THE ADIT(IT)-3(2), MUMBAI V. M/S. MCKINSEY & CO. INC. BELGIUM, MUMBAI

ITA 3711/MUM/2006

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 1791 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 11 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-06-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: L
• Assessment Year: 2003-2004
• Appeal Filed On: 12-06-2006
• Result in Favour of: Assessee
• Court: TRIBUNAL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH L, MUMBAI BEFORE SHRI R.S. PADVEKAR, JM & SHRI R.K.PANDA, AM SR. NO. I.T.A. NO. & A.Y. APPELLANT RESPONDENT 1. 3711/MUM/2006 2003-04 ADIT(IT)-3(2) SCINDIA HOUSE, R.NO. 132, 1 ST FLOOR, N.M. ROAD, MUMBAI-38 M/S. MCKINSEY & CO. INC., BELGIUM PAN: AAACM7232P C/O. BMR & ASSOCIATES 3F, CONTRACTOR BUILDING, 41, R. KAMANI MARG, BALLARD ESTATE, MUMBAI-400 001 2. 3712/MUM/2006 2003-04 -DO- M/S. MCKINSEY KNOWLEDGE CENTRE, BELGIUM INC. PAN: AADCM3489P 3. 3717/MUM/2006 2003-04 -DO- M/S. MCKINSEY & CO. INC., ISRAEL PAN: AADCM3492J 4. 3718/MUM/2006 2003-04 -DO- M/S. MCKINSEY & CO. INC., SINGAPORE, PAN: AABCM8232A 5. 3719/MUM/2006 2003-04 -DO- M/S. MCKINSEY & CO., INC., NORWAY PAN: AAACM7225J 6. 3722/MUM/2006 2003-04 -DO- M/S. MCKINSEY & CO. INC., THAILAND, PAN: AABCM0992P 7. 3723/MUM/2006 2003-04 -DO- M/S. MCKINSEY & CO. INC., CHINA, PAN: AAACM7220P 8. 3731/MUM/2006 2003-04 -DO- M/S. MCKINSEY & CO., INC. (PHILS) PAN: AAECM3954C 9. 3733/MUM/2006 2003-04 -DO- M/S. MCKINSEY INCORPORATED PAN: AAACM7221N 10. 3734/MUM/2006 2003-04 -DO- M/S. MCKINSEY & CO. INC., INTERNATIONAL, PAN: AADCM3493K 11. 3735/MUM/2006 2003-04 -DO- M/S. MCKINSEY & CO. INC., COLOMBIA, PAN: AABCM0995L 12. 3736/MUM/2006 2003-04 -DO- M/S. MCKINSEY & CO. INC., HUNGARY, PAN: AABCM0987G 13. 3753/MUM/2006 2003-04 -DO- M/S. MCKINSEY & CO. INC., SWEDEN PAN: AAACM7213J ADDRESS OF ALL THE RESPONDENTS: C/O. BMR & ASSOCIATES 3F, CONTRACTOR BUILDING, 41, R. KAMANI MARG, BALLARD ESTATE, MUMBAI-400 001 APPELLANT BY : MR. S.M. KESH KAMAT RESPONDENT BY : MR. PORUS KAKA ORDER DATE OF HEARING: 10.06.2010 DATE OF ORDER: 10.06.2010 M/S. MCKINSEY & CO. INC., BELGIUM & ORS ================================== 2 PER BENCH ALL THE ABOVE APPEALS FILED BY THE REVENUE ARE DIR ECTED AGAINST THE RESPECTIVE ORDERS OF THE CIT(A)-XXXIII, MUMBAI RELATING TO ASSESSMENT YEAR 2003-04. SINCE IDENTICAL GROUNDS A RE INVOLVED IN ALL THESE APPEALS, THEREFORE, THESE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER. 2. WE FIRST TAKE UP I.T.A. NO. 3711/MUM/2006. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE, M/S. MCKINSEY & CO . INC., BELGIUM IS A COMPANY INCORPORATED IN AND A TAX RESIDENT OF THE U NITED STATES. DURING THE RELEVANT FINANCIAL YEAR UNDER CONSIDERAT ION THE ASSESSEE CHARGED AN AMOUNT OF RS.3,68,047/- TO THE INDIAN BR ANCH OF MCKINSEY & CO. INC., A US BASED ENTITY, IN RESPECT OF CERTAIN SERVICES RENDERED TO MCKINSEY INDIA. BEING THE TAX RESIDENT OF US, THE ASSESSEE IS GOVERNED BY THE PROVISIONS OF INDIA-US DOUBLE TAXATION AVOIDANCE AGREEMENT (DTAA). DURING THE COURSE OF A SSESSMENT PROCEEDINGS IT WAS EXPLAINED THAT SINCE THE INCOME RECEIVED BY THE ASSESSEE IS NOT IN THE NATURE OF FEE FOR INCLUDED SERVICES OR ROYALTY AS PER ARTICLE 12 OF THE TREATY, ITS INCOME IS TAXA BLE AS BUSINESS PROFITS. AS PER ARTICLE 7 OF THE TREATY, THE BUS INESS PROFIT WOULD BE TAXABLE ONLY IF THE ENTITY EARNED THE PROFIT AS PE IN INDIA. SINCE THE ASSESSEE DOES NOT HAVE A PE IN INDIA, THEREFORE, TH E INCOME EARNED BY IT HAS NOT BEEN CONSIDERED TAXABLE IN INDIA. HOWEV ER, THE ASSESSING OFFICER REJECTED THE EXPLANATION GIVEN BY THE ASSES SEE AND HELD THAT THE MONEY RECEIVED BY THE ASSESSEE COMPANY FROM IND IA BRANCH OFFICE OF MCKINSEY & CO. INC. CONSTITUTES FEES FOR INCLUD ED SERVICES WITHIN THE MEANING OF ARTICLE 12(4) OF THE INDIA-US TREATY AND ARE ACCORDINGLY LIABLE TO BE TAXED IN INDIA. 3. IN APPEAL, THE CIT(A) FOLLOWING THE ORDER OF THE TR IBUNAL IN ASSESSEES OWN CASE FOR A.Y. 1997-98 VIDE I.T.A. NO . 7242/MUM/2002 ORDER DATED 12.12.2005 HELD THAT THE PAYMENTS IN QU ESTION CANNOT BE TREATED AS FEE FOR INCLUDED SERVICES. SINCE THE ASSESSEE COMPANY DO M/S. MCKINSEY & CO. INC., BELGIUM & ORS ================================== 3 NOT HAVE ANY PE IN INDIA, THE INCOME SO ARISING TO THEM IN INDIA CANNOT BE TAXED UNDER ARTICLE 7 AS BUSINESS PROFIT EITHER. HE ACCORDINGLY ALLOWED THE APPEAL FILED BY THE ASSESSE E. 4. AGGRIEVED WITH SUCH ORDER OF THE CIT(A), THE REVENU E IS IN APPEAL BEFORE US WITH THE FOLLOWING GROUNDS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) ERRED IN HOLDING THAT TH E MONIES RECEIVED BY THE ASSESSEE COMPANY FROM INDIAN BRANCH IS NOT IN THE NATURE OF FEES FOR INCLUDED SERVICES W ITHIN THE MEANING OF ARTICLE 12(4) OF THE INDIA-US TREATY. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) FURTHER ERRED IN HOLDING THAT SINCE THERE IS NO PE IN INDIA THE INCOME SO ARISING IN INDIA CANNOT BE TAXED UNDER ARTICLE 7 AS BUSINESS PROFIT S. 5. THE LEARNED COUNSEL FOR THE ASSESSEE, AT THE OUTSET SUBMITTED THAT THE ISSUE STANDS COVERED IN FAVOUR OF THE ASSE SSEE BY THE FOLLOWING DECISIONS OF THE TRIBUNAL IN ASSESSEES O WN CASE: A. DECISION OF THE TRIBUNAL IN THE CASE OF MCKINSEY & COMPANY, CHINA FOR A.Y. 1997-98 (ITA NO.7239/MUM/ 02 AND OTHERS). B. DECISION OF THE TRIBUNAL IN THE CASE OF MCKINSEY & COMPANY, INC. SWITZERLAND FOR A.Y. 1997-98 (ITA NO.7238/MUM/02). C. DECISION OF THE TRIBUNAL IN THE CASE OF MCKINSEY & COMPANY, INC., UNITED STATES FOR A.Y. 2000-01 (ITA NO.3483/MUM/05). D. DECISION OF THE TRIBUNAL IN THE CASE OF MCKINSEY & COMPANY, INC., PHILIPPINES VS. ASST. DIRECTOR OF IN COME TAX (99 TTJ 857). E. DECISION OF THE TRIBUNAL IN THE CASE OF MCKINSEY INCORPORATED & OTHERS FOR A.Y. 2006-07 (ITA NO.2289/MUM/2009). 6. THE LEARNED DR, ON THE OTHER HAND, WHILE SUPPORTING THE ORDER OF THE ASSESSING OFFICER FAIRLY CONCEDED THAT THE I SSUE STANDS COVERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE B Y THE DECISIONS OF THE TRIBUNAL IN ASSESSEES OWN CASES. M/S. MCKINSEY & CO. INC., BELGIUM & ORS ================================== 4 7. AFTER HEARING BOTH THE SIDES, WE FIND SIMILAR ISSUE HAS BEEN DECIDED BY THE TRIBUNAL IN FAVOUR OF THE ASSESSEE A ND AGAINST THE REVENUE BY DIFFERENT CO-ORDINATE BENCHES. WE FIND THE TRIBUNAL VIDE I.T.A. NO.2297/MUM/09 TO 2301/MUM/09 ORDER DATED 24 TH MARCH, 2010 FOR THE A.Y. 2006-07 IN THE CASE OF DIT (INTL. TAXN.) VS. MCKINSEY & CO. INC., SWEDEN & OTHERS AT PARAS 4 AND 5 OF THE ORDER HAS UPHELD THE ORDER OF THE CIT(A) AND DISMISSED THE APPEALS F ILED BY THE REVENUE BY HOLDING AS UNDER: 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. THE LEARNED COUNS EL FOR THE ASSESSEE PLACED ON RECORD A COPY OF THE ORDER RELIE D ON BY THE LEARNED CIT(A) RANGING FROM ASSESSMENT YEARS 19 95-96 TO 2002-2003 IN WHICH THE ISSUE HAS BEEN DECIDED IN ITS FAVOUR. HE ALSO PLACED ON RECORD A COPY OF ANOTHER ORDER PASSED BY THE MUMBAI BENCH OF THE TRIBUNAL IN THE C ASE OF MCKINSEY & CO., INC. (PHILIPPINES) VS. ADIT [(2006) 99 ITD 549 (MUM) (SMC)] TAKING THE SIMILAR VIEW. IN THE L IKE MANNER ANOTHER ORDER PASSED IN THE CASE OF MCKINSEY & CO. (SWITZERLAND) DATED 29.12.2005 IN ITA NO. 7238/ MUM/ 2002 REITERATING THE SAME VIEW HAS ALSO BEEN PLACED ON RECORD. I T WAS CONTENDED THAT THE CONSISTENT VIEW OF THE TRIBUNAL IN ASSESSEES OWN CASES HAS BEEN IN ITS FA VOUR HOLDING AGAINST THE TAXATION OF THE AMOUNTS IN DISP UTE. THE LEARNED DEPARTMENTAL REPRESENTATIVE CONCEDED THAT T HE FACTS AND CIRCUMSTANCES OF THE INSTANT APPEALS WERE SIMILAR TO THOSE ALREADY CONSIDERED AND DECIDED BY THE TRIB UNAL. IN VIEW OF THE RIVAL BUT COMMON SUBMISSIONS AND RESPECTFULLY FOLLOWING THE PRECEDENTS, WE UPHOLD TH E IMPUGNED ORDERS. 5. BOTH THE SIDES ARE IN AGREEMENT THAT THE FACTS A ND CIRCUMSTANCES IN OTHER CASES ARE MUTATIS MUTANDIS S IMILAR TO THOSE DISCUSSED ABOVE. FOLLOWING THE VIEW TAKEN HEREINABOVE, WE UPHOLD THE IMPUGNED ORDER FOR ALL T HE YEARS. 8. RESPECTFULLY FOLLOWING THE DECISION OF THE CO-ORDIN ATE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE AND IN ABSENCE OF ANY DISTINGUISHABLE FEATURES BROUGHT BEFORE US BY THE R EVENUE, THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED. M/S. MCKINSEY & CO. INC., BELGIUM & ORS ================================== 5 9. SINCE GROUNDS IN THE REMAINING APPEALS ARE IDENTICA L TO THE GROUNDS IN I.T.A. NO. 3711/MUM/06, THEREFORE, FOLLO WING THE SAME RATIO, THE GROUNDS RAISED BY THE REVENUE IN THE REM AINING APPEALS ARE DISMISSED. 10. IN THE RESULT, ALL THE APPEALS FILED BY THE REVENUE ARE DISMISSED. PRONOUNCED IN THE OPEN COURT AT THE TIME OF HEARING ITSELF, I.E., ON 10.06.2010 SD/- (R.S. PADVEKAR) JUDICIAL MEMBER SD/- (R.K. PANDA) ACCOUNTANT MEMBER MUMBAI, DATED 10 TH JUNE, 2010 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A)-XXXIII, MUMBAI 4. THE DIT (INTL. TAX.), MUMBAI 5. THE DR L BENCH. //TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT MUMBAI BENCHES, MUMBAI TPRAO