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| The Tax Publishers2020 TaxPub(DT) 1481 (Kol-Trib) INCOME TAX ACT, 1961
Section 195
Foreign attorneys performed services at behest of assessee for which requisite invoices were raised on assessee and these were paid by him. It was for this reason that invoiced amounts were debited by way of assessee's own expenditure in his personal Profit & Loss Account.Also prior to making remittances to foreign attorneys, assessee had filed certificates with his banker in prescribed Form 15CB certified by Chartered Accountant. In said certificate, these payments were characterized as fees for professional services. In Form A2 accompanying remittance instruction, purpose of payment was described as “Associate Feeâ€. Thus, plea of assessee that payments were in the nature of 'pure reimbursements' and hence did not require tax deduction under section 195 due to absence of income element stood disproved by contemporaneous documents which assessee himself produced.
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Tax deduction at source - Under section 195 - Payments made to foreign associates in the form of professional fee - Assessee pleading payments to be in the nature of 'pure reimbursements'-Also assesse raised alternate plea that payments were non-taxable in India
Assessee claimed deduction of payments made to foreign associates in the form of professional fees.AO held that payments resulted in accrual of income of foreign associates concerned in India within the meaning of section 9(1)(vii)(b) and the assessee was statutorily required to deduct tax at source under section 195(1). Assessee pleaded that payments were in the nature of 'pure reimbursements' and hence did not require tax deduction under section 195. Also, assessee furnished invoices raised by foreign attorneys, certificate filed with bankers and Form A2 accompanying remittance instruction. Further assessee pleaded that payments were non-taxable in India because of beneficial provisions of DTAAs with respective countries. Held: Foreign attorneys performed the services at behest of assessee for which requisite invoices were raised on assessee and these were paid by him. It was for this reason that invoiced amounts were debited by way of assessee's own expenditure in his personal Profit & Loss Account.Also prior to making remittances to foreign attorneys, assessee had filed certificates with his banker in prescribed Form 15CB certified by Chartered Accountant. In said certificate, these payments were characterized as fees for professional services. In Form A2 accompanying remittance instruction, purpose of payment was described as “Associate Feeâ€.Thus plea of assessee that payments were in the nature of 'pure reimbursements' and hence did not require tax deduction under section 195 due to absence of income element stood disproved by contemporaneous documents which assessee himself produced.However, to meet the ends of justice matter was restored to AO to examine alternate plea raised for the first time that payments were non-taxable in India because of beneficial provisions of DTAAs with respective countries.
REFERRED :
FAVOUR : Matter remanded.
A.Y. : 2011-12
IN THE ITAT, KOLKATA C-SMC BENCH
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