KPMG India Pvt Ltd vs. DCIT (ITAT Mumbai)

DATE: (Date of pronouncement)
DATE: June 15, 2012 (Date of publication)

Click here to download the judgement (kpmg_professional_services_royalty.pdf)

Rendering of services is not “supply of knowledge or information” to be “royalty”

The assessee was engaged as a consultant by Essar Oil Ltd to provide consultancy services in connection with sale of its energy business. As the consultancy required high level technical and industry knowledge, the assessee engaged KPMG LLP, USA & KPMG Consulting LP, Canada for rendering professional services and paid Rs. 20 lakhs & Rs. 13 lakhs respectively. The AO held that the said fees constituted “royalty” u/s 9(1)(vi) & Article 12 and as there was no TDS, the amount was to be disallowed u/s 40(a)(i). This was reversed by the CIT(A). On appeal by the department, HELD dismissing the appeal:

The professional services rendered does not fall in the definition of “royalty” in Article 12 of the DTAA. It was purely a professional service for consultancy which were rendered outside India and not for supply of scientific, technical, industrial or commercial knowledge or information. Thus, there was no liability to deduct TDS and consequently no disallowance u/s 40(ia) can be made.

Note: On whether such services can be “fees for technical services” see De Beers (Kar) & Guy Carpenter (Del)

One comment on “KPMG India Pvt Ltd vs. DCIT (ITAT Mumbai)
  1. Srinivas reddy says:

    Dear Sir,
    Is TDS to be deducted on payment made to Bureau of Indian Standards for Marking fee along with service tax . Under which section 194 j or 194 c / and the rate of TDS . Help me in this regard

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