MCKINSEY & COMPANY INC. THE NEHTERLANDS, MUMBAI V. ASST DIT (IT) 4(1), MUMBAI

ITA 1572/MUM/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 2522 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 7 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-10-2016
• Appeal Filed By: Assessee
• Bench Allotted: L
• Next Hearing Date: 19-10-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 06-03-2014
• Court: TRIBUNAL
• Keywords: Double taxation relief; Competent authority

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL L BENCH, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI RAVISH SOOD, JUDICIAL MEMBER I. I.T.A. NO.1572/M/2014 (ASSESSMENT YEAR: 2010 - 2011 ) MCKINSEY & COMPANY, INC. THE NETHERLANDS, C/O. S.R.B.C & ASSOCIATES LLP, 14 TH FLOOR, THE RUBY, SEPATI BAPAT MARG, DADAR (W), MUMBAI 400 038. / VS. ASST. DIRECTOR OF INCOME TAX ( INTERNATIONAL TAXATION ) - 4(1), SCINDIA HOUSE, BALLARD ESTATE, MUMBAI 400 038. ./ PAN : AAACM7234M ( / APPELLANT) .. ( / RESPONDENT ) II. I.T.A. NO.1573/M/2014 (ASSESSMENT YEAR: 2010 - 2011 ) MCKINSEY & COMPANY, INC. UNITED KINGDOM, C/O. S.R.B.C & ASSOCIATES LLP, 14 TH FLOOR, THE RUBY, SEPATI BAPAT MARG, DADAR (W), MUMBAI 400 038. / VS. ASST. DIRECTOR OF INCOME TAX ( INTERNATIONAL TAXATION ) - 4(1), SCINDIA HOUSE, BALLARD ESTATE, MUMBAI 400 038. ./ PAN : AAACM7 227L ( / APPELLANT) .. ( / RESPONDENT ) III. I.T.A. NO.1574/M/2014 (ASSESSMENT YEAR: 2010 - 2011 ) MCKINSEY & COMPANY, INC. SWEDEN, C/O. S.R.B.C & ASSOCIATES LLP, 14 TH FLOOR, THE RUBY, SEPATI BAPAT MARG, DADAR (W), MUMBAI 400 038. / VS. ASST. DIRECTOR OF INCOME TAX ( INTERNATIONAL TAXATION ) - 4(1), SCINDIA HOUSE, BALLARD ESTATE, MUMBAI 400 038. ./ PAN : AAACM7213J ( / APPELLANT) .. ( / RESPONDENT ) IV. I.T.A. NO.1575/M/2014 (ASSESSMENT YEAR: 2010 - 2011 ) MCKINSEY & COMPANY, INC. FRANCE, C/O. S.R.B.C & ASSOCIATES LLP, 14 TH FLOOR, THE RUBY, SEPATI BAPAT MARG, DADAR (W), / VS. ASST. DIRECTOR OF INCOME TAX ( INTERNATIONAL TAXATION ) - 4(1), SCINDIA HOUSE, BALLARD ESTATE, MUMBAI 400 038. 2 MUMBAI 400 038. ./ PAN : AAACM72 23Q ( / APPELLANT) .. ( / RESPONDENT ) V. I.T.A. NO.1576/M/2014 (ASSESSMENT YEAR: 2010 - 2011 ) MCKINSEY & COMPANY, INC. BELGIUM, C/O. S.R.B.C & ASSOCIATES LLP, 14 TH FLOOR, THE RUBY, SEPATI BAPAT MARG, DADAR (W), MUMBAI 400 038. / VS. ASST. DIRECTOR OF INCOME TAX ( INTERNATIONAL TAXATION ) - 4(1), SCINDIA HOUSE, BALLARD ESTATE, MUMBAI 400 038. ./ PAN : AAACM7232P ( / APPELLANT) .. ( / RESPONDENT ) VI. I.T.A. NO.1577/M/2014 (ASSESSMENT YEAR: 2010 - 2011 ) MCKINSEY & COMPANY, INC. HONG KONG, C/O. S.R.B.C & ASSOCIATES LLP, 14 TH FLOOR, THE RUBY, SEPATI BAPAT MARG, DADAR (W), MUMBAI 400 038. / VS. ASST. DIRECTOR OF INCOME TAX ( INTERNATIONAL TAXATION ) - 4(1), SCINDIA HOUSE, BALLARD ESTATE, MUMBAI 400 038. ./ PAN : AAACM7230R ( / APPELLANT) .. ( / RESPONDENT ) VII. I.T.A. NO.1578/M/2014 (ASSESSMENT YEAR: 2010 - 2011 ) MCKINSEY & COMPANY, INC. INTERNATIONAL, C/O. S.R.B.C & ASSOCIATES LLP, 14 TH FLOOR, THE RUBY, SEPATI BAPAT MARG, DADAR (W), MUMBAI 400 038. / VS. ASST. DIRECTOR OF INCOME TAX ( INTERNATIONAL TAXATION ) - 4(1), SCINDIA HOUSE, BALLARD ESTATE, MUMBAI 400 038. ./ PAN : A ADCM3493K ( / APPELLANT) .. ( / RESPONDENT ) VIII. I.T.A. NO.1579/M/2014 (ASSESSMENT YEAR: 2010 - 2011 ) MCKINSEY & COMPANY, INC. SINGAPORE PTE LTD, C/O. S.R.B.C & ASSOCIATES LLP, 14 TH FLOOR, THE RUBY, / VS. ASST. DIRECTOR OF INCOME TAX ( INTERNATIONAL TAXATION ) - 4(1), SCINDIA HOUSE, BALLARD ESTATE, MUMBAI 400 038. 3 SEPATI BAPAT MARG, DADAR (W), MUMBAI 400 038. ./ PAN : AAECM4465A ( / APPELLANT) .. ( / RESPONDENT ) IX. I.T.A. NO.1580/M/2014 (ASSESSMENT YEAR: 2010 - 2011 ) MCKINSEY, INCORPORATED, C/O. S.R.B.C & ASSOCIATES LLP, 14 TH FLOOR, THE RUBY, SEPATI BAPAT MARG, DADAR (W), MUMBAI 400 038. / VS. ASST. DIRECTOR OF INCOME TAX ( INTERNATIONAL TAXATION ) - 4(1), SCINDIA HOUSE, BALLARD ESTATE, MUMBAI 400 038. ./ PAN : AAACM7221N ( / APPELLANT) .. ( / RESPONDENT ) X. I.T.A. NO.1599/M/2014 (ASSESSMENT YEAR: 2010 - 2011 ) MCKINSEY & COMPANY, INC. NORWAY, C/O. S.R.B.C & ASSOCIATES LLP, 14 TH FLOOR, THE RUBY, SEPATI BAPAT MARG, DADAR (W), MUMBAI 400 038. / VS. ASST. DIRECTOR OF INCOME TAX ( INTERNATIONAL TAXATION ) - 4(1), SCINDIA HOUSE, BALLARD ESTATE, MUMBAI 400 038. ./ PAN : AAACM72 25J ( / APPELLANT) .. ( / RESPONDENT ) / ASSESSEE BY : SHRI PORUS KAKA / MR. DIVESH CHAWLA / REVENUE BY : SHRI JABIR CHGOUHAN, CIT - DR / DATE OF HEARING : 19.10.2016 / DATE OF PRONOUNCEMENT : 21 .10.2016 / O R D E R PER BENCH : THERE ARE TEN APPEALS UNDER CONSIDERATION. ALL THESE APPEALS ARE FILED BY THE DIFFERENT ASSESSEES AGAINST THE ORDERS OF THE DIRECTIONS OF THE DRP / RESPECTIVE ASSESSMENT ORDERS INVOLVING THE ASSESSMENT YEAR 2010 - 2011. SINCE, THE ISSUES RAISED IN THESE APPEALS ARE IDENT ICAL, THEREFORE, FOR THE SAKE OF CONVENIENCE, THEY ARE 4 CLUBBED, HEARD COMBINEDLY AND DISPOSED OFF IN THIS CONSOLIDATED ORDER. APPEAL WISE ADJUDICATION IS GIVEN IN THE FOLLOWING PARAS OF THIS ORDER. 2. OUT OF THE CAPTIONED TEN APPEALS, NINE APPEALS ATTRACT INDO - US DTAA AND THE OTHER APPEAL ITA NO.1579/M/2014, WHEREIN ASSESSEE IS A SINGAPORE BASED COMPANY, ATTRACTS INDO - SINGAPORE DTAA. THE INTERPRETATION OF THE TREATIES WHICH IS WORDED COMMONLY IS THE SUBJECT MATTER OF THESE APPEALS. THE TAXABILITY OF BORR OWED / LOAN SERVICES CHARGES RECEIVED BY THE ASSESSEE IS THE ISSUE AND IF THE SAME WAS RIGHTLY CONSIDERED BY AO AS FEES FOR TECHNICAL SERVICES / FEES FOR INCLUDED SERVICES (FTS / FIS ) UNDER ARTICLE 12 OF THE TREATY . ASSESSEE DID NOT CONSIDER THE SAME AS F TS / FIS / ROYALTY. THE ASSESSING OFFICER, AFTER DUE PROCESS OF MAKING OF THE DRAFT ASSESSMENT ORDER AND THE DRP / CIT ORDERS, MADE ASSESSMENTS ON THE COMMON DATE OF 30.12.20 13 TREATING THE SAME AS FTS AND MADE RESPECTIVE ADDITIONS OF SUCH CHARGES IN ALL T HE TEN ASSESSEES UNDER CONSIDERATION FOR AY 2010 - 2011 . PARAS 5, 6 AND 7 OF THE ASSESSMENT ORDER 2010 - 2011 ARE RELEVANT IN THIS REGARD AND THEY TAKEN AS STANDARD FOR WANT OF FACTS WHICH READ AS UNDER: - 5. ASSESSEE WAS ASKED TO EXPLAIN AS TO WHY THE LOAN SERVICE INCOME OF RS. 4,47,75,245/ - SHOULD NOT BE TREATED AS FEES FOR TECHNICAL SERVICES, AS DISCUSSED IN DETAIL IN THE ASSESSMENT ORDER FOR AY 2007 - 2008 AND WHY THE SAME SHOULD NOT BE ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 6. IN REPLY TO IT, M/S. S.R .B.C. & ASSOCIATES, C.A.S., FILED VARIOUS DOCUMENTARY EVIDENCES / CORRESPONDENCES ALONG WITH TABULAR SUMMARY OF THE SAME WHICH SUBSTANTIATE THE SERVICES RENDERED TO MCKINSEY INDIA DURING THE YEAR AND THE NATURE THEREOF ALONG WITH REASONS FOR NON TAXATION OF THE BORROWED SERVICES (LOANED SERVICE INCOME EARNED BY THE ASSESSEE). THIS CASE IS SI MILAR TO THE CASE OF MCKINSEY & COMPANY, INC. NETHERLANDS, A MCKINSEY GROUP COMPANY, WHICH IS ALSO ASSESSED BY ME. AS IN MCKINSEY & COMPANY, INC. NETHERLANDS CASE, THE ASSESSEE RELYING ON THE MAP ORDER IN THE CASE FOR AY 2007 - 2008 REQUESTED THAT BORROWED SERVICES (LOAN SERVICES INCOME EARNED BY THE ASSESSEE) SHOULD NOT BE TAXABLE IN INDIA. THE EXPLANATION OFFERED BY THE ASSESSEES AUTHORIZED REPRESENTATIVES WAS DULY CONSIDERED BUT WAS NOT FOUND ACCEPTABLE AND THE REASON FOR NON ACCEPTANCE OF THE SAME WAS DISCUSSED IN DETAIL IN THE ASSESSMENT ORDERS OF AY 2007 - 2008. IN VIEW OF THE FINDINGS GIVEN BY MY PREDECESSOR IN AY 2007 - 2008 AND ALSO THE FACT THAT THE DRAFT ASSESSMENT ORDERS HAVE BEEN CONFIRMED BY THE DRP, MUMBAI; MOREOVER, THE DRP IN ITS ORDER FOR AY 2009 - 2010 HAS HELD THAT THERE IS NO SPECIFIC FINDING REGARDING TAXABILITY OR NON - TAXABILITY OF INCOME ON THE ISSUES BEFORE US, IN THE MAP AGREEMENT REFERRED TO IN THE CASE. THUS, WE ARE UNABLE TO ACCEPT THE CONTENTION OF THE ASSESSEE THAT BOTH THE COMPET ENT AUTHORITIES HAVE REACHED THE CONCLUSION THAT THIS INCOME IS NOT TAXABLE IN TERMS OF ARTICLE OF INDO - USA DTAA. IN VIEW OF THIS OBSERVATION, WE FIND THAT THE MAP ORDER CANNOT BE CONSIDERED A PRECEDENT HERE. THEREFORE, THE ISSUE NEEDS TO BE DEALT WITH O N MERITS; THE EXPLANATION OFFERED BY THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE IS NOT ACCEPTED AND THE LOANED SERVICE INCOME OF RS. 4,47,75,245/ - IS TREATED AS FEES FOR TECHNICAL SERVICES AND IS ADDED TO THE TOTAL INCOME OF 5 THE ASSESSEE. THE PENALTY PROCEEDINGS ARE BEING SEPARATELY INITIATED FOR FURNISHING INACCURATE PARTICULARS OF INCOME AND CONCEALMENT THEREOF TO THAT EXTENT. 7. THE INCOME TAX ACT DOES NOT PRESCRIBE ANY RATES OF TAXATION OF ROYALTY OR FEES FOR TECHNICAL SERVICES WHEN PAYMENT HAS BEE N DONE FROM ONE NON - RESIDENT TO ANOTHER AND THAT THE RATE OF TAX SHALL HAVE TO BE DETERMINED ON A NET BASIS. HOWEVER, SINCE THE RATES OF TAXATION HAVE BEEN SPECIFICALLY PROVIDED IN THE DTAA AND ALSO IN VIEW OF THE FACT THAT THE ASSESSES FAILED TO PROVIDE SUCH A BASIS FOR ESTIMATION OF THE NET PROFIT, THE NET PROFIT ESTIMATED IN SUCH A MANNER THAT THERE IS PARITY IN THE RATS AS PRESCRIBED IN THE DTAA AND AS COMPARED UNDER THE INCOME TAX ACT. IN VIEW OF THE ABOVE, IT IS ESTIMATED THAT THE NET PROFIT OF THE A SSESSEE ON ACCOUNT OF THE RECEIPTS, THE NATURE BEING IRRELEVANT IS AT 35.52% SO THAT THE NET RATE OF TAX APPLICABLE IS 15% ON THE ENTIRE INCOME EARNED. 3. BEFORE US, SHRI PORUS KAKA AND M R. DIVESH CHAWLA, LD COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION TO THE ABOVE SAID ORDER ASSESSMENT ORDER FOR THE AY 2010 - 11 AND SUBMITTED THAT THE ASSESSING OFFICER PROCEEDED TO MAKE ABOVE ADDITION IN ALL THE CASES UNDER CONSIDERATION SUBSTANTIALLY RELYING ON HIS ORDER FOR THE AY 2007 - 2008. ASSESSING OFFICER DID NOT RECOGNISE THE BINDING NATURE OF THE MUTUAL AGREEMENT PROCEDURE ( MAP ) ORDER RELEVANT TO THE ISSUE UNDER CONSIDERATION . FURTHER, LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT ASSESSMENT FOR THE AY 2007 - 08 WAS A SUBJECT MATTER OF LITIGATION BEFORE THE TRIBUNAL AND THE TRIBUNAL PASSED THE ORDER IN FAVOUR OF THE ASSESSEE HOLDING THAT THE SAID LOAN SERVICE CHARGES EARNED BY THE ASSESSEE DO NOT AMOUNT TO FTS. THEREFORE, AS PER THE LD AR, THE ADDITION HAS TO BE DELETED FOR ALL THESE TEN AYS. HE FURTHER MENTIONED TH AT THE ISSUE IN ALL THESE TEN APPEALS IS COMMON AND THE SAME STANDS COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE TRIBUNAL IN T HE ASSESSEES OWN CASE NOT ONLY FOR THE AY 2007 - 08 BUT ALSO REST OF THE AYS AS WELL IE AYS 2008 - 09 TO 2011 - 12. IN SUPPOR T OF THE SAME, LD COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION TO PAGE 100 OF THE PAPER BOOK WHEREIN A COPY OF THE ORDER OF THE TRIBUNAL IN ITA NO.7595/MUM/2010 (AY 2006 - 07), DATED 21.2.2014 IS PLACED. BRINGING OUR ATTENTION TO PAGE 2 OF THE SAID TRIBUN ALS ORDER FOR THE AY 2006 - 07 (SUPRA), LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE GROUND NO.1 OF THE SAID APPEAL RELATES TO ARTICLE 12 OF THE TREATY AND IF THE BORROWED SERVICE CHARGES CONSTITUTES FTS OR NOT? FURTHER, BRINGING OUR ATTENTION TO PARA 6 OF THE SAID DECISION OF THE TRIBUNAL (SUPRA), LD COUNSEL FOR THE ASSESSEE DEMONSTRATED THAT THE ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE AND THE AO WAS DIRECTED TO GRANT RELIEF AFTER VERIFICATION OF THE FACTS AND FINALLY THE APPEALS OF THE ASSESSEE ARE ALLOWED. LD COUNSEL FOR THE ASSESSEE ALSO MENTIONED THAT ARTICLE 12 OF BOTH INDO - US 6 AND INDO - SINGAPORE TREATIES ARE COMMONLY WORDED THEREFORE, THE SAID ORDER OF THE TRIBUNAL IS EQUALLY APPLICABLE TO THE FACTS OF THE COMPANIES REGISTERED IN US AS WELL AS S INGAPORE. BRINGING OUR ATTENTION TO THE OF THE AO / DRP, LD COUNSEL FOR THE ASSESSEE ALSO DEMONSTRATED THAT THEY APPROVED THE ORDER OF THE AO MERELY BY STATING THAT THE MAP IS YEAR SPECIFIC AND THEY CANNOT BE EXTENDED TO THE OTHER ASSESSMENT YEARS . ON TH IS ISSUE, HE SUBMITTED THAT THE FACT ARE ALIKE IN ALL THE AYS / APPEALS UNDER CONSIDERATION, THE ISSUE IS COMMON AND THE CONCLUSIONS WILL NOT DIFFER AND THEREFORE, THE ORDER OF THE TRIBUNAL IS FAIRLY APPLICABLE TO THE FACTS OF THE PRESENT CASE. FURTHER, B RINGING OUR ATTENTION TO PAGE 82 OF THE PAPER BOOK, LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE RESOLUTION UNDER MAP WAS DULY ACCEPTED BY THE DEPARTMENT. IN SUCH CASE, THE DRP / AO CANNOT TAKE A DIFFERENT VIEW IN THE MATTER. FURTHER, REFERRING TO PARA 3.3 ON PAGE 85 OF THE PAPER BOOK (A COPY OF THE MAP PROCEEDINGS VIDE FILE NO.480/02/2008 - FTD.I), LD COUNSEL FOR THE ASSESSEE MENTIONED THAT THE BORROWED SERVICE CHARGES SHALL NOT BE TAXABLE IN INDIA AS ROYALTY OR FIS. RELEVANT LINES FROM THE SAID PA RA 3.3 READ AS UNDER: - 3.3. THE AMOUNT PAID BY MCKINSEY INDIA TO MCKINSEY & CO., INC. OR ANY OTHER MCKINSEY ENTITY INCORPORATED IN THE US ON ACCOUNT OF...........BORROWED SERVICE CHARGES.......SHALL NOT BE TAXABLE IN INDIA AS ROYALTY OR FEES FOR INCLUDED SERVICES....... 4. THESE MAP PROCEEDINGS ARE RELEVANT FOR THE AYS 2008 - 09 AND 2009 - 10 WHERE SUCH SERVICE CHARGES WERE HELD CONCLUSIVELY NOT TAXABLE IN INDIA. HE FURTHER MENTIONED THAT IF THE FACTS ARE COMMON, THE ABOVE SAID CONCLUSIONS ARE EQUALLY APPLICABLE TO THE APPEALS UNDER CONSIDERATION FOR THE AY 2010 - 2011 TOO. LD COUNSEL FOR THE ASSESSEE ALSO SUBMITTED THAT THE PROCEEDINGS PENDING BEFORE THE HONBLE JURISDICTIONAL HIGH COURT ON THIS ISSUE WERE ALSO WITHDRAWN BY VIRTUE OF THE JUDGMENT DATED 23.1.2013, A COPY OF WHICH IS PLACED AT PAGES 94 & 95 OF THE PAPER BOOK. IN ESSENCE, LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ISSUE UNDER CONSIDERATION STANDS COVERED IN FAVOUR OF THE ASSESSEE CONSIDERING THE DISCUSSION GIVEN IN PARAS 3 TO 7 OF THE SAID ORDER OF THE TRIBUNAL (SUPRA) FOR THE AY 2007 - 2008, WHEREIN ONE OF US (AM) IS A PARTY TO THE SAID ORDER. 5. PER CONTRA, LD DR FOR THE REVENUE SUBMITTED THAT MAP IS YEAR SPECIFIC AND THEREFORE, THE ISSUE UNDER CONSIDERATION CANNOT BE DECIDED RELYING ON THE TRIBUNALS ORDER FOR THE AY 2007 - 2008. 7 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDER OF THE DRP / AO AS WELL AS THE RELEVANT MATERIAL PLACED BEFORE US. ON HEARING BOTH THE PARTIES, WE HAVE PERUSED PARAS 5, 6 AND 7 OF THE ORDER OF THE ASSESSMENT, WHICH ARE EXTRACTED ABOVE, AND FIND THAT IT IS OBVIOUS THAT THE ASSESSING OFFICER RELIED HEAVILY ON THE ASSESSMENT ORDER FOR THE AY 2007 - 2008 AND FOUND THE ISSUE IS ONE AND THE SAME IE IF THE BORROWED SERVICE CHARGES CONSTITUTES FTS UNDER ARTICLE 12 OF THE INDO - SINGAPORE DTA A. SINCE, THE LANGUAGE OF ARTICLE 12 IS COMMON FOR INDO - US AND INDO - SINGAPORE DTAA, THE ORDER OF THE TRIBUNAL IS EQUALLY RELEVANT FOR ALL THE US BASED COMPANIES AS WELL. 3. WE HAVE HEARD SHRI PORAS KAKA LD. SENIOR COUNSEL OF THE ASSESSEE AS WELL AS LD. DR AND CONSIDERED THE RELEVANT MATER ON RECORD. THE LD. SENIOR COUNSEL HAS POINTED OUT THAT THE ISSUE INVOLVED IN THIS APPEAL HAS ALREADY BEEN CONSIDERED AND DECIDED BY THIS TRIBUNAL IN THE NUMBER OF DECISIONS IN THE CASES OF GROUP CONCERNS OF THE ASSESSEE. HE HAS REFERRED THE FOLLOWING DECISIONS. P.T.MCKINSEY INDONESIA V/S DDIT(IT), (ITA NO.7625/M/ 2010) DDIT(IT) V/S MCKINSEY INCORPORATED & ORS.(ITA NO.2289/M/ 2009) ADIT(IT) V/S MCKINSEY & COMPANY, INC. UNITED STATES (ITA NO.649/M/2007) MCKINSEY & COMPANY, INC. SWITZERLAND V/S ADIT(IT)(ITA NO.7238/M/2002) MCKINSEY & COMPANY, INC. (PHILIPPINES) & ORS. V/S ADIT (99TTJ 857) DDIT(IT) V/S MCKINSEY & COMPANY, INC. UNITED STATES & OTHERS V ADIT(IT)(ITA NO.3483/M/2005) MCKINSEY & COMPANY, INC. CHINA & OTHERS V/S DC IT (ITA NO.7239/M/2002) ADIT(IT) V/S MCKINSEY & COMPANY, INC. BELGIUM (ITA NO.3711/MUM/2006) 4. THE LD. COUNSEL HAS FURTHER INVITED OUR ATTENTION THAT EVEN THE AMOUNT PAID BY THE INDIAN BRANCH TO THE HEAD OFFICE ON ACCOUNT OF BORROWED SERVICE CHARGES HAS BEEN ACCEPTED AND DECIDED IN FAVOUR OF THE ASSESSEE UNDER MUTUAL AGREEMENT PROCEDURE (MAP) RESOLUTION AND THEREFORE THE SAME IS NOT TAXABLE. THE LD. COUNSEL HAS REFERRED LETTER DATED 23/03/2012 TO SHOW THAT UNDER THE MUTUAL AGREEMENT PROCEEDING, ONE OF T HE ITEM WAS BORROWED SERVICE CHARGES. THE LD. COUNSEL HAS FURTHER POINTED THAT THE REVENUE CHALLENGED THE DECISION OF THIS TRIBUNAL BEFORE THE HONBLE HIGH COURT RECORD THE ISSUE INVOLVED IN THE APPEAL HOW DULY BEEN RESOLVED UNDER MAP AND GIVEN EFFECT BY THE ASSESSING OFFICER. HE HAS REFERRED THE DECISION OF THE HONBLE JURISDICTION HIGH COURT DATED 23/01/2013, WHEREIN THE APPEALS FILED BY THE REVENUE WERE ALLOWED TO WITHDRAWN AND DISMISSED ACCORDINGLY. ON THE OTHER HAND, THE LD. DR THOUGH HAS NOT DISPUT ED THE WITHDRAWN OF THE APPEALS HOWEVER SUBMITTED THAT WHETHER THESE ISSUES IN THESE APPEALS HAVE BEEN SETTLED UNDER MAP REQUIRES VERIFICATION. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CONSIDERED THE RELEVANT MATERIAL ON RECORD, WE NOTED THAT THESE ISSUES HAVE ALREADY BEEN DECIDED BY THIS TRIBUNAL IN THE VARIOUS DECISIONS AS MENTIONED ABOVE IN THE GROUP CONCERNS OF THE ASSESSEE BEFORE US. AGAINST THE DECISION OF THE TRIBUNAL, THE REVENUE FILED THE APPEALS BEFORE THE 8 HONBLE HIGH COURT IN 14 CASES. THOSE 14 APPEALS WERE WITHDRAWN BY THE REVENUE AS PER THE ORDER OF THE HONBLE HIGH COURT DATED 23 RD JANUARY 2013. WE FURTHER NOTE THAT THE DEPARTMENT HAD DECIDED TO WITHDRAW THOSE APPEALS BEFORE THE HIGH COURT DUE TO THE REASON THAT THE ISSUES WERE DULY RESOLVED UNDER MAP. IN THIS CONNECTION THE LETTER DATED 22/10/2012 AS WELL AS 21/01/2013 ARE RELEVANT WHICH ARE AS UNDER: - 9 10 6. THUS, IT IS CLEAR T HAT THE ISSUE INVOLVED REGARDING BORROWED SERVICE CHARGES WAS DECIDED BY THIS TRIBUNAL IN FAVOUR OF THE ASSESSEE AND FURTHER THE DEPARTMENT HAS RESOLVED THAT THE ISSUE UNDER MAP AND CONSEQUENTLY WITHDRAWN THE APPEALS FILED BEFORE THE HONBLE HIGH COURT. F URTHER, THE ASSESSEE HAS FILED A LETTER DATED 12/02/2014 THEREBY STATED THAT THE ISSUE RELATING TO TAXABILITY OF FIRM FUNCTION CHARGES DOES NOT ARISE IN CASE OF THESE THREE APPEALS AND THE ONLY ISSUE INVOLVED IN THESE APPEALS IS THE TAXABILITY OF BORROWED SERVICE CHARGES, WHICH HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE UNDER THE MUTUAL AGREEMENT PROCEDURE. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES, WHEN THE ISSUES INVOLVED IN THESE APPEALS HAVE ALREADY RESOLVED UNDER THE MUTUAL AGREEMENT PROCEDURE, WE DIRECT THE AO TO GRANT THE RELIEF ACCORDINGLY TO THE ASSESSEE AFTER VERIFICATION OF FACT THAT THE ISSUES HAVE ALREADY BEEN RESOLVED UNDER THE MUTUAL AGREEMENT PROCEDURE. 7. IN THE RESULT, APPEALS OF THE ASSESSEE ARE ALLOWED. 7. WE HAVE EXTRACTED AND INSERTED IN THE PRECEDING PARAS OF THIS ORDER , THE STAND OF THE COMPETENT AUTHORITY INDIA ON THE SUCH LOAN SERVICE CHARGES COLLECTED BY THE ASSESSEE AND THE SAME WERE HELD AS NEITHER ROYALTY NOR FIS. IF THE FACTS ARE SIMILAR OVER THE OTHER AYS AN D ALSO THE OTHER ASSESSEE S OF THE GROUP, THE RATIO OF THE ORDER OF THE TRIBUNAL FOR THE AY 2007 - 2008 IN THE CASE OF OTHER ASSESSEES BECOMES RELEVANT FOR ADJUDICATING THE SIMILAR ISSUE OF THE TEN APPEALS UNDER CONSIDERATION. AS SUCH, THE ASSESSEES MAP IS PENDING IN ALL THESE CASES BEFORE THE AUTHORITIES. FURTHER, WE FIND THAT IT IS NOT THE CASE OF THE AO THAT THE FACTS ARE NOT SIMILAR TO THAT OF THE AY 2007 - 2008 AND OTHERS. THEREFORE, THE ARGUMENT THAT THE MAP RELEVANT FOR THE OTHER AY HAS NO APPLICATION TO THE FACTS OF THE PRESENT AY 2010 - 2011 IS NOT SUSTAINABLE. 8. CONSIDERING THE ABOVE SETTLED NATURE OF THE ISSUE UNDER CONSIDERATION, WE DIRECT THE AO TO GRANT RELIEF ACCORDINGLY TO THE ASSESSEE AFTER VERIFICATION OF THE FACT THAT THE ISSUES HAVE ALREADY BEEN RESOLVED UNDER THE MUTUAL AGREEMENT PROCEDURE. ACCORDINGLY, ALL THE GROUNDS RAISED BY THE ASSESSEES IN ALL THE TEN APPEALS ARE ALLOWED. 9 . IN THE RESULT, ALL THE TEN APPEALS FILED BY THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN CO URT ON 21 ST OCTOBER, 2016. SD/ - SD/ - ( RAVISH SOOD ) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; 21 .10.2016 . . ./ OKK , SR. PS 11 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI