Sundaram Business Services Limited Vs ITO (ITAT Chennai)
As regards professional charges paid to M/s. TWB Pty Ltd., a company of Chartered Accounts, although payment made to said company is not covered under Article 14, but said payment is covered under Article 7 of DTAA between India and USA because the business profits of an enterprise of one Contracting State shall be taxable only in that State unless the enterprise carries on business in other Contracting State through a permanent establishment situated therein. In this case, evidences filed by the assessee clearly proves that M/s. TWB CA does not have any permanent establishment in India and services are rendered outside India in connection with filing of statutory returns and liaison with statutory authorities. Therefore, said payment is outside the scope of provisions of section 195 of the Act, because it is neither in the nature of royalties as defined u/s.9(1)(vi) of the Act nor in the nature of fess for technical services because the nature of services rendered by the company of accountants does not make available technical knowledge, expertise, skill, know-how or processes to the assessee. Therefore, said payment is also outside the scope of provisions of section 195 of the Act and thus, the assessee is not liable to deduct tax at source u/s.195 of the Act. Therefore, we are of the considered view that the AO as well as the CIT(A) has erred in disallowing professional charges paid to offshore entities for non-deduction of tax at source u/s.195 of the Act. Hence, we direct the AO to delete additions made towards legal and professional charges paid to M/s. TWB CA and M/s. KL Gates.
