A.T. KEARNEY LTD.- INDIA BRANCH OFFICE,GURGAON V. DCIT, CIRCLE- 1(1)(1), INTERNATIONAL TAXATION, NEW DELHI

MA 270/DEL/2024

AI Insights

The case involves A. T. Kearney Ltd., which filed Miscellaneous Applications against the order of the Income Tax Appellate Tribunal concerning the assessment years 2012-13 and 2013-14. The applications were based on the grounds that the Tribunal had not considered substantial evidence and submissions made by the assessee during the original hearings. The Tribunal, however, found that all relevant documents and submissions had been adequately considered in the original decision. The Tribunal also referenced several judicial precedents to support its decision, emphasizing the limited scope of section 254(2) of the Income Tax Act, which does not allow for a re-examination of the case on merits but only permits rectification of apparent mistakes.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 42110 (ITAT-DELHI)
• Duration Of Justice: 4 month(s) 27 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 22-11-2024
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: I
• Next Hearing Date: 08-11-2024
• Assessment Year: 2013-2014
• Appeal Filed On: 26-06-2024
• Other Referred Cases: Cushman & Wakefield (India) Private Limited: 367 ITR 730 (Del), Akzo Nobel India Pvt. Ltd.: 145 taxmann.com 468, Safran Engineering Services India Ltd.: 89 taxmann.com 77 (Bengaluru), CIT vs. Reliance Telecom Ltd: (2022) 440 ITR 1 (SC)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: APPELLANTS EMPLOYEE PG; AJAY KUMAR ARORA
• Assessee Lawyers: PROVIDING IT
• Keywords: Set aside; Additional evidence; Transfer pricing; International transaction; Question of law; Capital expenditure; TDS
• Section: 254(2)

Judgement Text

" 1 M.A Nos. 269, 271, 271 & 272/Del/2024 A. T. Kearney Vs. DCIT IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH: ‘I’ NEW DELHI BEFORE SHAMIM YAHYA, ACCOUNTANT MEMBER AND SHRI YOGESH KUMAR U.S., JUDICIAL MEMBER M. A NO. 269/Del/2024 (A.Y 2012-13) in (ITA No. 959/Del/2018) M. A NO. 270/Del/2024 (A.Y 2013-14) in (ITA No. 960/Del/2018) M. A NO. 271/Del/2024 (A.Y 2012-13) in (ITA No. 1305/Del/2018) M. A NO. 272/Del/2024 (A.Y 2013-14) in (ITA No. 1306/Del/2018) A. t. Kearney Ltd. India Branch Office 19th floor, Tower C, FLF Cyber City, Phase-III DLF QE S.O, Gurgaon (Haryana) PAN: AADCA0861H (APPLICANT) vs DCIT Circle-1(1)(1), International Taxation, New Delhi (RESPONDENT) Applicant by Sh. Ajay Vohra, Sr. Adv Respondent by Sh. Ajay Kumar Arora, Sr. DR ORDER PER YOGESH KUMAR U.S., JUDICIAL MEMBER: All the above Miscellaneous Applications are filed by the Assessee in respect of order dated 28/02/2024 passed by the Date of Hearing 08.11.2024 Date of Pronouncement 22.11.2024 2 M.A Nos. 269, 271, 271 & 272/Del/2024 A. T. Kearney Vs. DCIT Tribunal in ITA No. 959. 960, 271 & 272/Del/2024 for Assessment Year 2012-13 and 2013-14. 2. The Assessee has raised the similar contentions in all the above four Miscellaneous Applications. For the sake of convenience, the contention raised in M.A No. 269/Del/2024 (A.Y 2012-13) are reproduced as under:- “It is the respectful submission of the Applicant that the findings recorded by the Hon'ble Tribunal in paras 7 to 7.20 of the appellate order have been arrived at without taking into consideration the evidences placed on record by the Applicant in form of paperbook (in 2 volumes), the synopsis of the case filed on 7th December 2023 and 11th December 2023 (also attached herewith as Annexure 3 and 4 respectively), tabulation of documentary evidence(s) of receipt of management and business support services filed on 6th December 2023 as also note on case laws relied upon. The Hon'ble Tribunal has in para 4.3 of the appellate order extensively reproduced the written submissions filed by the CIT DR after the conclusion of the hearing but has failed to note of the oral and written submissions filed by the Applicant, evidences placed on record and has proceeded on the premise that the Applicant had only relied upon the order of Tour Hon'ble Tribunal in Applicant's own case for assessment years 2009-10 and 2010-11 allowing similar payment of management fee to the AEs. It has not been appreciated by the Hon'ble Tribunal that the Applicant had drawn the attention of the Hon'ble Tribunal to the evidences placed on record to substantiate the rendition of services at pages 642-902, 905- 927, 993-1060 of the paperbook, which was duly 3 M.A Nos. 269, 271, 271 & 272/Del/2024 A. T. Kearney Vs. DCIT documented in the tabulation of documentary evidence submitted before the Hon'ble Tribunal on page 956 of paper book also submitted as part of the submission filed dated 7th December 2023. Further, the Hon'ble Tribunal has failed to take note of the submissions of the Applicant made at the time of the hearing of the appeal, based on decided judicial precedents relied upon the course of the hearing that: (i) the TPO is not competent to determine ALP of the international transaction at nil on the basis that no services were rendered since the same would be within the domain of the assessing officer, as held by the jurisdictional High Court in the case of Cushman & Wakefield (India) Private Limited: 367 ITR 730 (Del) (also attached herewith as Annexure 5); (ii) the TPO could not sit in judgment on the commercial wisdom of the Applicant and hold that there was no need for the assessee to avail such services; (iii) the TPO could not question the payment made to the AE for IGS on the ground that no benefit accrued to the assessee payer; (iv) email correspondence was adequate evidence of rendition and receipt of services. 1. The Applicant had further drawn the attention of the Hon'ble bench in the course of the hearing to: 1. Cost allocation sheet explaining the methodology of allocation Chart evidencing the cost allocation of the various IGS, their entire basis - allocation key, exclusion of shareholder services, allocation of common cost and specific costs etc. was submitted as a part of paper-book. (also attached herewith as Annexure 6) The above cost-allocation sheet clearly contradicts the CIT(A)'s findings that services were in nature of 4 M.A Nos. 269, 271, 271 & 272/Del/2024 A. T. Kearney Vs. DCIT stewardship services as the cost towards shareholder services was specifically removed from the total cost pool before allocation. 2. A detailed submission itemizing every expense of Profit and Loss A/c of the Applicant forming part of paper-book was filed to substantiate that the services were not duplicative in nature as no activities of the said nature were carried out inIndia. (Refer page 1098 of paper book Vol. 2) (also attached herewith as Annexure 7) The reliance placed by the CIT DR on the decision of the Hon'ble High Court in Akzo Nobel India Pvt. Ltd.: 145 taxmann.com 468, which has been followed by the Hon'ble Tribunal, was distinguished by the Applicant during the course of hearing on the following grounds: The Applicant had submitted voluminous evidences to substantiate the receipt of the services from its AEs before the lower authorities and the Tribunal whereas the assessee in Akzo Nobel (supra) failed to furnish any evidence either before lower authorities or the Tribunal. The assessee in Akzo Nobel (supra) submitted that the matter be remanded to the file of Assessing Officer to furnish the evidence, if any. However, no such request has been made by the Applicant in the present case and the Applicant most respectfully submits that voluminous evidences substantiating the need, benefit and receipt of services from the AE have been filed, It is submitted at the cost of repetition that the Hon'ble Tribunal has dismissed the appeal of the Applicant on the aforesaid issue and allowed the appeal of the Revenue without taking into account the oral submissions advanced by the Applicant during the course of the argument, the written submissions filed, the evidences placed on record and the reliance on various judicial precedents in support thereof. The order passed by the Hon'ble Tribunal is thus 5 M.A Nos. 269, 271, 271 & 272/Del/2024 A. T. Kearney Vs. DCIT clearly vitiated in law, requiring rectification thereof in terms of section 254(2) of the Act. It is pertinent to point out that the appellate order passed by the Hon'ble Tribunal in the appeal for assessment years 2009-10 and 2010-11 has been upheld by the Hon'ble Delhi High Court vide order dated 21 March 2024 where under the Hon'ble High Court was pleased not to entertain the appeal filed by the Revenue as giving rise to any substantial question of law,observing as under: \"4. As would be manifest from the above, the ITAT has taken into consideration the detailed break-up of costs which had been incurred in respect of IGS to ultimately come to conclude that the deletions as made by the Transfer Pricing Officer [\"TPO\"] would not sustain. 5. We note that the rendering of services was an aspect which was neither questioned nor doubted. In that view of the matter we find no ground to interfere with the view as taken by the ITAT. 6. The appeals fail to raise any substantial question of law. They shall stand dismissed. Further, the Hon'ble Tribunal erred in not following the binding judicial precedent in the form of the order of the Hon'ble Tribunal for assessment years 2009-10 and 2010- 11. It has not been appreciated by the Hon'ble Tribunal that the payment of management fee in the year under reference was under Agreement dated 1.01.2008 (also attached herewith as Annexure 9) which was the very same Agreement considered by the Hon'ble Tribunal in the appeals for assessment years 2009-10 and 2010-11 and that the Applicant had led substantial evidence is prove the factum of receipt of services for the year under appeal as well, which aspect was admitted and accepted by the CIT(A) after due verification of record. 6 M.A Nos. 269, 271, 271 & 272/Del/2024 A. T. Kearney Vs. DCIT Subsequent decision rendered by the Hon'ble Delhi High Court dismissing the appeal filedby the Revenue for assessment years 2009-10 and 2010-11 would show that the appellate order dated 28.02.2024 taking a contrary view is not sustainable and needs to be rectified. The Applicant seeks to rely upon the decision of the Hon'ble High Court in the case of ACIT v. Saurashtra Kutch Stock Exchange Ltd.: [2008] 173 Taxman 322 (SC) holding that non-consideration of the decision of the Supreme Court or the jurisdictional High Court, including decision rendered subsequent to the decision of the Tribunal, would constitute mistake apparent from record necessitating revision of the order passed by the Hon'ble Tribunal (The said order is attached herewith as Annexure 10). For the reasons as aforesaid, the order passed by the Hon'ble Tribunal dismissing grounds Nos. 1 to 2.4 of the appeal filed by the Applicant and allowing grounds Nos. 1 to 4 of the Revenue's appeal (on transfer pricing adjustment of the international transaction of IGS) being vitiated on account of mistakes apparent from record requires to be recalled for hearing afresh.” 3. The Ld. Senior Counsel appearing for the Assessee submitted that the Tribunal has committed error in dismissing the Ground No. 1 to 1.4 of the Assessee and allowing the Ground No. 1 to 4 of the Revenue without considering the evidences placed on record to substantiate rendition of service at page No. 642-902, 905-927, 993-1060 of the Paper Book, which has been tabulated at Page No. 956 of the Paper Book. The Ld. Senior Counsel further submitted 7 M.A Nos. 269, 271, 271 & 272/Del/2024 A. T. Kearney Vs. DCIT that, non consideration of documents produced in the paper bookand non-consideration of the submission made by the Assessee's Representative are error apparent from record, therefore, sought for recalling the order of the Tribunal dated 28/02/2024. 4. Per contra, the Ld. Departmental Representative relying on the Order of the Tribunal and submitted that the Tribunal has decided the Appeals of Revenue as well as the Assessee on its merit, therefore, the Tribunal cannot revisit the facts and decide the issues involved in the Appeal once again under the power conferred u/s 254(2) of the Income Tax Act, 1961 (‘Act’ for short). 5. We have heard both the parties and perused the material available on record. 6. The main contention of the Ld. Senior Counsel that the Assessee has provided sufficient documents to prove the rendering of services which have not been considered by the Tribunal while deciding the Appeals and the Tribunal has not considered the submissions made by the Assessee's Representative while deciding the issues involved in the Appeal against the Assessee. 8 M.A Nos. 269, 271, 271 & 272/Del/2024 A. T. Kearney Vs. DCIT 7. Ongoing through the order passed by the Tribunal dated 28/02/2024, it is found that while deciding the Appeals, the Co- ordinate Bench of the Tribunal observed that,‘unlike in the A.Y.2008-09, 2009-10 and 2010-11, in the years under consideration, the TPO as well as Ld. CIT(A) have specifically gone into each head of expenses claimed by the Assessee, minutely and meticulously examined the claim and contention of the Assessee and after considering the documents produced by the Assessee, not allowed certain expenses claimed by the Assessee’. The said fact is also emerging from the findings of the Ld. CIT(A). For the sake of convenience, the entire adjudication made by the CIT(A) is reproduced as under:- “Findings: 5.2 I have gone through the facts of the case, the submission of the Assessee and the transfer pricing order & assessment order in this case. It is noted that the Assessee has claimed an expenditure of Rs. 16,35,83,792/- for AY 2013-14 against following services: - • HR Services & IT Human Resource Information Systems (HRIS); • Global CEO Services • Global Business Policy Council (GBPC). • IT-KNet services • Production Services • Accounting. Treasury, Finance and Tax Service • Legal Services; and 9 M.A Nos. 269, 271, 271 & 272/Del/2024 A. T. Kearney Vs. DCIT • Marketing Services • Global Support Services (Office Services) 5.3 I find that AO in his order held that the assessee had not received any service and accordingly held the arm's length price of such services at nil value by applying CUP method as no uncontrolled enterprise would have paid any amount for such services. Accordingly, AO in this case disallowed the expenses of Rs. 16,35,83,792/-. 5.4 The appellant submitted that various evidences were placed before the AO during assessment proceedings in relation to the management service charges viz. the nature of the services availed, basis of charge of management fees etc. 5.5 As regards the allocation methodology in respect of management service charges, the appellant submitted that the AE had already removed the portion of costs spent by it which could be potentially shareholder services and thereafter charged to the Appellant a portion of such costs which attributed to Indiabusiness only. The following methodology has been claimed to be used by the AE. • Exclusion for shareholder's services During the year, ATK-US incurred total ATK Group costs of $46,926,760 related to management services. Costs of $18,623,888 were not allocable to ATK-Affiliates. The remaining costs of $28,302,872 were costs incurred from the provision of services to ATK- Affiliates. By applying à 10 percent NCPM to the allocable costs, ATK-US charged ATK-Affiliates a total of $31,133,160 • Allocation between specific direct costs and common cost allocations Out of the total of $31,133,160, the cost directly incurred for any entity was allocated to that entity as 'Specific Allocation'. The remaining cost were allocated to each of the entity as below:- 10 M.A Nos. 269, 271, 271 & 272/Del/2024 A. T. Kearney Vs. DCIT • Where both the consultants and administrative personnel benefit from the relevant services, the allocation basis is the \"total average headcount\". This is calculated by dividing the average headcount of each country by the ATK Group's average headcount. • Where only consultants benefited from the relevant services, the allocation basis is the \"total consultant headcount\". The difference in the calculation with the total average headcount is that the average is applied to consultant and admin officer headcounts only. • As per the allocation sheet, any specific cost allocable to any entity and cost of shareholder services are specifically excluded. The amount that is allocated to each entity are the total of specific cost and common allocable cost. The cost of shareholder services is not included. 5.6 At the outset, it may be relevant to pinpoint that two main issues arise in the analysis of transfer pricing for intra-group services. One issue is whether intra- group chargeable services have in fact been provided and the other issue is what the intra-group charge for such services should be in accordance with the arm's length principle. The first issue has another two components attached. The first is whether the services have been rendered, i.e. rendition and the second is the subsequent benefits accruing from it. 5.7 Issue1: Need, rendition and benefit test for intra-group chargeable services: The detailed submission made in respect of each service is discussed as under: A. Human Resource services & IT Human Resource Information Systems (HRIS) 11 M.A Nos. 269, 271, 271 & 272/Del/2024 A. T. Kearney Vs. DCIT A.1 The assessee explained that HRIS services involve supervision and facilitation of HR personnel activities at an executive level for all the ATK Group entities. The appellant further submitted that HRIS team of Global HR is responsible for IT-related support and training for theGlobal Human Resource systems used by the employees of the ATK Group entities. The assessee cited HR personnel activities which are described below: • Corporate Human Resources; • Benefits; • Compensation; • Performance Management; • Professional Development; and • Expatriate Services team; A.2 Further, the assessee stated that the HRIS team provided support, in particular in creating, managing and troubleshooting the following internal HR software required on a day today basis: • Online performance management system, • Epay, online partner performance system, • Online officer and principal nominations system • Online Partner Performance System ('PPS') • Online Principal Performance System ('PRO System') • Taleo WebTop System, etc. • Engagement Performance Evaluation ('EPE') systems. Annual Performance Evaluation ('APE') form the MBO ('Action Plan') weightings and specific targets 12 M.A Nos. 269, 271, 271 & 272/Del/2024 A. T. Kearney Vs. DCIT A.3 As regards the need and benefit from receipt of services, the assessee pointed out asunder:- • As the Appellant has a small HR team which are not capable to perform all HR related activities. Global HR team supervises and facilitates all HR related activities of the Appellant. The Global team is also responsible for election and promotion of Partners and Principles in all ATK affiliates (including the Appellant). • Global HR is responsible for formulating compensation policy and assists local HR team of the Appellant in roll-out of the same. This includes benefits projects, health and welfare plans to augment local plans. • Global HR team also assists in performance management process which includesroll-out of performance review guidelines, processes at all levels, performanceevaluation of Principles and Partners, Partner mentor program administration andsupport. • Global HR team takes various initiatives for providing growth opportunities to its employees which is an important factor in attracting and retaining talents. Duplicative Expenses: A.4 The assessee submitted the comparison of expenses incurred locally by the branch office in India and incurred by ATK US related to HRIS. The appellant submitted following details to highlight that the expenses incurred as part of intra group services towards HRIS is not duplicative in nature. Particulars Expenses in the nature of Intra Group Expenses incurred locally Category Human resources services Salaries of employees in HR team operation Amount Rs. 4.69 crores Rs. 43.34 lacs 13 M.A Nos. 269, 271, 271 & 272/Del/2024 A. T. Kearney Vs. DCIT Nature The IT-HRIS of the AE is a central team which manages all IT applications and systems related to HR support and employee trainings. These are used by employees across ATK affiliates including the Assessee Expenses Incurred by AE include expenses for Global HR which is responsible for formulating compensation policy Global HR team also leads the performance management process which includes roll-out of performance review guidelines, processes at all levels, performance evaluation of Principles and Partners, Partner mentor program administration and support on a year on year basis The global team guides and assists the small less experiences local HR team of the Appellant in roll-out of the same This includes benefits projects, health and welfare plans to augment local plans The Appellant does not procure the HRIS tools and software on its own or on a local level. The HR team in India only looks after the local hiring process of junior level staff and fresh hires Partner level and senior recruitments are driven by the AF HR team. Also, the Indian team is not capable of formulating appraisal and performance systems of the company as done by the AE HR team. A.5 The assessee pointed out that Rs. 43.34 lacs were spent locally in respect of salary of employees in HR team operations looking after the local hiring process of junior level staff and fresh hires. The appellant clarified that partner level and senior recruitments were driven by the ATK US HR team. A.6 The assessee also submitted email communication on sample basis to demonstrate the fact of rendering of services. These emails pertain to various initiatives taken by the Global HR during the year which are as follows • Mail from Sharon Bennett (Director HR Team of Asia Pacific) in providing details on all the aspects related to global mobility program.- Pg. No. 748 of the paperbook • Mail from Sharon Bennett to various HR personnel of different countries in restructuring the ongoing mobility program. Pg. No. 749-751 of the paperbook • Mail from Sharon Bennett to HR personnel of the Appellant for providing information regarding Global Tuition support for Appellant's employee- Pg. No. 769-770 of the paperbook 14 M.A Nos. 269, 271, 271 & 272/Del/2024 A. T. Kearney Vs. DCIT • Mail from Sharon Bennett to Gaurav Parmar (employee of ATKBO) for providing assistance regarding sponsored MBA program of the ATK group. Pg. No. 771-773 of the paperbook • Mail from Christopher Julius (Director of Global Operations), providing the revised per hourly rate for the Client research activity- Pg 737 of the paperbook • Detailed presentation on Career Roadmap- Pg. No. 839-866 of the paperbook • Mail from Julie Kinney (Director, Performance Management) launching the Careerroadmap of the employees which includes guidelines related to performancemanagement and career development. - Pg. No. 756 & 757 of the paperbook Mail from Sarah Adamson to Sakshi Sood & Garima Budhiraja (HR personnel of the ATKBO) for providing assistance in transfer of an employee- Pg. No. 752-755 of the paperbook • Mail from Sakshi Sood to Mary Lynn Geanconteri asking for assistance regarding EPE forms. - Pg. No. 759-761 of the paperbook • Mail from Bill Clegg (Senior HR Specialist of the Global Team) sharing the training guide to various HR personnel in different countries including Rakhee Malik from India. Pg. No. 758 of the paperbook • Mail from Bill Clegg on providing assistance regarding promotion process of the employees- Pg. No. 762 of the paperbook • Mail from Karine Flatres to Rakhee Malik and Sakshi Sood for providing support to people interested in joining ATKBO.Pg. No. 763-764 of the paperbook Mail from Federico luettner in providing assistance to Varun Arora (employee of ATKBO) for campus recruitment of ATKBO in IIM Calcutta. Pg. No. 765-767 of the paperbook • Mall from HRIS Asia team providing assistance to the Appellant for amending the hiring date of an employee-Pg. No. 867 of the paperbook • Mail from HRIS Asia team in providing assistance for making changes in the details of the employees in the database Pg. No. 868-870 of the paperbook • Mall from Bina Bhatt (HRIS Global Support Manager) asking for feedback for new tystem of entering leaves in the system-Pg No. 871 872 of the paperbook 15 M.A Nos. 269, 271, 271 & 272/Del/2024 A. T. Kearney Vs. DCIT • Mail from Bina Bhatt to the HR personnel of ATKBO for providing services for making requisite changes in the database-Pg. No. 873 of the paperbook Screenshots of Principal Performance Online System ('POS') and Career Roadmap Refer Additional Evidence A.7 The above set of emalls does provide a glimpse of the HRIS services provided by ATK US to the assessee entity. A8 I find that the HRIS Services are important for the growth of the business as such services ensure the best practices in respect of HR Management including hiring, flexi working, mobility, career development, compensation, training and avenues for higher studies etc. which in turn result in retention of competent and talented resources. Since, the assessee is in the business of management consultancy services, therefore, the competency of resources is critical. Hence, the business need of HRIS Services is satisfied in this case. As regards the benefit tests, it is evident from the fact of delivery of quality services by the appellant to its clients in the field of management consulting. Further, the fact of rendition of services gets evidenced from the sample e-mails submitted in this case. B. Global CEO Services:- B.1 The assessee explained that Global CEO's office provides leadership services to all ATK affiliates including the Appellant which is important for any global organization to continuously monitor the needs and expectations of the employees and develop and implement new practices on a regular basis with the ever-changing HR environment. B.2 As regards the need and benefit from receipt of services, the assessee pointed out that • ATKBO benefits largely out of the CEO's exceptional expertise, who is recognized even by external firms and has been awarded as one of the finest consultants globally by a leading consulting journal. Based on his experience and insights, the Appellant has been able to build strong credentials in 16 M.A Nos. 269, 271, 271 & 272/Del/2024 A. T. Kearney Vs. DCIT associations with leading practitioners and clients in the industry • Global CEO's international relations and knowledge benefitted the Appellant in getting more business for itself • This not only helps in retaining the existing employees of the organization but also to attract new talent. 8.3 The assessee submitted email communication on sample basis to demonstrate the factof rendering of services. These emails are as follows:- • Mail from Randi Zelleri Partner & General Counsel) on introducing new personal Investment Policy for the employees. The team shall provide support and also handle queries through conference calls. Pg. No. 1101-1110 of the paperbook • Mail from Paul Laudicina introducing new website of AT Kearney with revised logo and redesigned and rebranded materials. Pg. No 1127 of the paperbook. • Mail from branding team providing new guidelines for email signatures and visual identity pursuant to revised branding- Pg. No 1123-1126 of the paperbook • Mail from Paul Laudicina for providing Organization Update to all the employees Pg. No 1148-1150 of the paperbook • Mail from Paul Laudicina on details of the election of new Managing Partner.Pg. No 1154 of the paperbook • Mail from Paul Laudicina in introducing the new Managing partner Johan Aurik- Pg. No 1151-1152 of the paperbook 17 M.A Nos. 269, 271, 271 & 272/Del/2024 A. T. Kearney Vs. DCIT • Mail from Saurine Doshi in planning the revenue forecast of ATKBO Pg. No 1171-1122 of the paperbook • Mail between Dan DeCanniere, Micheal Friedman, John Yoshimura and various other serios personnel of the ATK Group in planning and forecasting the operations of the ATK Group entities Pg. No 1169- 1179 of the paperbook Duplicative Expenses: B.4 The assessee submitted the comparison of expenses incurred locally by the branch office in India and incurred by ATK US related to Global CEO Services. The appellant submitted following details to highlight that the expenses incurred as part of intra group services towards Global CEO Services is not duplicative in nature. Particulars Expenses in the nature of intra Group Services Expenses incurred locally Category Global CEO Services NA Amount Rs. 0.61 crores NA Nature Expenses Incurred by AE include expenses retreat NA expenses incurred for CEO's NA B.5 In view of the above discussion, it is noted that the sample e-mail submitted in this case do satisfy the rendition test of delivery of services. Since, the assessee is in the business of management consultancy services, therefore, updating knowledge of resources with latest developments in the globe is critical. I find that Global CEO Services do equip the resources in this regard. C. Global Business Policy Council (GBPC): C.1 The assessee explained that GBPC services are for providing early analysis to understand global trends and future external challenges and it serves a very relevant source of thought leadership for top CEOs and 18 M.A Nos. 269, 271, 271 & 272/Del/2024 A. T. Kearney Vs. DCIT senior business executives for building their strategies. The assessee cited GBPC activities which are described below: • GBPC produces a series of intellectually capital products that provide a broad range of insights on important global trends. • GBPC conducts a yearly conference called 'CEO Retreat' which provides opportunity to the ATK affiliates including the appellant to reach out to CEOs and corporations to pitch for business. • The GBPC team also prepares knowledge paper which includes research on certain recent important update on the global economic scenario C.2 As regards the need and benefit from receipt of services, the assessee pointed out asunder: The benefits derived from the thought leadership of A.T. Kearney's global leaders benefit all its affiliates, including the Appellant. Different products arising out of GBPC are leveraged by Appellant, cited and used in abundance by consultants, since the firm 'provides professional services' and its main asset is its 'intellectual capital'. This thought leadership is widely cited globally and intangibly, being largely used in the professional services provided by the Appellant to clients in India. Being a management consulting firm, meetings helped the staff of the Appellant get exposure to global situations. International conference brought together renowned CEOs and International guests at one platform. GBPC helped the staff of the Appellant to keep abreast with changing needs of the businesses across the world. Internal discussions through GBPC enabled the staff of the Appellant to leverage on the knowledge of other ATK affiliates. The meetings were privy and exclusively to ATK affiliates only. All the events were addressed in keeping mind the types of services offered by the affiliates of ATK including the Appellant. GBPC also conducts various internal meetings and conferences which act as a training sessions for the employees of the Appellant. Such knowledge papers and researches helps the ATK Group entities including the Appellant in gaining knowledge required for providing 19 M.A Nos. 269, 271, 271 & 272/Del/2024 A. T. Kearney Vs. DCIT services. These knowledge papers also act as a marketing tool which highlights the capabilities of the organization and provides active presence in the market. C.3 The assessee submitted email communication on sample basis to demonstrate the fact of rendering of services. These emails are as follows:- Report of the CEO Retreat 'At the Crossroads held in istanbul from June 24-26, 2012 where the notable personalities from various institution and industries joined. Pg. No 774-791 of the paperbook ATK's knowledge paper on the potential of Sri Lanka for IT, BPO and KPO business 'Competitive Benchmarking: Sri Lanka Knowledge Services' which provides detail insight on the various aspects on the subject matter. Pg. No. 792-815 of the paperbook ATK's knowledge paper on the global economy \"Simultaneous Recovery and Risk: Forecast for the Global Economy, 2012 Pg. No. 816-826 of the paperbook ATK's knowledge paper on political transition across the world 'Political Tidal Waves in 2012 and Beyond-Pg. No. 827-838 of the paperbook Duplicative Expenses: C.4 The appellant submitted following details to highlight that the expenses incurred as part of intra group services towards Global Business Policy Council is not duplicative in nature. Particulars Expenses in the nature of Intra Group services Expenses incurred locally Category Global Business NA Amount Rs. 1.0 Crores NA Nature Expenses incurred by AE include expenses related to GBPC helping the staff of the Assessee to keep abreast with Changing needs of the businesses across the world, internal discussions through GBPC enabled the staff of the Appellant to leverage on the knowledge of other ATK affiliates. NA 20 M.A Nos. 269, 271, 271 & 272/Del/2024 A. T. Kearney Vs. DCIT C.5 In view of the above discussion, it is noted that the sample e-mail submitted in this case do satisfy the rendition test of delivery of services. Since, the assessee is in the business of management consultancy services, therefore, building up of intellectual capital is essential for delivery of services to the clients. I find that Global Business Policy Council do lead to the development of intellectual capital in the form of knowledge papers, research papers and insights on important global trends. D. IT- Information Systems and K-Net Services:- D.1 The assessee explained that ATK US has central team which is responsible for managing and maintaining various software, servers, data centres, applications, etc., which are accessed by employees across ATK affiliates and helps employees to work seamlessly from anywhere in the world. The assessee cited certain activities which are described below: • building of data input screens, business rules for validation, and reporting requirements from an Oracle database • constant improvement to the financial systemstechnical support D.2 As regards the need and benefit from receipt of services, theassessee pointed out that the Appellant is dependent on ATK US for IT infrastructure and support as it does nothave its own database or server to maintain user data as it involves huge cost. D.3 The assessee submitted email communication on sample basis to demonstrate the fact of rendering of services. These emails are as follows:- Detail on the services provided by the K-Net team. Pg. No. 1052-1075 of the paper book Mails from K-Net team on providing new automated password reset service. - Pg. No. 1047-1049 of the paper book 21 M.A Nos. 269, 271, 271 & 272/Del/2024 A. T. Kearney Vs. DCIT Mails from K-Net team on providing protection of SPAM mails in the mall boxes. - Pg. No. 1050-1051 of the paper book Duplicative Expenses: C.4 The appellant submitted following details to highlight that the expenses incurred as part of intra group services towards IT is not duplicative in nature. Particulars Category Information technology (IT)/ Knet & database charges under other global office services/ production services which relate to designing services No similar expenses have been incurred locally in India. Communication expenses incurred locally include internet/ telephone expenses of consultant staff plus salary cost of local Knet team and research team in India which use the applications/ databases provided by the AE team. Amount Rs. 95.1 lakh as IT cost and Knet cost Rs. 7.99 lakh Production Services Technology cost charged under other services Rs. 24.02 lakh on Global knowledge systems, le. use of third party databases Rs. 3.73 lakh on Global Knet infrastructure, monitoring, troubleshooting Nature Total amount-Rs. 1.31 crores Rs. 1.89crores plus salary cost of 7.28 lakh plus 23.99 lakh Expenses incurred relates to - Mobile phone bill of consultants, land line phone bills of Gurgaon & Mumbai offices, Internet line expenses of Gurgaon & Mumbai offices, Courier charges, Data card expenses of consultants Reimbursements of IRC cost etc. 22 M.A Nos. 269, 271, 271 & 272/Del/2024 A. T. Kearney Vs. DCIT Salary to employees engaged in research activities in the support team, who use the databases procured from AEs for research for the consultancy team Salary of team in India that uses the Knet Infrastructure provided by the AE and help in execution of Knet functions on a day to day basis under the guidance of the overseas team Nature Payment of Knet charges enables employees of Appellant to use the company's intranet globally which is otherwise a costly affair to be handled by the Appeliant independently Expenses incurred by the information technology (IT) team which provides support in the area of IT as the Appellant does not have an IT team in india, Service include building of data input screens, business rules for validation, and reporting requirements from an Oracle database. Thus, IT issues faced by the Appellant are resolved remotely by the overseas AE team Access is provided to various expensive databases to avail economies of scale the AE have subscribed to various expensive databases (like Factiva, Bloomberg, Reuters, etc.) to collect information from the various databases and 23 M.A Nos. 269, 271, 271 & 272/Del/2024 A. T. Kearney Vs. DCIT document the same as per the instructions provided by the front-end consultants of overseas AEs. The deliverables prepared by the team are used by the consultants in India for the purpose of their deliverables to the clients. Production Services group is a global network of professionals whose role is to support consultants and other administrative support staff members in preparing and producing a wide range of presentation materials. The said team is engaged in documentation of work involving designing, layout, etc., of documents, power-point presentations and work deliverables shared by the consultant staff. Based on the request of the staff, the work is assigned to team/employee in the PRC unit/team which evaluates the scope of work and does requisite value addition as per the quality standards D.5 The above details highlight that the expenses incurred locally are in respect of communication expenses and salary of resources engaged as users of the K-net system for accessing database and doing research activities based on the knowledge available on K-net. As against this, the ATK-US charges fee for putting the system in place and allowing the access to knowledge database. D.6 In view of the above, it is noted that the information technology/ K-net and database related services provide platform for the assessee to deliver services to the clients. This platform consists of IT Infrastructure, Software Application and third party databases. The access to the knowledge (intellectual capital) database has been enabled through this platform. I find that the appellant is totally dependent on the platform to access the 24 M.A Nos. 269, 271, 271 & 272/Del/2024 A. T. Kearney Vs. DCIT intellectual capital which is an asset in the domain of imparting management consulting services. Production Services:- E.1 The assessee explained that production services are to support consultants and other administrative support staff members in preparing and producing a wide range of presentation materials. The assessee cited certain activities which are described below: Utilization and cost metrics Management of Production Service teams globally which in turn, services the Appellant. Implementing changes in identity or branding formats, Coordination of standardized global templates, tools and resource, including the preparation of ATK information to be used by the Appellant's presentation to clients Creating and responding to queries relating to program usage, for instance, to assist withparticular ATK functions within Microsoft Power Point Development of skills to offer high-end presentations, hyperlinked, dynamic proposals,external web surveys Video editing and streaming into presentations and websites, Maintaining global production services support ratiosregular guidance and updates on branding related matters As regards the need and benefit from receipt of services, the assessee pointed out that Maintaining appropriate quality standard in alignment with ATK services globally. preparation and reporting of monthly production service metrics support, which helps make decisions on staffing and recruitment, implementing changes in identity/branding formats, video editing and streaming into presentations for the consulting projects of the Appellantperformance evaluation input on the Production Services group globally. 25 M.A Nos. 269, 271, 271 & 272/Del/2024 A. T. Kearney Vs. DCIT Preserving corporate presentation format consistency. coordination of global work sharing and sharing best practices. E3 The assessee submitted email communication on sample basis to demonstrate the fact of rendering of services. These emails are as follows:- Mail from Liz Trujillo (Global Administrator) on intimating the global production team about the updates in the Production tracker- Pg. No 875- 877 of the paperbook Mail from Liz Trujillo in introducing new member in the Production team. Pg. No. 878-881 of the paperbook Mail from Liz Trujillo to Abhinav Chauhan providing information regarding accessing the interface of the production tracker module.- Pg. No. 882-886 of the paperbook Mail from Liz Trujillo to Abhinav Chauhan for providing assistance in extracting reports from the production tracker. Pg. No. 897-898 of the paperbook Mail from Randy Robertson (Manager, Global Production Services) helping the employees of ATKBO for translation of any text. Pg. No. 901-902 of the paperbook Mail from Liz Trujillo to the India team providing instructions required for movement of terminal server of Production Services. Pg. No. 912 of the paperbook Mail from Liz Trujillo to Abhinav Chauhan for providing access to certain employees of ATKBO and also guiding them to create profile for the new user. Pg. No. 919-923 of the paperbook 26 M.A Nos. 269, 271, 271 & 272/Del/2024 A. T. Kearney Vs. DCIT Mail from Liz Trujillo and Randy Robertson providing various guidance and assistance required for transfer of server to Chicago Pg. No. 924-929 of the paperbook Mails between Liz Trujillo, Kurt Hammond and Randy Robertson coordinating on the transfer of server Pg. No. 930-944 of the paperbook Mail from Liz Trujillo to David Ritchie for providing access to certain employees of the Appellant.- Pg. No. 956 of the paperbook Mail from Liz Trujillo to Abhinav Chauhan and Randy Robertson on resolving certain queries Pg. No. 984-985, 998-1000 of the paperbook Mail from Randy Robertson to various production team members including Abhinav Chauhan of the Appellant to highlight the issue with new format which corrupts branding. - Pg. No. 1011-1012 of the paperbook Mail from Randy Robertson to Ruchika Sodhi and Rohit Rodrigues on providing them with required guidance. Pg. No. 1013-1015 of the paperbook Mail from Randy Robertson to Rakhee Malik on providing possible solution for food services managed by production team. Pg. No. 1016- 1017 of the paperbook Mail from Randy Robertson to all employees of the ATK Group sharing the new power point update with added feature. Pg. No. 1018 of the paperbook Mail from Randy Robertson to various employees of the ATK Group inviting them for the PowerPoint training. Pg. No. 1019-1020 of the paperbook Mail from Randy Robertson to Rakhee Malik discussing on the revision of the Medical Insurance cover of the employees of the Appellant.- Pg. No. 1031 of the paperbook Mail from Randy Robertson on finding solution for the back problem to the employees from the chairs. - Pg. No. 1032-1035 of the paperbook Mail from Randy Robertson sharing the revised templates on the SharePoint site accessible to all the employees of the ATK Group. Pg. No. 1039-1040 of the paperbook 27 M.A Nos. 269, 271, 271 & 272/Del/2024 A. T. Kearney Vs. DCIT Mail from Randy Robertson providing the total work done by the production team on various power point for the Appellant. Pg. No. 1045- 1046 of the paperbook. Duplicative Expenses: E.4 The appellant submitted that Production Services fall under the head \"IT\" and the details of expenses in respect of IT head has already been discussed above at para \"D\" which reflects that expenses incurred as part of intra group services towards Production Services is not duplicative in nature. E.5 In view of the above, it is noted that the production services are intended to equip the resources to prepare and produce wide range of presentation material, various brand tool kits and standardised global templates to ensure appropriate quality standards in alignment with ATK Group Services globally. F. Accounting, Treasury, Finance & Tax Services:- F.1 The assessee explained that accounting & finance services are in respect of development of standard accounting policies and procedures that are followed by all the ATK- affiliates, including the Appellant. The assessee cited certain activities which are described below: The team overlooks the creation and implementation of the ATK group's time and expense policy, which provides guidance and instructions to all staff belonging to the Appellant, relating to the submission of timesheets and expenses. Central accounting team also undertake intercompany clearing assistance services for the Appellant, providing general guidance on open or closed accounting issues, collates and provides accounting information to the Appellant on need basis. 28 M.A Nos. 269, 271, 271 & 272/Del/2024 A. T. Kearney Vs. DCIT F.2 As regards the need and benefit from receipt of services, the assessee pointed out that: Since the India office does not its own finance head, the team of ATK US undertakedifferent financial activities, undertake compliance with the industry standards, and ensurethat the company is financially sound for meeting the firm's goais. The guidance and policies rolled out by central accounting team benefit the Appellant in reaching a higher degree of accuracy in their financial reporting. ATKBO derives benefit by leveraging on the benefits of being part of the global firm. The team is actively involved in the finance operations of the Appellant and overlooks all important matters, an example being his position on the Appellant's rental renewal process, which contained advice to minimize the deposit paid by the Appellant and making offerings to provide a letter of credit instead. F-2 The assessee submitted email communication on sample basis to demonstrate the fact of rendering of services. These emails are as follows:- Mail from Eena Khanna to Mark Chappell & Beth Emery to receive their assistance in maintaining the accounting records of the Appellant- Pg. No. 738-743 of the paperbook Mail from Matthew M. Gross (Director of Finance) for finalizing the Per Diem rates India team. Pg. No. 744-747 of the paperbook Mall from Kathy Holland to various person of the ATK Group entities including Shikha Gupta and Eena Malhotra for providing assistance regarding intercompany transaction required for the books of accounts of all the entities. Duplicative Expenses: 29 M.A Nos. 269, 271, 271 & 272/Del/2024 A. T. Kearney Vs. DCIT F.4 The appellant submitted the details in respect of Accounting Services head which reflects that expenses incurred as part of intra group services towards Accounting Services is notduplicative in nature. Particulars Expenses in the nature of Intra Group services Expenses incurred locally Category Accounting services- Finance & Treasury Amount Rs. 1.94 Crores Nature Expenses incurred by AE include expenses of the team which is actively involved in the finance operations of the Appellant. They help the relatively less experienced India team in resolving critical matters. Eg. Advice on working capital management. The Appellant has locally hired a small team who are involved in execution and look into the daily accounting and related compliance matters under the guidance of AES F.5 The accounting services providing inputs in accounting policies (refer emails dated 04/10/2017 at page no. 15, 16 & 69 (Refer reply dated 21/08/2017) are to align the accounting standards and policies across the group. It is a settled position internationally that providing for consistency of accounting systems and processes are to the benefit of parent company and therefore, are not subject to allocation. Such services are largely in the nature of control and supervisory functions and hence fall under stewardship activity (Refer Para 5.15 to 5.17). It is also noted that there is accounting team deployed in India for performing the finance and accounting activities. There is no such mail submitted by the assessee which highlights resolution of any important accounting/finance/tax matter. Moreover, Indian entity is bound to follow the accounting standards and tax laws in India. Therefore, the question of foreign resources guiding Indian resources in respect of Indian accounting and tax laws does not arise. It is also important to note that the evidence regarding accounting services was not submitted during the assessment proceedings. I find that the payment for accounting services is redundant for the appellant and the services have significance only for the parent. G. Legal Services: 30 M.A Nos. 269, 271, 271 & 272/Del/2024 A. T. Kearney Vs. DCIT G.1 The assessee explained that central legal team based out of Chicago (US) is responsible for the review of legal terms in all commercial contracts, employee contracts, vendor contracts, bank agreements, insurance policies, etc. of the Appellant. As regards the need and benefit from receipt of services, the assessee pointed out that The Appellant does not have any dedicated legal team/personnel in India As are the Aspirant is completelyrelate on the centroclinal team based out of US for legal support on the commercial contracts, employee contracts vendor contracts entered between the Appellant, client endors and empower for any sort of legal support. ATK Group entities in the providing management consultancy services to large MNCs the engagement contracts enter son to same Includes various terms and conditions interlard to understand and verify that such contract is not predal to the ATthis regard the central legal team provide guideless. Further, the legal provides there any special modification is required based on the requirement of the cento peculiarity of the service provided Such support it not only restricted for the contracts entered with the clients. The central legal teamverting of contracts entered with ovenfor The assessee submitted mall communication on sample is to demonstrate the factof rendering of services. These emailare as follows Mall from Wiltam GATESponding to the de engagement letter of 2008-100 of the paper Mail from Affan Arian on providing thements on talong the terms and conditions of Client engagement 2010 1082 of the paper book. Mail from Willian Guthrie to Abhishek Borang cert clauses of the client engagement etter Pg. No 1047 1045 of the paperbook Met from Affan Arman to Sachin Gupta part of the Finance team of ATKBO) on providing their approvals on the terms and conditions of Clent engagement lette2003- 1095 of the paperbook No. 1206-1100 of the paperbock Mall From William Gutteto Acheron providing comments on tan terms of the engagement later. No. 103-1095 1111 1112 of the paperboos Mail from William Guthrie to anshumar Maheshwary employee of ATK their comments on General Terms and Conditions of clent contract Pe 110- 1116 of the paperbook 31 M.A Nos. 269, 271, 271 & 272/Del/2024 A. T. Kearney Vs. DCIT Mat from Affan Ananto Rahul than employee of ATKBO) on providing thegrovalonthe terms of client engagement letter. No. 1117 of the paperbook Mal hom Aftan Arianto Sarvar Aggarwal amp of ATKSO opting Approval on a specific tem regarding vara fees. P No. 1118 1113 of the Mel from Witam Qutton reed terms andconditions of a client engagement No. 1120-1122 of the paperbook. Duplicative Expenses. G.4 The appellant submitted that out of total legal and professional expenses of Rs. 22.82crores debited in the P&L A/c, a sum of Rs. 12.68 crores is towards intragroup services as a whole. Remaining 10.14 crores incurred locally relate to expenses incurred by consultant staff on various expenses which includes - o air ticket and travelling/conveyance o training expenses, o fees for various professional programmes sponsored for consultants, conference charges) o Campus placement cost, • Payroll processing charges, • Fees for Tax consultants/preparation of TDS Return/PF consultant/auditor/ etc. G.5 The details provided by the appellant in this regard are tabulated below: particulars Category No similar expenses have been incurred locally in india. While there are \"Legal and Professional expenses\" to the tune of Rs. 20.46 crores, the same are not duplicative of the intra- group services and are explained below in detail 32 M.A Nos. 269, 271, 271 & 272/Del/2024 A. T. Kearney Vs. DCIT Amount Out of Rs. 20.46 crores, Rs. 16.35 crores is the amount of intra-group services charges booked under \"legal and professional expenses\" The remaining INR 4. 11 crores is explained below and does not include any cost for legal consultancy as paid under IGS Nature These expenses include charge for the legal team involved in overseas offices who help in reviewing and advising on vendor/ third party contracts of the Appellant to secure them from a risk perspective as the Appellant neither has an in-house legal team nor has hired third party legal consultants The Appellant does not have a legal team on its payrolls in India and has not paid any charges for outsourced consultants for legal advice required by the company on a day-to- day basis..The INR 4.11 crores expenses Incurred locally relate to expenses incurred by consultant staff on various expenses. This includes -air ticket and travelling/conveyance training expenses,fees for various professional programmes sponsored for consultants, conference charges) Campus placement cost, Payroll processing charges, Fees for Tax consultants/preparation of TDS Return/ PF consultant/auditor/ etc. 33 M.A Nos. 269, 271, 271 & 272/Del/2024 A. T. Kearney Vs. DCIT -6.6 In view of the above discussion, it is noted that the appellant needs to enter into contracts with various clients for delivery of management consulting services. Such contracts are important for defining the scope of work and to safeguard the intellectual property right of the ATK Group. Therefore, I find that drafting of contract is quite critical task and the parent entity provides services to protect its brand and intellectual property rights. H. Marketing Services:- H.1 The assessee explained that global marketing team provides strategic management in respect of marketing and communication functions to all ATK affiliates (including the Appellant) for overall marketing efficiencies. The Appellant claims to have received support from the corporate marketing team in the form of marketing articles, promotion material, etc., which is used by the Appellant to market its services in India. H.2 As regards the need and benefit from receipt of services, the assessee pointed out that The Appellant had only one person in India as marketing coordinator, who was responsible for coordinating between the Global marketing team and Indian Partners / Principles related to firm's overall marketing and communication strategy, planning and strategizing specific campaigns and events, analyzing media perceptions, etc. Global marketing division support the Appellant by providing it with several promotional material and giving access of international marketing campaigns to the Appellant and also helped in the following:- Such international approach of marketing helped the Appellant in getting more business It helped the Appellant in aligning its marketing activities with that of ATK's global marketing approach H.3 The assessee submitted email communication on sample basis to demonstrate the fact of rendering of services. These emails are as follows:- Mail from Dan DeCanniere on providing new project to ATKBO. Pg. No 1154-1165 of the paperbook Mail from Dan DeCanniere on providing opportunity to ATKBO on a new client. - Pg. No 1166-1169, 1180-1181 of the paperbook H.4 Expenses incurred by AE include expenses incurred by the Global marketing team the Assessee on providing the Appellant with several promotional material and giving access of international marketing campaigns, developing guidelines on new visual identity and expense on development of new A.T. Kearney website, receipt of brand products which 34 M.A Nos. 269, 271, 271 & 272/Del/2024 A. T. Kearney Vs. DCIT helped in fetching business in India. The appellant claimed that such international approach of marketing helped the Appellant in getting more business. Duplicative Expenses:- H.5 The appellant submitted the details in respect of Marketing Services head which reflects that expenses incurred as part of intra group services towards Marketing Services is not duplicative in nature. Particulars. Expenses in the nature of Intra Group services Expenses incurred locally Category Marketing services No similar expenses have been incurred locally in India Advertisement and Business Promotion expenses are incurred on a local level. Amount Rs. 68.82 Lacs Rs. 2.72 crores plus salary cost of Rs. 12.22 Lacs This does not relate to any global marketing functions for which the AE provides the services Nature Expenses incurred by AE include expenses incurred by the Global marketing team the Assessee on providing the Appellant with several promotional material and giving access of international marketing campaigns, developing guidelines Expenses incurred to purchase greeting cards, membership with Confederation of Indian industries and expenses in the nature of general business promotion. Such international approach of marketing helped the Appellant in getting more 35 M.A Nos. 269, 271, 271 & 272/Del/2024 A. T. Kearney Vs. DCIT on new visual identity and expense on development of new A.T. Kearney website, receipt of brand products which helped in fetching business in India business The Appellant had only one person in India as marketing coordinator, who was responsible for coordinating between the Global marketing team and Indian Partners/Principles related to firm's overall marketing and communication strategy, planning and strategizing specific campaigns and events, analyzing media perceptions, etc. H.6 In view of the above discussion, it is noted that the advertisement and business promotion expenses incurred locally are met directly by the appellant. The parent entity has incurred expenses only towards giving access to international marketing campaigns, guidelines on visual identity, brand products etc. which are part of intellectual capital of the parent entity. Global Support Services (office services):- 1.1 The assessee explained that the Office Services group is responsible for global activities related to real estate administration, office operations and equipment rental/leases. The Global support team is stated to be involved in providing assistance in relation to office infrastructure related matters which involves finalization of office spaces, designing and infrastructure of the offices, verifying and execution of lease agreements for office space, analyzing and finalizing of lessor for entering into any lease agreement. 1.2 The assessee cited certain activities which are described below: Office Services team provides corporate benchmark to the Appellant, in order to ensure that the transactions are viable from a cost and risk perspective. 36 M.A Nos. 269, 271, 271 & 272/Del/2024 A. T. Kearney Vs. DCIT It helps the Appellant in appropriate site selection using financial analyses, provided full support to the local team for a rental renewal, helped facilitate global discount arrangements for the Appellant, It also proves plans for capital expenditure in india, preparing tracking tools for the local office's real estate transactions, liaised with city security alerts locally, and provided the Appellant with overall guidance and leadership in the area of office management. 1.3 As regards the need and benefit from receipt of services, the assessee pointed out that The support provided by the central Office Services team is necessary and important as the Appellant has no staff with the experience of negotiating rental agreements, global discount arrangements, risks attributable, etc. These services are thus beneficial to the Appellant. The centralized approach for negotiating leases/rental helped the Appellant in getting best possible deals for setting up its offices in the country and keeping costs as low as possible. The international team helped the Appellant's staff in further negotiating for better discounts and value for going for any support services in the country. 1.4 The assessee submitted email communication on sample basis to demonstrate the fact of rendering of services. These emails are as follows:- Mail from Marlene Servos (senior Director, Administration) on gathering requisite detalls required for planning of office space in Gurgaon for the Appellant-- Pg. No 1128-1130 of the paperbook Mail from Marlene Servos on handling and also guiding its team for new office space in Mumbai. Pg. No 1131-1133 of the paperbook Mail between Affan Arian and Marlene Servos in finalizing the lease agreement. - Pg. No 1134-1139 of the paperbook Mail from Marlene Servos on expediting the process of site finalization in Mumbai. Pg. No 1140-1142 of the paperbook . Mail from Marlene Servos on determining the capital expenditure required for the Gurgaon office. Pg. No 1143-1144 of the paperbook Mail from Marlene Servos on planning and strategizing on the operational cost of Gurgaon office. Pg. No 1145-1147 of the paperbook Mail from Dan DeCanniere on planning for new office space in Gurgaon. - Pg. No 1162-1163 of the paperbook 37 M.A Nos. 269, 271, 271 & 272/Del/2024 A. T. Kearney Vs. DCIT Itinerary and budgeted cost for ATK Worldwide Partners Meeting. - Pg. No 1181-1243 of the paperbook Duplicative Expenses:- 1.5 The appellant submitted the details in respect of Office Services head which reflects that expenses incurred as part of intra group services towards Office Services is not duplicative in nature. Particulars. Expenses in the nature of intra group services Expenses incurred locally Category Office services and procurement cost Advertisement and operation services Amount Rs. 1.15 Crores under office services Rs. 32.41 lacs Global tech support for PAS (Procurement & Analytic Solutions) Rs. 2.21 crores which does not involve any cost incurred on overall cost planning, selection of vendors, etc. Nature The Office Services group is responsible for global activities related to real estate administration, office. operations and equipment rental/leases. These appellant have had Incurred certain expenses under this head which are related to the day to day administration of the company unlike strategic negotiations with global vendors and other vendor association provided by the AE. ATK US has global procurement team responsible for negotiating contracts for various services from vendors at global level. This includes travel agency, corporate credit card, preferred hotels, airlines etc. These appellant have had incurred certain expenses under this head which are related to the day to day administration of the company unlike strategic negations with global vendors and other vendor association provide by the A.E 38 M.A Nos. 269, 271, 271 & 272/Del/2024 A. T. Kearney Vs. DCIT The Global support team is involved in providing assistance in relation to office Infrastructure related matters which involves finalization of office spares, designing and Infrastructure of the offices, verifying and execution of lease agreements for office space, analysing and finalizing of lessor for entering into any lease agreement. 1.6. In view of the above discussion, it is noted that the global support team provides corporate benchmark to ensure that the transactions are viable from cost and risk perspective. Further, it provides assistance and guidance in relation to office infrastructure related matters The assessee has submitted sample e-mails in order to satisfy the rendition test. Emails at page n. 1013 to 1083 in respect of costing planning and monitoring to reflect the colour of stewardship activity which has been discussed separately at Para no 5.12.15.12.3 5.8 It is important to take note of the fact that ATK US develops, maintains and owns valuable trade names and trademarks. Such trademarks and trade names include the name \"A.T. Kearney\" and all derivatives and abbreviated forms of that name, including \"KEARNEY\" and \"A.T.K.\", and all trademarks, service marks, and logos used by any member of ATK in the United States or in any area of the world. As per transfer pricing study report at page no. 25. Intellectual property means Trademarks and Trade 39 M.A Nos. 269, 271, 271 & 272/Del/2024 A. T. Kearney Vs. DCIT names, Business processes and all the other rights of ATK US related to inventions, copyrights, trade secrets etc. 5.9 Further, ATK US has a Master International License Agreement, which provides the right to use the trademarks and trade names in its management consulting business to ATK Affiliates. The use of the trade names and trademarks allows ATK Affiliates to achieve a certain volume of business and a certain pricing point that each affiliate would not be able to obtain without the use of these well. regarded and established trade names and trademarks. The nature of the positive image and reputation of the ATK brand name may vary from country to country and from client to client, but generally, third party clients consider the ATK brand name to be representative of collaboration, a team-oriented approach and strength in certain service lines and industries. Third party clients perception of the ATK brand name results from ATK's history of more than 80 years of participation in the management consulting industry. 5.10 As per Transfer Pricing report, the appellant has entered into an agreement with ATK US for the use of trading and trademarks. Under the agreement, ATK BO avails the right to use the intellectual property of ATK US. ATK US has received royalty of an amount of Rs.4,57,51,888/- for the subject year from the appellant for use of its intellectual property. There are different slab rates of the royalty based on the range of net revenue earned in the fiscal year. 5.11 In this backdrop of payment of Royalty for use of intellectual property (Trademarks and Trade names, Business processes and all the other rights of ATK US related to inventions, copyrights, trade secrets etc.), I find that the expenditure incurred on account of Global Business Policy Council, Global CEO Office, Production services, Legal services and Marketing Services is not justified. It is because the aforesaid specific services (Global Business Policy Council, Global CEO Office, Production services and Marketing Services) are building blocks for development of intellectual capital and Legal Service is for protection of intellectual property. So, it is a case where the appellant is first investing in development, maintenance 40 M.A Nos. 269, 271, 271 & 272/Del/2024 A. T. Kearney Vs. DCIT and protection of intellectual capital through sharing expenses for such services and thereafter, paying Royalty for the same intellectual capital developed through sharing of expenses. As discussed above, the term \"intellectual capital\" has been defined in the transfer pricing report at page no. 25. As per the given definition, Intellectual property does include \"Business processes\", \"rights related to inventions, copyrights, trade secrets etc\". The discussion above in respect of specific services (Global Business Policy Council, Global CEO Office, Production services and Marketing Services) highlight the fact of development of intellectual capital including knowledge papers, research papers, global trends monitoring, standardised business processes, standardization of global templates, development and use of brand tool kit, branding format, updates on branding related matters, enhancement of brand and distribution of brand products. The following extracts from each of such service would clearly highlight that such services are building blocks for development of intellectual capital. Global CEO's office: ATK US claims to provide leadership services to all ATK affiliates to develop and implement new practices on a regular basis with the ever-changing HR environment. Based on CEO's experience and insights, the Appellant has been able to build strong credentials in associations with leading practitioners and clients in the industry. * GBPC services: It serves a very relevant source of thought leadership for top CEOs and senior business executives for building their strategies. GBPC produces a series of intellectually capital products that provide a broad range of insights on important global trends. The GBPC team also prepares knowledge paper which includes research on certain recent Important update on the global economic scenario. Different products arising out of GBPC are leveraged by Appellant, cited and used in abundance by consultants, since the firm 'provides professional services' and its main asset is its 'intellectual capital. 41 M.A Nos. 269, 271, 271 & 272/Del/2024 A. T. Kearney Vs. DCIT Production Services: The assessee explained that production services are for implementing changes in identity or branding formats, Coordination of standardized global templates, tools and resource, including the preparation of ATK information to be used by the Appellant's presentation to clients Maintaining appropriate quality standard in alignment with ATK services globally. Preserving corporate presentation format consistency. Coordination of global work sharing and sharing best practices Marketing services: Expenses incurred by AE towards Marketing services include expenses incurred by the Global marketing team on providing the Appellant with several promotional material and giving access of international marketing campaigns, developing guidelines on new visual identity and expense on development of new A.T. Kearney website, receipt of brand products which helped in fetching busiriess in India. Legal services: The expenses towards legal services are for vetting contracts by the Central Legal Team to protect the brand image and intellectual property rights of the ATK Group. The discussion made below at Para 5.12.1, Para 5.12.4 and Para 5.12.5 is also relevant in this regard. 5.12 It is worth mentioning that certain instances of stewardship activities such as oversight function and control function have been noticed based on emails at page no. 1013 to 1033. Page 1025 to 1028: It is an email related to seeking an approval of lowering the quoted price for an assignment with Pepsico India at an RV of 50% from Mr. Dan and Mr. John. The email contains justification for bringing down the quated price. Page no 1032, 1033: It is an email from Mr. Mohit Rana to Mr. Dan wherein Mr. Mohit Rana has requested for an approval of lowering the quoted price for an assignment with 42 M.A Nos. 269, 271, 271 & 272/Del/2024 A. T. Kearney Vs. DCIT MTS India at an RV of 55% from Mr. Dan. The email contains justification for bringingdown the quoted price. Page no. 1029, 1030, 1031: It is an email related to seeking an approval of lowering the quoted price for an assignment with KYB japan at an RV of 30% from Mr. Dan and Mr. John. The emall contains justification for bringing down the quoted price. 5.12.1 Perusal of emails from Page no. 1025 to 1033 reflect that the Indian entity need to seek approval from the parent entity for offering discount on quoted prices in order to get the contract assignment. Indian resources have made out a case for extending the discount on case to case basis. The email correspondence does reflect the control function of the parent entity. The Indian entity has no freedom to extend the discount in this case. The approval is nothing but a control and supervisory function in respect of commercial terms & conditions of the contract. The Indian entity would not have required any third entity to deliver such service to approve the discount offered on case to case basis. There is no value added service delivered through the process of approval except the control function of the parent entity on Indian entity. Page 1023 and 1024: It is an email dated 09.08.2011 from Mr. John and Mr. Dan on the subject of 2012 planning process. The relevant extracts of email are reproduced as under: \"We have begun to prepare for the 2012 planning process and would like to share a brief update on your enhanced process and templates for this year's effort. You may also have begun internal practice and unit 2012 planning discussions 2012 planningprocess will mirror the operating model in the regions and factors in the global industry practices-CIRP, EPI Page 1022: It is an email dated 17.08.2011 from Mr. Dan on the subject of 2012-14 top- down targets-India. The relevant extracts of email are reproduced as under: \"Attached are the top-down directional targets for your region/unit The attached excel model is 43 M.A Nos. 269, 271, 271 & 272/Del/2024 A. T. Kearney Vs. DCIT similar to what we have used in the past, however, we have added a few things this year including a supporting schedule which isolates partner headcount mavement across the three year time horizon, and a calculated partner bonus estimate (assuming no bonus export of the 30% at his point in the process. As John mentions in his emails below, we are taking a more coordinated approach this year in the planning process between the practices and the regions. Attached is a file with your historical bookings data and a planning template for your to complete. As you work through your plan, please reach out to the practice leaders to ensure that we have alignment in terms of the overall strategy and the required investment needed to achieve the outcome. There is a limited budget for practice investments at corporate and as a result most of those costs will need to be reflected in the regional plans.\" 5.12.2 Perusal of emails from Page no. 1022 to 1024 reflect that the parent entity has chalked out coordinated approach between the practices and the regions in target planning process for the year. It is a fact that coordinated planning process does benefit parent entity as well as Indian entity. However, the question arises that which entity has direct and proximate benefit through this coordinated planning process? The answer is evident that the global alignment of targets is the need of the parent entity. It is duly mentioned in the email that \"As you work through your plan, please reach out to the practice leaders to ensure that we have alignment in terms of the overall strategy and the required investment needed to achieve the outcome...\". This highlights that Indian entity has its own planning process at regional level. The coordinated and global approach is for the direct benefit of the parent. Indian entity would not have approached third party for such services of coordinated planning. These services are in the nature of stewardship activities. The emails on Page no. 1017 to 1019 are exactly the same as the emails on page on 1022 and 1023. Page 1020: It is an email dated 01.11.2011 from Mr. David to Mr. Dan and Mr. John on the subject of 2012-14 India plans. The relevant extracts of email are reproduced asunder: \"Please see attached plan submission for India. Note that their 9+3 forecast reported higher net feesthan 6+6 and as a result the growth rate is less (unit submission for 2012 kept at the net fee dollars we asked for in the guidance). This submission is well below guidance for most metrics and I suggest we ask them to try again: Net fees are in line with guidance but they have more comp (headcount and merit increase driven). Per diem increases appear to be at zero in 2012 while rave variance is up 6%. 1assume that 44 M.A Nos. 269, 271, 271 & 272/Del/2024 A. T. Kearney Vs. DCIT his an error in the report and that they have the recommended rates in hissubmission. Note that our rate variance guidance was 22% primarily because the 6+6 forecast was showing 21%. The forecast RV is now 16% so I do not see a reason to increase it by 6% . 56&A 53m higher than guidance Margin of 12% is well below guidance and lower than any year since the MBO (2008 was close ot 32.5%) Also their 2013 and 2014 margin is declining Realization of 35K is some as guidance but they are achieving this with merginolly increased headcount 5.12.3 Perusal of email at page 1020 reflects that the communication is in the form of monitoring activity by the parent entity where the Indian entity is merely a reporting entity. Effectively, it is the analysis of reports submitted by Indian entity. The reporting has been forced on the Indian entity by the parent entity to have effective control. Indian entity would not have approached third party for such feedback based on their own report. These services are in the nature of stewardship activities. 5.12.4 The assessee has submitted a set of emails vide submission dated 21.08.2017 for A.Y. 2012-13. However, similar set of emails was not submitted for A.Y. 2013-14. There is no dispute that the business model of the assessee has remained similar in both relevant years. Therefore, the mails submitted vide reply dated 21.08.2017 have also been used for A.Y. 2013-14. The trail of emails on the subject \"comments on Edge contracts\", from 01.09.2011 to 11.10.2011, reflect that while finalizing contracts, the comments are sought on the draft contract submitted by the appellant entity E-mail dt. 01 September, 2011 from Richard Forrest to Hemant 45 M.A Nos. 269, 271, 271 & 272/Del/2024 A. T. Kearney Vs. DCIT mentions about supplementary comments made on the draft contract provided by the Indian entity. Further, Indian entity resources sensitize the parent entity resources about the changes sought by clients in India (Email dated 05/09/2011 from Hemant to Clive/ Affan). The parent entity has given consent to the changes proposed by Indian client. (refer email dated 05/09/2011). An email dated 18.08.2011 at 06.41 a.m. is from Mr. Anshuman to Mr. Affan with a attached copy of engagement letter for a project with BP India and request has been made for approval of the same. Mr. Affan in turn has approved the same vide email dated 18.08.2011 at 07.08 p.m. An email dated 17/05/2011 at Pg. 60 is from Mr. Karin Schneider of Schott AG regarding objection on terms of contract. A specific objection in this regard isreproduced as under:- Section. We at onderstand your desire to protect your pet of course, what belongs to you should reman yours. However, as long as your intellectual property is necessary to make use of the results of the consulting project (deliverables and as long your intelectual property will be part of the deliverables we need at least a non-exclusive night of use for it free of charge within the context of this onder The above extracts of the objections clearly highlight that the contract does ensure protection of intellectual property of the ATK Group and the above comments are in respect of the drafting of the terms & conditions related to protection of intellectual property rights. 5.12.5 it is understandable that in case of engagement/ assignment for a client, the terms & conditions of contract are critical for both client as well as the service provider. So contract needs to be finalized & agreed upon by both parties i.e. client as well as service provider. It is noticed that the legal team of parent entity of the appellant company is engaged to finalise and approve the contract/engagement letter. The terms & conditions of the 46 M.A Nos. 269, 271, 271 & 272/Del/2024 A. T. Kearney Vs. DCIT contract include \"General terms & conditions\", \"payment terms & conditions\", \"limitation of liability\", the protection against the infringement of intellectual capital/rights and commercial terms and conditions. It is noted that in the process of approval of contract, the parent entity ensures protection of infringement of intellectual property rights because the parent entity is the owner of intellectual property of the group. Further, by enforcing the process of approval on the commercial terms & conditions by the Indian entity as depicted by the emails discussed above (refer Para 5.12.1), the parent entity is performing supervisory and control function. Furthermore, in view of the above discussion, services (refer Para 5.12.2 and 5.12.3) in the nature of coordinated planning and feedback on reports are found to be in the nature of supervisory and control functions because the larger purpose is only to align the policies across the group. 5.13 It may be important to highlight that Judicial pronouncements in the US broadened the concept of 'stewardship functions', which have included control activities or 'supervisory activities' within its meaning. This is evident from the decisions in Columbian Rope Co. v. Commissioner, 42 TC 800 (1964) and Young and Rubicam v. United States, 410 F.2d 1233 (Ct.CI.1969). I. Further, the US Tax Court found in the case of H. Group Holding Inc. v. Commissioner, TCM 1999-334 (1999), that the following activities did not qualify as services: \"We find that items such as HIC's audits, reporting requirements, reviewing contracts, and providing for consistency of accounting systems are supervisory functions that benefited the parent company and are not management services... Likewise, business development activities, financial quaranties, and owner relations are to the benefit of the parent company and not subject to allocation.\" 5.14 In conclusion, the US courts have applied a broad definition to the concept of 'stewardship functions' so as to include control activities, duplicative activities, reporting activities of a parent company, and financing activities of a parent company. The principle behind the same is 47 M.A Nos. 269, 271, 271 & 272/Del/2024 A. T. Kearney Vs. DCIT that the reporting requirements, reviewing contracts and providing for consistency of accounting systems are supervisory functions that benefited the parent company and are not management services. The stewardship activity is basically to protect the interest of the parent entity. 5.15 It may be important to mention that as per the allocation methodology, the shareholder cost has been separately allocated to ATK US. It is found that over and above the already excluded portion of shareholder cost, there are instances f stewardship functions which have been charged as a part of the Global Support Services as evident from the specific findings based on email communication discussed above (Refer Para 5.12.1 to 5.12.3) and as a part of Accounting, Treasury, Finance & Tax Services as discussed at \"Para 5.7 (F.5)\"above. Accordingly, I find that the intragroup corporate services rendered in this case do satisfy the need test, rendition test and duplication test. Therefore, the adjustment made by the AO/TPO in respect of HRIS and IT & K-Net Services are not justified. However, in view of specific instances mentioned above, I find it appropriate to hold 20% of the payments for Global Office services in the nature of stewardship activities and 100% of the payment for Accounting, Treasury, Finance & Tax Services. 5.16 Further, as regards, payments in respect of Global Business Policy Council, Global CEO Office, Production Services, Legal Services and Marketing Services is concerned, it is evident from the discussion at Para 5.8 to Para 5.11 that the assessee paid in duplicate-once for development and protection of intellectual development through sharing of expenses towards the above mentioned services and at later stage towards Royalty for use of the same intellectual capital. ATK US has not spent any amount towards intellectual capital which has not been shared except for certain share holder expenses. This is also evident from its allocation methodology. I hold that the expenses towards Global Business Policy Council, Global CEO Office, Production Services and Marketing Services need to be adjusted as it is wrong to share theexpenses towards building 48 M.A Nos. 269, 271, 271 & 272/Del/2024 A. T. Kearney Vs. DCIT up intellectual capital particularly where the entity contributing for the same is not having the right to use without paying Royalty. As regards legal services, it is evident from the discussion at Para 5.12.4 & 5.12.5 that the legal services are to protect the intellectual property rights and to perform the control and supervisory functions. Accordingly, AO is justified in treating the value of services at Nil. In respect of services under the head Global Business Policy Council, Global CEO Office, Production Services, Legal Services and Marketing Services. 5.17 To sum up, • 20% of the payments for Global Office services are in the nature of stewardship activities (Refer Para 5.15). • 100% of the payments for Accounting, Treasury, Finance & Tax services are in the nature of stewardship activities (Refer Para 5.7 (F.5). • 100% of the payments for Global Business Policy Council, Global CEO Office, Production Services, Legal Services and Marketing Services (Refer Para 5.16) are duplicative in nature. • 100% of the payments towards HRIS, IT and K-net Services are found to be justified payments based on need, benefit and rendition test.” 8. It could be seen from the above findings of Ld. CIT(A), the CIT(A) has allowed the expenses claimed in the nature of HR services, IT, Human resources information systems, IT- K-Net services as the Assessee could produce the cogent evidences proving rendition of service. Whereas, the Ld. CIT(A) has not allowed the expenses claimed under the head Global CEO services, Global business policy council, production services, accounting, treasury, finance and tax services, Legal services and marketing services. Further the CIT(A) has not allowed 20% of the 49 M.A Nos. 269, 271, 271 & 272/Del/2024 A. T. Kearney Vs. DCIT expenses claimed under the head of Global support services (Office services) as the Assessee couldn’t produce the cogent evidences proving rendition of service. 9. Ongoing through the above findings of the CIT (A) and the material produced before the Co-ordinate Bench of the Tribunal, in its Order dated 28-02-2024, at para 7 and its sub paras, it was specifically observed by the Tribunal that the facts of the case of the Assessee for the year under consideration and the adjudication made by the lower authorities are entirely different than that of A.Y’s 2008-09, 2009-10 and 2010-11. Therefore, held that the decision rendered by the Tribunal in earlier years ie A.Y’s 2008-09, 2009-10 and 2010-11 are not applicable. 10. In so far as the documents produced at page Numbers 642-902, 905-927, 993-1060 of the Paper Book, which have been tabulated at Page no 956 of the Paper Book are concerned, which have been looked into during passing of the final Order dated28-02-2024 and now, we have revisited those documents again and found that those documents are not sufficient to prove the receipt of services in the absence of independent third party documentations. The Tribunal while dismissing the grounds of the Assessee, relied on the Judgment of Hon’ble Jurisdictional High Court of Delhi in the case 50 M.A Nos. 269, 271, 271 & 272/Del/2024 A. T. Kearney Vs. DCIT of Akzo Nobel India Pvt. Ltd, 145 Taxmann.com 468, wherein while holding that the Assessee could not prove the receipt of Intra Group Services by providing requisite documents, also held that the Tribunal’s decision will not prejudice Assessee’s claim in other Assessment Years, as it has to be resided based on the evidence produced to establish the claim of the receipt of services from the AEs. Further, the Tribunal also relied on the judgment of co- ordinate Bench of ITAT Banguluru in the case of Safran Engineering Services India Ltd. 89 Taxmann.com 77 (Bengaluru), wherein similar ratio has been laid down by the co-ordinate bench of the Tribunal. Thus, we find no error apparent from record which can be rectified u/s 254(2) of the Act in the present M.As. 11. Apart from the above, on the scope of section 254(2) of the Act, it would be relevant to refer to the Judgment of the Hon’ble Supreme Court in the case of CIT vs. Reliance Telecom Ltd, reported in (2022) 440 ITR 1 (SC) wherein Hon’ble Court has defined the scope of powers u/s.254(2) of the Act. The Hon’ble Supreme Court held that the powers u/s.254(2) of the Act are akin to Order XLVII Rule 1 CPC and while considering the application 51 M.A Nos. 269, 271, 271 & 272/Del/2024 A. T. Kearney Vs. DCIT u/s.254(2) of the Act, the Appellate Tribunal is not required to re- visit its earlier order and to go into details on merits. The powers u/s. 254(2) of the Act are that they are only to rectify or correct any mistake apparent from the record. The relevant Observation of the Court reads as under:- “3.2 Having gone through both the orders passed by the ITAT, we are of the opinion that the order passed by the ITAT dated 18.11.2016 recalling its earlier in ITA.No.224/Del./2017 Sahara India Life Insurance Co. Ltd., Lucknow. order dated 06.09.2013 is beyond the scope and ambit of the powers under Section 254(2) of the Act. While allowing the application under Section 254(2) of the Act and recalling its earlier order dated 06.09.2013, it appears that the ITAT has re-heard the entire appeal on merits as if the ITAT was deciding the appeal against the order passed by the C.I.T. In exercise of powers under Section 254(2) of the Act, the Appellate Tribunal may amend any order passed by it under sub-section (1) of Section 254 of the Act with a view to rectifying any mistake apparent from the record only. Therefore, the powers under Section 254(2) of the Act are akin to Order XLVII Rule 1 CPC. While considering the application under Section 254(2) of the Act, the Appellate Tribunal is not required to revisit its earlier order and to go into detail on merits. The powers under Section 254(2) of the Act are only to rectify/correct any mistake apparent from the record. 4. In the present case, a detailed order was passed by the ITAT when it passed an order on 06.09.2013, by which the ITAT held in favour of the Revenue. Therefore, the said order could not have been recalled by the Appellate Tribunal in exercise of powers under Section 254(2) of the Act. If the Assessee was of the opinion that the order passed by the ITAT was erroneous, either on facts or in law, in that case, the only remedy available to the Assessee was to prefer the appeal before the High Court, which as such was already filed by the 52 M.A Nos. 269, 271, 271 & 272/Del/2024 A. T. Kearney Vs. DCIT Assessee before the High Court, which the Assessee withdrew after the order passed by the ITAT dated 18.11.2016 recalling its earlier order dated 06.09.2013. Therefore, as such, the order passed by the ITAT recalling its earlier order dated 06.09.2013 which has been passed in exercise of powers under Section 254(2) of the Act is beyond the scope and ambit of the powers of the Appellate Tribunal conferred under Section 254 (2) of the Act. Therefore, the order passed by the ITAT dated 18.11.2016 recalling its earlier order dated 06.09.2013 is unsustainable, which ought to have been set aside by the High Court. 5. From the impugned judgment and order passed by the High Court, it appears that the High Court has dismissed the writ petitions by observing that (i) the Revenue itself had in detail gone into merits of the case before the ITAT and the parties filed detailed submissions based on which the ITAT passed its order recalling its earlier order; (ii) the Revenue had not contended that the ITAT had become functus officio after delivering its original order and that if it had to relook/revisit the order, it must be for limited purpose as permitted by Section 254(2) of the Act; and (iii) that the merits might have been decided erroneously but ITAT had the jurisdiction and within its powers it may pass an erroneous order and that such objections had not been raised before ITAT. 6. None of the aforesaid grounds are tenable in law. Merely because the Revenue might have in detail gone into the merits of the case before the ITAT and merely because the parties might have filed detailed submissions, it does not confer jurisdiction upon the ITAT to pass the order de hors Section 254(2) of the Act. As observed hereinabove, the powers under Section 254(2) of the Act are only to correct and/or rectify the mistake apparent from the record and not beyond that. Even the observations that the merits might have been decided erroneously and the ITAT had jurisdiction and within its powers it may pass an order recalling its earlier order which is an erroneous order, cannot be accepted. As observed hereinabove, if the order passed by the ITAT was erroneous on merits, in that case, the remedy available to the Assessee was to prefer an appeal before the High Court, which in fact was filed by the Assessee before the High Court, but later on the Assessee withdrew the same in the instant case. 53 M.A Nos. 269, 271, 271 & 272/Del/2024 A. T. Kearney Vs. DCIT 7. In view of the above and for the reasons stated above, the impugned common judgment and order passed by the High Court as well as the common order passed by the ITAT dated 18.11.2016 recalling its earlier order dated 06.09.2013 deserve to be quashed and set aside and are accordingly quashed and set aside. The original orders passed by the ITAT dated 06.09.2013 passed in the respective appeals preferred by the Revenue are hereby restored. 8. Considering the fact that the Assessee had earlier preferred appeal/s before the High Court challenging the original order passed by the ITAT dated 06.09.2013, which the Assessee withdrew in view of the subsequent order passed by the ITAT dated 18.11.2016 recalling its earlier order dated 06.09.2013, we observe that if the Assessee/s prefers/prefer appeal/s before the High Court against the original order dated 06.09.2013 within a period of six weeks from today, the same may be decided and disposed of in accordance with law and on its/their own merits and without raising any objection with respect to limitation.” 12. In the present case, the Tribunal has decided the issue involved in the Appeals of the Revenue as well as the Assessee on its merits and now the Assessee by way of the present Miscellaneous Application praying for recalling the order and seeking hearing afresh which is beyond the scope of provision of Section 254(2) of the Act. Even otherwise also the Hon'ble Supreme Court in the case of CIT vs. Reliance Telecom Ltd. (supra), held that the powers u/s. 254(2) of the Act are akin to Order XLVII Rule 1 CPC, then it cannot be held that scope of power u/s.254(2) of the Act is beyond and much larger than scope of review as given in the Order XLVII Rule 1 of CPC. In fact, the scope of Section 254(2) of the Act is 54 M.A Nos. 269, 271, 271 & 272/Del/2024 A. T. Kearney Vs. DCIT much limited and the scope of review is much wider. Accordingly, in view of the law laid down by the Hon’ble Supreme Court cited supra, we hold that order of the Tribunal dated 28/02/2024 cannot be recalled in the facts and circumstances of the case. Consequently, the Miscellaneous Applications No. 269/Del/2024 (A.Y 2012-13) in ITA No. 959/Del/2018, M.A NO. 270/Del/2024 (A.Y 2013-14) in ITA No. 960/Del/2018, M. A NO. 271/Del/2024 (A.Y 2012-13) in ITA No. 1305/Del/2018 and M. A NO. 272/Del/2024 (A.Y 2013-14) in ITA No. 1306/Del/2018 are dismissed. Order pronounced in the open court on 22nd November, 2024 Sd/- Sd/- (SHAMIM YAHYA) (YOGESH KUMAR U.S.) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 22nd November, 2024 R.N, Sr. PS Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi 55 M.A Nos. 269, 271, 271 & 272/Del/2024 A. T. Kearney Vs. DCIT "