McKINSEY & COMPANY S.L, MUMBAI V. DDIT (IT) 4(1), MUMBAI

ITA 7622/MUM/2010

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75677 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 3 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-02-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: L
• Next Hearing Date: 12-02-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 03-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AJAY SHRIVASTAVA
• Section: 143(3); 234B

Judgement Text

, ,, , , ,, , IN THE INCOME TAX APPELLATE TRIBUNAL L BENCH, MUMBAI , ! ' . # , , $% ! $ $$ $ & & & & BEFORE SRI VIJAY PAL RAO, JM AND SHRI D. KARUNAKARA RAO, AM ./ I.T.A. NO. 7595/MUM/2010 ( ' ( ' ( ' ( ' ( )( )( )( )( / ASSESSMENT YEARS: 2006-07) MCKINSEY & COMPANY SINGAPORE, PTE LTD., C/O- S.R. BATLIBOI & CO. 18 TH FLOOR, EXPRESS TOWERS, NARIMAN POINT, MUMBAI-400021 ' ' ' ' / VS. DEPUTY DIRECTOR OF INCOME-TAX(INTERNATIONAL TAXATION)-4(1), SCINIDIA HOUSE, BALLARD ESTATE, MUMBAI-400038 !* $% ./ + ./ PAN/GIR NO . : AAECM4465A ( *, / ASSESSEE ) .. ( -.*, / RESPONDENT ) ./ I.T.A. NO. 7622/MUM/2010 ( ' ( ' ( ' ( ' ( )( )( )( )( / ASSESSMENT YEARS: 2007-08 ) MCKINSEY & COMPANY S.L., C/O- S.R. BATLIBOI & CO. 18 TH FLOOR, EXPRESS TOWERS, NARIMAN POINT, MUMBAI-400021 ' ' ' ' / VS. DEPUTY DIRECTOR OF INCOME-TAX(INTERNATIONAL TAXATION)-4(1), SCINIDIA HOUSE, BALLARD ESTATE, MUMBAI-400038 !* $% ./ + ./ PAN/GIR NO . : AAECM4285A ( *, / ASSESSEE ) .. ( -.*, / RESPONDENT ) ./ I.T.A. NO. 7623/MUM/2010 ( ' ( ' ( ' ( ' ( )( )( )( )( / ASSESSMENT YEARS: 2007-08 ) MCKINSEY & COMPANY CANADA, C/O- S.R. BATLIBOI & CO. 18 TH FLOOR, EXPRESS TOWERS, NARIMAN POINT, MUMBAI-400021 ' ' ' ' / VS. DEPUTY DIRECTOR OF INCOME-TAX(INTERNATIONAL TAXATION)-4(1), SCINIDIA HOUSE, BALLARD ESTATE, MUMBAI-400038 !* $% ./ + ./ PAN/GIR NO . : AAECM3644I ( *, / ASSESSEE ) .. ( -.*, / RESPONDENT ) 2 ITA NO.7595,7622 &7623/MUM/2010 MCKINSEY & CO. *, / 0 $ / ASSESSEE BY : SHRI PORUS KAKA & SHRI DIVESH CHAWLA -.*, / 0 $ / RESPONDENT BY : SHRI AJAY SHRIVASTAVA ' / 1% / DATE OF HEARING : 12/02/2014 23) / 1% / DATE OF PRONOUNCEMENT :21 /02/2014 $4 / O R D E R PER VIJAY PAL RAO, JM: THESE THREE APPEALS BY THREE RELATED FOREIGN ENTITI ES DIRECTED AGAINST THE ASSESSMENT ORDERS PASSED U/S 143(3) R.W.S. 144C (13) OF INCOME-TAX ACT IN PURSUANT TO THE DIRECTIONS OF DRP U/S 144C(5 ) OF THE INCOME-TAX ACT FOR THE ASSESSMENT YEAR 2006-07 AND 2007-08 RES PECTIVELY. 2. THESE THREE APPEALS HAVE RAISED COMMON ISSUE REG ARDING BORROWED SERVICE RENDERED BY THE ASSESSEE ARE TREATED AS FEE FOR TECHNICAL SERVICES. THEREFORE, ALL THESE APPEALS WERE CLUBBED AND HEARD TOGETHER AND DISPOSED OF BY THIS COMPOSITE ORDER. THE GROUNDS R AISED IN ITA NO.7595/MUM/2010 ARE AS UNDER:- I. THE LEARNED AO /HONBLE DISPUTE RESOLUTION PANEL(D RP) HAS ERRED IN CONCLUDING THAT BORROWED SERVICE RENDERED BY THE AP PELLANT ARE IN THE NATURE OF FEES FOR TECHNICAL SERVICES UNDER ARTIC LE 12 OF THE INDIA- SINGAPORE DOUBLE TAXATION AVOIDANCE AGREEMENT (IND IA-SINGAPORE TAX TREATY). II. THE LEARNED AOS ORDER AND FINDING ON THE EVIDENCE SUBMITTED IS CONTRARY TO THE DETAILS FILED BEFORE HIM AND ALSO T HE HONBLE DRP AND IS CONTRARY TO THE RECORD AND ORDER OF THE DRP. III. THE LEARNED AO/HONBLE DRP HAS ERRED IN NOT APPLYIN G THE PRINCIPLES ENUNCIATED IN THE EARLIER DECISIONS PRONOUNCED BY T HE HONBLE INCOME TAX APPELLATE TRIBUNAL(ITAT) IN CASE OF GROUP COM PANIES OF THE 3 ITA NO.7595,7622 &7623/MUM/2010 MCKINSEY & CO. APPELLANT WHEREIN IT HAS BEEN HELD THAT BORROWED SE RVICES FEE RECEIVED ARE NOT TAXABLE AS FEES FOR INCLUDED SERVICES. IV. THE LEARNED AO HAS ERRED IN CHARGING INTEREST UNDER SECTION 234B OF THE ACT. 3. WE HAVE HEARD SHRI PORAS KAKA LD. SENIOR COUNSEL OF THE ASSESSEE AS WELL AS LD. DR AND CONSIDERED THE RELEV ANT MATER ON RECORD. THE LD. SENIOR COUNSEL HAS POINTED OUT THA T THE ISSUE INVOLVED IN THIS APPEAL HAS ALREADY BEEN CONSIDERED AND DECIDED BY THIS TRIBUNAL IN THE NUMBER OF DECISIONS IN THE CAS ES OF GROUP CONCERNS OF THE ASSESSEE. HE HAS REFERRED THE FOLL OWING 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)(I TA NO.7238/M/2002) MCKINSEY & COMPANY, INC. (PHILIPPINES) & ORS. V/S A DIT (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 DCIT (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 ATTENTIO N THAT EVEN THE AMOUNT PAID BY THE INDIAN BRANCH TO THE HEAD OFFICE ON ACCOUNT OF BORROWED SERVICE CHARGES HAS BEEN ACCEPTED AND DECI DED IN FAVOUR 4 ITA NO.7595,7622 &7623/MUM/2010 MCKINSEY & CO. OF THE ASSESSEE UNDER MUTUAL AGREEMENT PROCEDURE (M AP) RESOLUTION AND THEREFORE THE SAME IS NOT TAXABLE. THE LD. COU NSEL HAS REFERRED LETTER DATED 23/03/2012 TO SHOW THAT UNDER THE MUTU AL AGREEMENT PROCEEDING, ONE OF THE ITEM WAS BORROWED SERVICE CH ARGES. THE LD. COUNSEL HAS FURTHER POINTED THAT THE REVENUE CHALLE NGED THE DECISION OF THIS TRIBUNAL BEFORE THE HONBLE HIGH C OURT RECORD THE ISSUE INVOLVED IN THE APPEAL HOW DULY BEEN RESOLVED UNDER MAP AND GIVEN EFFECT BY THE ASSESSING OFFICER. HE HAS REFE RRED THE DECISION OF THE HONBLE JURISDICTION HIGH COURT DATED 23/01/201 3, WHEREIN THE APPEALS FILED BY THE REVENUE WERE ALLOWED TO WITHDR AWN AND DISMISSED ACCORDINGLY. ON THE OTHER HAND, THE LD. DR THOUGH HAS NOT DISPUTED THE WITHDRAWN OF THE APPEALS HOWEVER S UBMITTED THAT WHETHER THESE ISSUES IN THESE APPEALS HAVE BEEN SET TLED UNDER MAP REQUIRES VERIFICATION. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CONSIDER ED THE RELEVANT MATERIAL ON RECORD, WE NOTED THAT THESE IS SUES HAVE ALREADY BEEN DECIDED BY THIS TRIBUNAL IN THE VARIOUS DECISI ONS AS MENTIONED ABOVE IN THE GROUP CONCERNS OF THE ASSESSEE BEFORE US. AGAINST THE DECISION OF THE TRIBUNAL, THE REVENUE FILED THE APP EALS BEFORE THE HONBLE HIGH COURT IN 14 CASES. THOSE 14 APPEALS W ERE 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 T HIS CONNECTION THE LETTER DATED 22/10/2012 AS WELL AS 21/01/2013 A RE RELEVANT WHICH ARE AS UNDER:- 5 ITA NO.7595,7622 &7623/MUM/2010 MCKINSEY & CO. 6 ITA NO.7595,7622 &7623/MUM/2010 MCKINSEY & CO. 7 ITA NO.7595,7622 &7623/MUM/2010 MCKINSEY & CO. 6. THUS, IT IS CLEAR THAT THE ISSUE INVOLVED REGARD ING BORROWED SERVICE CHARGES WAS DECIDED BY THIS TRIBUNAL IN FAV OUR OF THE ASSESSEE AND FURTHER THE DEPARTMENT HAS RESOLVED TH AT THE ISSUE UNDER MAP AND CONSEQUENTLY WITHDRAWN THE APPEALS FI LED BEFORE THE HONBLE HIGH COURT. FURTHER, THE ASSESSEE HAS FILED A LETTER DATED 12/02/2014 THEREBY STATED THAT THE ISSUE RELATING T O TAXABILITY OF FIRM FUNCTION CHARGES DOES NOT ARISE IN CASE OF THE SE 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 INVO LVED IN THESE APPEALS HAVE ALREADY RESOLVED UNDER THE MUTUAL AGRE EMENT PROCEDURE, WE DIRECT THE AO TO GRANT THE RELIEF ACC ORDINGLY 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 ALLOW ED. ORDER PRONOUNCED IN THE OPEN COURT ON 21 /02/2014 . $4 / 23) % $ 5 ' 21 /02/2014 , 3 / 6 SD/- ( D.KARUNAKARA RAO ) SD/- ( VIJAY PAL RAO ) $% ! / ACCOUNTANT MEMBER ! / JUDICIAL MEMBER MUMBAI; 5 ' /DATED : 21 /02/ 2014 F{X~{T? P.S. $4 / -17 8$)1 / COPY OF THE ORDER FORWARDED TO : (1) ' (91 / THE ASSESSEE; (2) ! / THE REVENUE; (3) : ( ) / THE CIT(A); 8 ITA NO.7595,7622 &7623/MUM/2010 MCKINSEY & CO. (4) : / THE CIT, MUMBAI CITY CONCERNED; (5) ;6 -1' , , / THE DR, ITAT, MUMBAI; (6) 6'( < / GUARD FILE. .1 -1 / TRUE COPY $4' / BY ORDER = / > / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI,