEL CO. (SUPRA), THE ASSESSEE SHOULD HAVE DEDUCTED TAX IN CASE OF THE 3 NON-RESIDENT US ENTITIES. 4844/MUM/2011,(06-07)&2768/MUM/2013,(08-09)+3 , DELOITTE 20 16.A. REGARDING PAYMENT MADE TO THE NON-RESIDENT ITALIAN ENTITY, THE FAA HELD THAT THE PAYMENT WAS MADE IN CONNECTION WITH DUE DILIGENCE ACTIVITI ES PERFORMED IN CONNECTION WITH THE PROJECT PIONEER,AS PER THE ENGAGEMENT LETTER, DTD.16/01/200 7, THE ASSESSEE AND THE ITALIAN ENTITY WERE REQUIRED TO WORK IN CLOSE ASSOCIATION, THAT THE PAY MENT MADE WERE TO BE REGARDED AS FTS, AS ENVISAGED BY SECTION 9(1)(VII)(B) OF THE ACT,THAT T HE SERVICES WERE RENDERED OUTSIDE INDIA BUT WERE UTILIZED IN INDIA, THAT THE SERVICES WERE DULY COVERED BY PROVISIONS OF SECTION 9(1) THAT SAME WERE NOT COVERED BY THE EXCLUSION CLAUSE, THAT AFT ER THE AMENDMENT , BY FINANCE ACT, 2010 RESIDENTS MAKING PAYMENT TO THE NON RESIDENTS HAVE TO DEDUCT TAX AT SOURCE FOR SUCH PAYMENT, THAT THE AO HAD RIGHTLY MADE DISALLOWANCE FOR THE P AYMENT MADE TO ITALIAN ENTITY.ABOUT THE PROFESSIONAL FEE PAID TO PUERTO RICO ENTITY,THE FA A HELD THAT THE SERVICES WERE UTILISED IN INDIA,THAT SOURCE OF INCOME WAS FROM INDIA, THAT IN COME WAS GENERATED FROM INDIAN SOURCE,THAT THE PROFESSIONAL FEE PAID TO ITS COUNTERPART WAS TA XABLE AS PER THE PROVISIONS OF THE ACT, THAT THE AO WAS JUSTIFIED IN MAKING THE DISALLOWANCE.WITH RE GARD TO THE PAYMENT MADE TO BELGIUM ENTITY,THE FAA HELD THAT THE AO WAS JUSTIFIED IN MA KING THE DISALLOWANCE,THAT THE SERVICES WERE AVAILED IN INDIA. 16.2. DURING THE COURSE OF HEARING BEFORE US,THE AR SUBMI TTED THAT ISSUE OF PAYMENTS MADE TO THE USA ENTITIES STANDS DECIDED BY THE ORDER OF THE TRI BUNAL FOR THE EARLIER AY.S.ABOUT THE PAYMENT MADE TO ITALIAN ENTITY HE STATED THAT IT WAS NOT FT S,THAT SERVICES RENDERED BY THE NON-RESIDENT ENTITY FELL IN THE CATEGORY OF PROFESSIONAL SERVICE S,THAT EVEN IF IT WAS FTS IT WAS NOT TAXABLE IN INDIA AS THE PAYMENT WAS AS PER THE PROVISIONS OF S ECTION 9(1)(VII)(B) OF THE ACT,THAT THE FAA HIMSELF HAD ADMITTED THAT SERVICES WERE UTILISED OU TSIDE INDIA AND THAT THE SOURCE WAS ALSO OUTSIDE INDIA.ABOUT PAYMENT MADE TO PETRO HE STAT ED THAT SERVICES RENDERED BY THE NON-RESIDENT ENTITY COULD NOT BE CONSIDERED FTS,THAT NOTHING WAS MADE AVAILABLE. HE FURTHER STATED THAT PAYMENT MADE TO THE BELGIAN ENTITY WAS PROFESSIONAL FEES, THAT PROVISIONS OF SECTION 9(1)(VII) WERE NOT APPLICABLE TO SUCH PAYMENT.THE DR SUPPORTE D THE ORDER OF THE FAA. 16.3. WE HAVE HEARD THE RIVAL SUBMISSIONS.AS THE ISSUE OF APPLICABILITY OF THE PROVISIONS OF SECTION 40(A)(I)OF THE ACT IN THE CASES OF USA ENTI TIES STANDS DECIDED BY THE ORDER OF THE TRIBUANL ,DTD.30.11.2016,FOR EARLIER YEARS(SUPRA)AND THE FAC T FOR THE YEAR UNDER CONSIDERATION ARE SAME AS THAT OF THOSE AY.S,SO,WE HOLD THAT THE FAA WAS NOT JUSTIFIED IN DISMISSING THE APPEAL FILED BY THE ASSESSEE ABOUT THE THREE USA ENTITIES. REVERSING HI S ORDER,WE HOLD THAT THERE WAS NO NEED TO 4844/MUM/2011,(06-07)&2768/MUM/2013,(08-09)+3 , DELOITTE 21 DEDUCT TAX FOR THE PAYMENTS MADE TO THE US ENTITIES ,NAMELY, DELOITTE TAX LLP,USA, DTLL US AND DELOITTE CONSULTING LLP-USA.ABOUT THE THREE REM AINING NON-RESIDENT ENTITIES,WE HOLD THAT THERE IS NO DOUBT THAT SERVICES WERE RENDERED OUTSI DE INDIA,THAT NOTHING WAS MADE AVAILABLE TO THE ASSESSEE BY THOSE ENTITIES,THAT SERVICES AVAILED BY THE ASSESSEE WERE PROFESSIONAL SERVICES AND NOT TECHNICAL SERVICES.MAKING AVAILABLEIS ONE OF THE RECOGNISED PRINCIPLE OF TAX JURISPRUDENCE. THE PHRASE ENVISAGES THAT TECHNICAL KNOWLEDGE, EXPERIEN CE, SKILL, KNOW-HOW SHOULD BE MADE AVAILABLE TO THE PAYER BY THE PROVIDER OF THE SERVI CES,SO THE PAYER,RECEIVING THE SERVICES,WOULD BE ABLE TO APPLY THE TECHNOLOGY.IN CASE OF REMAINING T HREE NON-RESIDENTS ENTITIES IT IS CLEAR THAT THEY HAD NOT MADE AVAILABLE TO THE ASSESSEE.THE BASIC PR INCIPLE GOVERNING THE APPLICABILITY OF PROVISIONS OF SECTION 40(A)(I)OF THE ACT AND NON DE DUCTION OF TAX AT SOURCE HAVE BEEN ALREADY DISCUSSED IN THE EARLIER PART OF OUR ORDER.RESPECTF ULLY FOLLOWING THE ORDER OF THE TRIBUNAL FOR THE EARLIER YEAR(SUPRA)AND CONSIDERING THE DISCUSSION H ELD IN THE EARLIER PARAGRAPHS OF OUR ORDER,WE DECIDE GROUND NO.3 IN FAVOUR OF THE ASSESSEE. AS A RESULT,APPEALS FILED BY THE AO STAND DISMISSED .APPEALS FILED BY THE ASSESSEE FOR THE AY.S.2006-07 AND 2008-09 ARE PARTLY ALLOWED AND APP EAL FOR THE AY.2007-08 IS ALLOWED. 2006-07 2008-09 . .2007-08 ORDE R PRONOUNCED IN THE OPEN COURT ON 23 RD MARCH, 2018. 23 , 2018 SD/- SD/- ( RAVISH SOOD / ) ( / RAJENDRA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; /DATED :23 .03.2018. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR L BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.