THE DDIT (IT) 4(1), MUMBAI V. M/S. MCKINSEY INCORPORATED, MUMBAI

ITA 2289/MUM/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 7272 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-03-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 09-04-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIRENDRA OJHA; S S RANA
• Keywords: Double taxation relief; Permanent establishment

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B, MUMBAI BEFORE SHRI R.K.GUPTA, JM AND SHRI R.S.SYAL, AM ITA NO.2289/MUM/2009 : ASST.YEAR 2006-2007 THE DY.DIRECTOR OF INCOME-TAX (INTERNATIONAL TAXATION) 4(1) MUMBAI. VS. M/S.MCKINSEY INCORPORATED PA NO.AAACM7221N. (APPELLANT) (RESPONDENT) ITA NO.2290/MUM/2009 : ASST.YEAR 2006-2007 THE DY.DIRECTOR OF INCOME-TAX (INTERNATIONAL TAXATION) 4(1) MUMBAI. VS. M/S.MCKINSEY & CO. INC. NETHERLANDS PA NO.AAACM7234M. (APPELLANT) (RESPONDENT) ITA NO.2291/MUM/2009 : ASST.YEAR 2006-2007 THE DY.DIRECTOR OF INCOME-TAX (INTERNATIONAL TAXATION) 4(1) MUMBAI. VS. M/S.MCKINSEY & CO. INC. DENMARK PA NO.AAACM7231Q. (APPELLANT) (RESPONDENT) ITA NO.2292/MUM/2009 : ASST.YEAR 2006-2007 THE DY.DIRECTOR OF INCOME-TAX (INTERNATIONAL TAXATION) 4(1) MUMBAI. VS. M/S.MCKINSEY & CO. INC. HONGKONG PA NO.AAACM7230R. (APPELLANT) (RESPONDENT) ITA NO.2293/MUM/2009 : ASST.YEAR 2006-2007 THE DY.DIRECTOR OF INCOME-TAX (INTERNATIONAL TAXATION) 4(1) MUMBAI. VS. M/S.MCKINSEY & CO. INC. FRANCE PA NO.AAACM7223Q. (APPELLANT) (RESPONDENT) ITA NO.2294/MUM/2009 : ASST.YEAR 2006-2007 THE DY.DIRECTOR OF INCOME-TAX (INTERNATIONAL TAXATION) 4(1) MUMBAI. VS. M/S.MCKINSEY PACIFIC RIM INC. PA NO.AAACM7233N. (APPELLANT) (RESPONDENT) ITA NO.2295/MUM/2009 : ASST.YEAR 2006-2007 THE DY.DIRECTOR OF INCOME - TAX (INTERNATIONAL TAXATION) 4(1) MUMBAI. VS. M/S. MCK INSEY & CO. INC. THAILAND PA NO.AABCM0992P. (APPELLANT) (RESPONDENT) ITA NO.2296/MUM/2009 : ASST.YEAR 2006-2007 THE DY.DIRECTOR OF INCOME-TAX (INTERNATIONAL TAXATION) 4(1) MUMBAI. VS. M/S.MCKINSEY & CO. INC. UK PA NO.AAACM7227L. (APPELLANT) (RESPONDENT) ITA NOS.2289 & ORS./MUM/2009 M/S.MCKINSEY GROUP. 2 ITA NO.2297/MUM/2009 : ASST.YEAR 2006-2007 THE DY.DIRECTOR OF INCOME-TAX (INTERNATIONAL TAXATION) 4(1) MUMBAI. VS. M/S.MCKINSEY & CO. INC. SWEDEN PA NO.AAACM7213J. (APPELLANT) (RESPONDENT) ITA NO.2298/MUM/2009 : ASST.YEAR 2006-2007 THE DY.DIRECTOR OF INCOME-TAX (INTERNATIONAL TAXATION) 4(1) MUMBAI. VS. M/S.MCKINSEY & CO. INC. INTERNATIONAL PA NO.AADCM3493K. (APPELLANT) (RESPONDENT) ITA NO.2299/MUM/2009 : ASST.YEAR 2006-2007 THE DY.DIRECTOR OF INCOME - TAX (INTERNATIONAL TAXATION) 4(1) MUMBAI. VS. M/S. MCK INSEY & CO. INC. BELGIUM PA NO.AAACM7232P. (APPELLANT) (RESPONDENT) ITA NO.2300/MUM/2009 : ASST.YEAR 2006-2007 THE DY.DIRECTOR OF INCOME-TAX (INTERNATIONAL TAXATION) 4(1) MUMBAI. VS. M/S.MCKINSEY KNOWLEDGE CENTRE BELGIUM INC. PA NO.AADCM3489P. (APPELLANT) (RESPONDENT) ITA NO.2301/MUM/2009 : ASST.YEAR 2006-2007 THE DY.DIRECTOR OF INCOME-TAX (INTERNATIONAL TAXATION) 4(1) MUMBAI. VS. M/S.MCKINSEY & CO. INC. SWITZERLAND PA NO.AAACM7215Q. (APPELLANT) (RESPONDENT) ALL ASSESSEES ARE ADDRESSED AT : C/O.M/S.BMR & ASSOCIATES 3F CONTRACTOR BUILDING, 41 R.KAMANI MARG BALLARD ESTATE, MUMBAI 400 038. APPELLANTS BY : S/SHRI S.S.RANA & VIRENDRA OJHA RESPONDENTS BY : SHRI PORUS KAKA O R D E R PER BENCH : THIS BATCH OF 13 APPEALS BY THE REVENUE RELATING TO DIFFERENT BUT CONNECTED ASSESSEES RELATE TO THE ASSESSMENT YEAR 2006-2007. ITA NOS.2289 & ORS./MUM/2009 M/S.MCKINSEY GROUP. 3 2. THE FOLLOWING TWO EFFECTIVE COMMON GROUNDS HAVE BEEN RAISED IN ALL THESE APPEALS:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED CIT(APPEALS) ERRED IN HOLDING THAT THE SERVICES RENDERED BY THE ASSESSEE CANNOT BE CONSIDERED AS `INCLUDED S ERVICES WITHIN THE MEANING OF ARTICLE 12(4) OF THE INDIA USA DTAA. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD.CIT(APPEALS) ERRED IN HOLDING THAT SINCE THE ASSESSEE IS NOT HAVING ANY PERMANENT ESTABLISHMENT IN INDIA, THE RE CEIPTS CANNOT BE TAXED UNDER ARTICLE 7 OF THE INDIA USA DTAA. 3. ON A REPRESENTATIVE BASIS WE ARE TAKI NG UP THE APPEAL IN THE CASE OF M/S.MCKINSEY INCORPORATED IN ITA NO.2289/MUM/2009. IT IS A COMPANY INCORPORATED AND TAX RESIDENT OF USA. IT FILED ITS RETURN DECLARING TOTAL INCOME OF RS. 18,372. DURING THE FINANCIAL YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION THE ASSESSEE CHARGED AN AMOUNT OF RS. 44,62,805 TO THE INDIAN BRANCH OF MCKINSEY & CO., (MCKINSEY INDIA) A US BASED ENTI TY FOR THE SERVICES RENDERED TO MCKINSEY INDIA. TAX AMOUNTING TO RS.6,69,421 WAS DEDUCTED AT SOURCE BY MCKINSEY INDIA. IT WAS CLAIMED BEFORE THE A.O. THAT SINCE THE INCOME RECEIVED BY THE ASSESSEE WAS NOT IN THE NATURE OF FEES OF INCL UDED SERVICES OR ROYALTY AS PER ARTICLE 12 OF THE TREATY, ITS INCOME WAS TAXABLE AS BUSINESS PROFITS. AS PER ARTICLE 7 OF THE DTAA WITH UNITED STATES, THE BUSIN ESS PROFIT SHOULD BE TAXABLE ONLY IF THE ENTITY EARNING THE PROFIT AS A PERMANEN T ESTABLISHMENT IN INDIA. IT WAS ARGUED THAT SINCE THE ASSESSEE DID NOT HAVE A PERMA NENT ESTABLISHMENT IN INDIA HENCE THE ENTIRE INCOME WAS NOT LIABLE TO BE CONSID ERED FOR TAXATION IN INDIA. THE A.O. DID NOT ACCEPT THE ASSESSEES CONTENTION AND T REATED THE INCOME IN THE NATURE OF FEES FOR INCLUDED SERVICES AS PER ARTICLE 12 O F THE TREATY AND TAXED THE SAME AT ITA NOS.2289 & ORS./MUM/2009 M/S.MCKINSEY GROUP. 4 15% OF THE GROSS REVENUE. THE LEARNED CIT(A) OBSERV ED THAT THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEARS RANGING FR OM 1995-96 TO 2002-2003 (CONSOLIDATED ORDER DATED 26.04.2006) HAS HELD THAT SUCH PAYMENT CANNOT BE CONSIDERED AS FEES FOR INCLUDED SERVICES UNDER ARTI CLE 12(4) OF INDIA USA TREATY. IN THE ABSENCE OF ASSESSEE HAVING ANY P.E. IN IND IA, THE LEARNED CIT(A) HELD THAT THE RECEIPTS WERE NOT LIABLE TO BE TAXED UNDER ARTI CLE 7 OF THE TREATY AS WELL. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. THE LEARNED COUNSEL FOR THE ASSESSEE PLACED ON RECORD A COPY OF THE ORDER RELIED ON BY THE LEARNED CIT(A) RANGING FROM ASSESS MENT YEARS 1995-96 TO 2002- 2003 IN WHICH THE ISSUE HAS BEEN DECIDED IN ITS FA VOUR. HE ALSO PLACED ON RECORD A COPY OF ANOTHER ORDER PASSED BY THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF MCKINSEY & CO., INC. (PHILLIPINES) VS. ADIT [(2006 ) 99 ITD 549 (MUM.) (SMC)] TAKING THE SIMILAR VIEW. IN THE LIKE MANNER ANOTHER ORDER PASSED IN THE CASE OF MCKINSEY & CO. (SWITZERLAND) DATED 29.12.2005 IN IT A NO.7238/MUM/2002 REITERATING THE SAME VIEW HAS ALSO BEEN PLACED ON R ECORD. IT WAS CONTENDED THAT THE CONSISTENT VIEW OF THE TRIBUNAL IN ASSESSEES OWN C ASES HAS BEEN IN ITS FAVOUR HOLDING AGAINST THE TAXATION OF THE AMOUNTS IN DISP UTE. THE LEARNED DEPARTMENTAL REPRESENTATIVE CONCEDED THAT THE FACTS AND CIRCUMST ANCES OF THE INSTANT APPEALS WERE SIMILAR TO THOSE ALREADY CONSIDERED AND DECIDE D BY THE TRIBUNAL. IN VIEW OF THE RIVAL BUT COMMON SUBMISSIONS AND RESPECTFULLY F OLLOWING THE PRECEDENTS WE UPHOLD THE IMPUGNED ORDERS. 5. BOTH THE SIDES ARE IN AGREEMENT THAT THE FA CTS AND CIRCUMSTANCES IN OTHER CASES ARE MUTATIS MUTANDIS SIMILAR TO THOSE DISCUSSED ABO VE. FOLLOWING THE VIEW TAKEN HEREINABOVE, WE UPHOLD THE IMPUGNED ORDER FOR ALL T HE YEARS. ITA NOS.2289 & ORS./MUM/2009 M/S.MCKINSEY GROUP. 5 6. IN THE RESULT, ALL THE APPEALS STAND DISMISSED. ORDER PRONOUNCED ON THIS 24 TH DAY OF MARCH 2010. SD/- SD/- ( R.K.GUPTA ) ( R.S.SYAL ) JUDICIAL MEMBER ACCOUNTANT M EMBER MUMBAI : 24 TH MARCH, 2010. DEVDAS* COPY TO : 1. THE APPELLANT. 2. THE RESPONDENTS. 3. THE CIT CONCERNED 4. THE CIT(A) - XXXIII, MUMBAI. 5. THE DR/ITAT, MUMBAI. 6. GUARD FILE. TRUE COPY. BY ORDER ASSISTANT REGISTRAR, ITAT, MUMBAI.