ADIT (I.T)-3(2), MUMBAI V. M/s. MCKINSEY & CO. INC.-UNITED STATES, MUMBAI

ITA 649/MUM/2007

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 1232 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 5 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-06-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2003-2004
• Appeal Filed On: 19-01-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NARENDER SINGH SHRI PORUS KAKA
• Keywords: Permanent establishment

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH L,MUMBAI BEFORE SHRI R.S. PADVEKAR (JM) & SHRI R.K. PANDA (A M) I.T.A.NO.649/MUM/2007 (A.Y. 2003-04) ADIT(I.T.)-3(2), SCINDIA HOUSE, R.NO.132, 1 ST FLOOR, N.M. ROAD, MUMBAI-400 038. VS. MCKINSEY &CO. INC-UNITED STATES, C/0. M/S.BMR & ASSOCIATES, 3F, CONTRACTOR BLDG.,41R, KAMANI BLDG., BALLARD ESTATE,MUMBAI-1. PAN: AAACM7219C APPELLANT RESPONDENT APPELLANT BY RESPONDENT BY SHRI NARENDER SINGH. SHRI PORUS KAKA. O R D E R PER R.K. PANDA, AM : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER DATED 22-09- 2006 OF THE CIT(A)-XXXIII, MUMBAI, RELATING TO ASST . YEAR 2003-04. 2. THE EFFECTIVE GROUND RAISED BY THE REVENUE IS A S UNDER : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE AD DITION OFRS.5,12,12,759/- MADE UNDER THE HEAD FEES FOR INCLUDED SERVICES UNDER ARTICLE 12 OF THE INDIA-US TREATY. THE FACTS OF THE CASE, IN BRIEF, ARE THAT THE AO TR EATED THE REVENUE OF RS.5,12,12,759/- EARNED BY THE INDIAN BRANCHES OF M CKINSEY & CO. IN RESPECT OF CONSULTANCY SERVICES IN CONNECTION WITH THE PROJECT S EXECUTED IN INDIA AND FOR PROVIDING ACCESS TO CUSTOMIZED SOFTWARE SYSTEM MAIN TAINED BY MCKINSEY & CO. USA AS FEES FOR INCLUDED SERVICES UNDER ARTICLE 1 3 AND TAXED IT AT 15%. 3. IN APPEAL, THE CIT(A) DIRECTED THE AO TO DELETE THE ADDITION BY HOLDING AS UNDER : 3. GROUND NO.(I), (II) & (III): ON IDENTICAL FACTS, THE HONBLE ITAT IN THE APPELLANTS OWN CASE FOR A.Y .99-00 ITA 649/M/07 MCKINSEY & CO. 2 VIDE ITA.NO.821/M/03, ITA.NO.3483/M/05 FOR A.Y. 2000-01, ITA.NO.7468/M/05 FOR A.Y. 2002-03, ITA.NO.5658/M/02 FOR A.Y. 95-96, ITA. NO.5677/M/02 FOR A.Y. 96-97, ITA.NO.7246/M/02 FOR A.Y. 97-98 AND ITA.NO.2068/M/03 FOR A.Y. 98- 99 ALL DATED 26/04/2006 AFTER A DETAILED DISCUSSION S HAS HELD THAT PAYMENTS IN QUESTION CANNOT BE TREATED AS FEES FOR INCLUDED SERVICES. THE DECISI ON OF THE SAID ORDER AT PAGE NO.12 IN PARA-5 IS EXTRACTED BELOW: THIS DIVISION BENCH HAS CAREFULLY GONE THROUGH THE ABOVE ORDER AND HAS ALSO DULY CONSIDERED RIVAL CONTENTIONS AS ALSO MATERIAL ON RECORD. OUR CONSIDERED VIEW IS THAT THE MATERIAL FACTS BEING IDENTICAL AND THE SAID SMC DECISION MEETING OUR CONCURRENCE. WE HAVE NO REASON TO TAKE ANY OTHER VIEW OF THE MATTER THAN THE VIEW SO TAKEN BY THE SMC BENCH. WE ADOPT THE SAID VIEW. WE HOLD THAT THE PAYMENTS IN QUESTION CANNOT BE SUBJECTED TO TAX UNDER ARTICLE 12 OF THE INDIA US TREATY AND ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO DELETE THE IMPUGNED ADDITIONS. 3.1 WHILE DECIDING THE ISSUE, THE HONBLE DIVISION BENCH OF THE TRIBUNAL FOLLOWED THE ORDER PASSED BY THE SINGLE MEMBER BENCH IN THE CASE OF MCKINSEY & CO. INC. (SWITZERLAND) VS. ADIT REPORTED IN 99 ITD 549. IN THAT ORDER THE HONBLE MEMBER IN PARA 10 HAS HELD AS UNDER: 10. FOR THE REASONS SET OUT ABOVE, I AM OF THE CONSIDERED VIEW THAT THE CIT(A) INDEED ERRED IN HOLDING THAT THE MONIES RECEIVED BY APPELLANT COMPANIES FROM MCKINSEY INDIA CONSTITUTE FEES FOR INCLUDED SERVICES WITHIN THE MEANING OF ARTICLE 12(4) OF THE INDIA US TREATY AND ARE ACCORDINGLY LIABLE TO BE TAXED IN INDIA. IN MY VIEW , THE PAYMENTS IN QUESTION, FOR THE DETAILED REASONS SET OUT ABOVE, CANNOT BE TREATED AS FEES FOR INCLUDED SERVICES. SINCE, THE APPELLANT COMPANIES DO NOT HAVE ANY PERMANENT ESTABLISHMENT IN INDIA, THE INCOMES SO ARISING TO THEM IN INDIA CAN NOT BE TAXED UNDER ARTICLE 7 AS BUSINESS PROFITS EITHER. THEREFORE, I DIRECT THE ASSESSING OFFICER DELETE TH E IMPUGNED ADDITIONS. THE ASSESSEE GET RELIEF ACCORDINGLY. 4. IN VIEW OF THE ABOVE AND RESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE ITAT, I DIRECT THE ITA 649/M/07 MCKINSEY & CO. 3 ASSESSING OFFICER TO DELETE THE IMPUGNED ADDITIONS. AGGRIEVED WITH THE ORDER OF THE CIT(A), THE REVENU E IS IN APPEAL BEFORE US. 4. AFTER HEARING BOTH THE SIDES, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) WHO HAS FOLLOWED THE DECISION OF THE TRI BUNAL IN THE ASSESSEES OWN CASE FOR VARIOUS ASST. YEARS. THE LD. D.R. COULD NO T CONTROVERT THE ABOVE FINDING OF THE CIT(A). THEREFORE, RESPECTFULLY FOLLOWING T HE DECISION OF THE TRIBUNAL IN THE ASSESSEES OWN CASE AND IN THE ABSENCE OF ANY DISTI NGUISHING FEATURES BROUGHT BEFORE US, WE UPHOLD THE ORDER OF CIT(A). THE GROUN D RAISED BY THE REVENUE IS DISMISSED. 5. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER PRONOUNCED ON THE 25TH DAY OF JUNE, 201 0. SD/- SD/- (R.S. PADVEKAR) ( R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI: 25TH JUNE , 2010. NG: COPY TO : 1. ASSESSEE. 2.DEPARTMENT. 3 CIT(A)-XXXIII,,MUMBAI. 4 DIT(IT),MUMBAI. 5.DR,L BENCH,MUMBAI. 6. MASTER FILE. (TRUE COPY) BY ORDER, ASST.REGISTRAR, ITAT, MUMBAI. ITA 649/M/07 MCKINSEY & CO. 4 DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 18-06-2010 SR.PS/ 2 DRAFT PLACED BEFORE AUTHOR 18-06-2010 SR.PS/ 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/ 6. KEPT FOR PRONOUNCEMENT ON SR.PS/ 7. FILE SENT TO THE BENCH CLERK SR.PS/ 8 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER