Mc KINSEY & COMPANY, WASHINGTON DC, MUMBAI V. ADIT (IT) 4(1), MUMBAI

ITA 7664/MUM/2012

• Counselvise Citation: 766419914 RSA 2012
• Duration Of Justice: 2 year(s) 3 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-04-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: L
• Next Hearing Date: 19-02-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 26-12-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Double taxation relief; Charitable institution
• Section: 260A

Judgement Text

MCKINSEY & COMPANY, INC. SWITZERLAND AND 23 OTHER GROUP APPEALS ITA S 7646 TO 7669 /MUM/2012 1 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH L, MUMBAI . . , , BEFORE SHRI R.C. SHARMA , ACCOUNTANT MEMBER AND SHRI VIVEK VARMA, JUDICIAL MEMBER ITA S NO. : 76 46 TO 76 53 /MUM/20 12 (ASSESSMENT YEAR: 200 9 - 1 0 ) MCKINSEY & COMPANY, INC. INTERNATIONAL ; MCKINSEY & COMPANY, INC. RUSSIA; MCKINSEY KNOWLEDGE CENTRE, BELGIUM, INC.; MCKINSEY PACIFIC RIM, INC.; MCKINSEY & COMPANY, INC. JA PAN; MCKINSEY & COMPANY, INC. HONG KONG; MCKINSEY & COMPANY (THAILAND),CO. LTD.; MCKINSEY & COMPANY, INC.(MALAYSIA) C/O SRBC & ASSOCIATES, 14TH FLOOR, THE RUBY, SENAPATI BAPAT MARG, DADAR (WEST), MUMBAI - 400 028 .: PAN: AA D CM 3493 K .: PAN: AABCM 1172 B .: PAN: AA D CM 3489 P .: PAN: AAACM 72 33 N .: PAN: AAACM 72 24 K .: PAN: AAACM 72 30 R .: PAN: AA E CM 7443 C .: PAN: AABCM 0986 H VS ASSISTANT DIRECTOR OF INCOME - TAX (INTERNATIONAL TAXATION) - 4(1), SCINDIA HOUSE, BALLARD ESTATE, MUMBAI - 400 038 (APPELLANT) (RESPONDENT) ITAS NO. : 7654 TO 76 61 /MUM/2012 (ASSESSMENT YEAR: 2009 - 10) MCKINSEY & COMPAN Y, CANADA ; MCKINSEY & COMPANY, INC. SWITZERLAND ; MCKINSEY & COMPANY, INC. THAILAND ; MCKINSEY PACIFIC RIM, INC. ITALY ; MCKINSEY & COMPANY, INC. BELGIUM ; MCKINSEY & COMPANY, INC. THE NETHERLANDS ; VS ASSISTANT DIRECTOR OF INCOME - TAX (INTERNATIONAL TAXATION) - 4(1), SCINDIA HOUSE, BALLARD ESTATE, MUMBAI - 400 038 MCKINSEY & COMPANY, INC. SWITZERLAND AND 23 OTHER GROUP APPEALS ITA S 7646 TO 7669 /MUM/2012 2 MCKINSEY & COMPANY INC., SWEDEN; MCKINSEY & COMPANY SINGAPOR E, PTE LTD, C/O SRBC & ASSOCIATES, 14TH FLOOR, THE RUBY, SENAPATI BAPAT MARG, DADAR (WEST), MUMBAI - 400 028 .: PAN: AA E CM 3 644 F .: PAN: AA A CM 11 15 Q .: PAN: AA B CM 0992 P .: PAN: AAACM 72 26 M .: PAN: AAACM 72 3 2 P .: PAN: AAACM 723 4 M .: PAN: AAECM 7 21 3 J .: PAN : AAE CM 4465 A (APPELLANT) (RESPONDENT) ITAS NO. : 7662 TO 7669/MUM/2012 (ASSESSMENT YEAR: 2009 - 10) MCKINSEY & COMP ANY, INC. SINGAPORE, PTE LTD ; MCKINSEY INCORPORATED ; MCKINSEY & COMPANY, WASHINGTON DC; MCKINSEY & COMPANY, INC. UNITED KINGDOM ; MCKINSEY & COMPANY, INC. UNITED KINGDOM; ; MCKINSEY & COMPANY , S.L. ; MCKINSEY & COMPANY, INC. FRANCE L MCKINSEY BUSINESS CONSU LTANTS SOLE PARTNER LTD LIABILITY COMPANY MEPE C/O SRBC & ASSOCIATES, 14TH FLOOR, THE RUBY, SENAPATI BAPAT MARG, DADAR (WEST), MUMBAI - 400 028 .: PAN: AA E CM 4 4 65 A .: PAN: AA A CM 72 21 N .: PAN: AA FCM 2921 G .: PAN: AAACM 72 27 L .: PAN: AAACM 722 7 L .: PAN: AA E CM 4 2 85 A .: PAN: AA A CM 7223 Q .: PAN: AA E CM 7576 N VS ASSISTANT DIRECTOR OF INCOME - TAX - (INTERNATIONAL TAXATION) - 4(1), SCINDIA HOUSE, BALLARD ESTATE, MUMBAI - 400 038 MCKINSEY & COMPANY, INC. SWITZERLAND AND 23 OTHER GROUP APPEALS ITA S 7646 TO 7669 /MUM/2012 3 (APPELLANT) (RESPONDENT) APPELLANT BY MR. PORUS KAKA , SENIOR AD VOCATE & DIVESH CHAWLA RESPONDENT BY MRS. NEENA SINGH PANDEY /DATE OF HEARING : 19 - 0 2 - 201 5 / DATE OF PRONOUNCEMENT : 17 - 0 4 - 201 5 ORDER PER BENCH : THE GROUP OF APPEAL S ARE FILED AGAINST THE ORDERS OF DISPUTE RESOLUTION PANEL (DRP), PASSED U/S 144C(5), S. NO. ITA NO. APPEA L FILED AGAINST DT OF ORDER APPEALED AGAINST 1 7646 /M/12 DRP - I, MUMBAI 29.09.2012 2 76 47 /M/12 DRP - I, MUMBAI 29.09.2012 3 76 48 /M/12 DRP - I, MUMBAI 29.09.2012 4 76 49 /M/12 DRP - I, MUMBAI 29.09.2012 5 765 0 /M/12 DRP - I. MUMBAI 29.09.2012 6 76 51 /M/12 DRP - I, MUMBAI 29.09.2012 7 76 52 /M/12 DRP - I, MUMBAI 29.09.2012 8 76 53 /M/12 DRP - I, MUMBAI 29.09.2012 9 76 54 /M/12 DRP - I, MUMBAI 29.09.2012 10 76 55 /M/12 DRP - I, MUMBAI 29.09.2012 11 76 56 /M/12 DRP - I, MUMBAI 29.09.2012 12 76 57 /M/12 DRP - I, MUMBAI 29.09.2012 13 76 58 /M/12 DRP - I, MUMBAI 29.09.2012 14 76 59 /M/12 DRP - I, MUMBAI 29.09.2012 15 766 0 /M/12 DRP - 1, MUMBAI 29.09.2012 16 76 61 /M/12 DRP - I, MUMBAI 29.09.2012 17 76 62 /M/12 DRP - I, MUMBAI 29.09.2012 18 76 63 /M/12 DRP - I, MUMBAI 29.09.2012 19 76 64 /M/12 DRP - I, MUMBAI 29.09.2012 20 76 65 /M/12 DRP - I, MUMBAI 29.09.2012 21 76 66 /M/12 DRP - I, MUMBAI 29.09.2012 22 766 7 /M/12 DRP - I, MUMBAI 29.09.2012 23 76 68 /M/12 DRP - I, MUMBAI 29.09.2012 24 76 69 /M/12 DRP - I, MUMBAI 29.09.2012 2. AS THE APPEALS HAVE COMMON GROUNDS AND ISSUES, WE THEREFORE FOR THE SAKE OF CONVENIENCE ARE DISPOSING OFF THE CAPTIONED APPEALS THROUGH THIS COMMON AND CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE AND BREVITY. FOR THE SAKE OF CONVENIENCE, WE ARE TAKING UP THE CASE OF MCKINSEY AND CO. INC., SWITZERLAND, AS THE LEAD CASE. MCKINSEY & COMPANY, INC. SWITZERLAND AND 23 OTHER GROUP APPEALS ITA S 7646 TO 7669 /MUM/2012 4 3. THE FACTS ARE , PERTAINING TO THE ABOVE ASSESSEE ARE , T HE ASSESSEE IS A COMPANY INCORPORATED IN AND A TAX RESIDENT OF US AND IS ELIGIBLE TO CLAIM THE BENEFITS UNDER THE INDIA - US DTAA TAX TREATY TO TH E EXTENT THEY ARE MORE BENEFICIAL. THE ASSESSEE IS A PART OF THE MCKINSEY GROUP (THE GROUP) WHICH IS ENGAGED IN PROVIDING STRATEGIC CONSULTANCY SERVICES TO THEIR CLIENTS. MCKINSEY INDIA WAS SET UP TO PROVIDE SIMILAR SERVICES IN INDIA. 4. IN THE COURSE OF PERFORMING ITS WORK ON VARIOUS PROJECTS I ASSIGNMENTS IN INDIA, MCKINSEY INDIA PERIODICALLY REQUIRES ASSISTANCE FROM OTHER COUNTRIES, WHICH IS RELEVANT IN THE CONTEXT OF A SPECIFIC CLIENT PROJECT/ASSIGNMENT THAT IT IS EXECUTING. THE ASSESSEE ORDINARILY REN DERS SERVICES TO MCKINSEY INDIA IN THE FOLLOWING AREAS: A) ADVICE ON MATTERS SUCH AS PREVAILING PRACTICES IN VARIOUS GEOGRAPHICAL AREAS, INDUSTRIES, ETC. AS MAY BE RELEVANT TO THE SPECIFIC CLIENT ASSIGNMENT; B) PROVISION OF INFORMATION/DATA AS MAY BE SPECIFICALL Y REQUESTED BY MCKINSEY INDIA IN AREAS SUCH AS POPULATION, GDP, INFLATION, PRODUCTION CAPACITIES, REGULATIONS, POLICY FRAMEWORK, ETC, AND C) OTHER ADVISORY SUPPORT AS MAY BE REQUIRED BY MCKINSEY INDIA FOR THE PURPOSES OF EXECUTING THE CLIENT ASSIGNMENTS. 5. T HE ABOVE SERVICES, HEREINAFTER REFERRED TO AS BORROWED SERVICES, AS REQUESTED BY MCKINSEY INDIA MAY BE PROVIDED BY THE ASSESSEE BY WAY OF EMAILS OR VERBALLY THROUGH THE TELEPHONE. 6. TO INDICATE THE NATURE OF SERVICES RENDERED, DURING THE COURSE OF THE ASS ESSMENT PROCEEDINGS, THE ASSESSEE SUBMITTED SAMPLE COPIES OF DOCUMENTS EVIDENCING THE NATURE OF SERVICES PROVIDED BY THE ASSESSEE TO MCKINSEY INDIA IN RELATION TO CERTAIN PROJECTS/CLIENT ASSIGNMENTS OF MCKINSEY INDIA , ALONG WITH TABULAR SUMMARY OF THE PROJ ECTS AND CLIENT ASSIGNMENTS UNDERTAKEN BY MCKINSEY INDIA IN RESPECT OF WHICH THE ASSESSEE HAD PROVIDED ASSISTANCE TO MCKINSEY INDIA IN THE FOLLOWING: A) SCOPE OF MCKINSEY INDIA'S CLIENT ASSIGNMENTS/PROJECTS; B) NATURE OF ASSISTANCE SOUGHT BY MCKINSEY INDIA MCKINSEY & COMPANY, INC. SWITZERLAND AND 23 OTHER GROUP APPEALS ITA S 7646 TO 7669 /MUM/2012 5 FRO M THE ASSESSEE; C) ASSISTANCE PROVIDED BY THE ASSESSEE TO MCKINSEY INDIA IN RESPECT OF THE BORROWED SERVICE REQUEST; D) NAME OF THE MCKINSEY INDIA EMPLOYEE INITIATING THE BORROWED SERVICE ASSISTANCE REQUEST; E) NAME OF THE EMPLOYEE OF THE ASSESSEE HANDLING THE REQU EST FROM MCKINSEY INDIA; F) QUANTUM OF BORROWED SERVICE FEE PAYMENT MADE BY MCKINSEY INDIA TO THE ASSESSEE IN RESPECT OF THE BORROWED SERVICES; AND G) QUANTUM OF TOTAL FEES CHARGED BY MCKINSEY INDIA TO THE ULTIMATE CLIENT. 7. THE ASSESSEE HAS ALSO FILED DOCUMENT ARY EVIDENCE VIDE LETTER DATED 27 .12. 2011 WITH THE LEARNED ASSESSING OFFICER DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS FOR ASSESSMENT YEAR 2009 - 10. 8. THE AO, AFTER CONSIDERING ALL THE ARGUMENTS OF THE ASSESSEE, NEGATED THE SAME AND HELD, THAT INCOM E EARNED FROM BORROWED SERVICE S, BY THE ASSESSEE , FROM MCKINSEY INDIA IS IN THE NATURE OF FEES FOR INCLUDED SERVI CES UNDER INDIA - US TAX TREATY. 9 . THE AO AS WELL AS DRP, HELD THE ABOVE SERVICES AS FEE FOR INCLU SIVE SERVICES AND INCLUDED IN ARTI C L E 12(4) (B) OF INDIA US DTAA. 10 . IT IS AGAINST THIS DECISION, THE ASSESSEE IS BEFORE THE ITAT. 11 . AT THE TIME OF HEARING BEFORE US, THE AR SEGREGATED THE APPEALS IN THE FOLLOWING BLOCKS : S. NO. ITA NO. ASSESSMENT YEAR COUNTRY OF INCORPORATION 1 76 46 /M/1 2 2009 - 10 USA 2 76 47 /M/12 2009 - 10 USA 3 76 48 /M/12 2009 - 10 USA 4 76 49 /M/12 2009 - 10 USA 5 765 0 /M/12 2009 - 10 USA 6 76 51 /M/12 2009 - 10 USA 7 76 52 /M/12 200 9 - 10 USA 8 76 53 /M/12 2009 - 10 USA 9 76 54 /M/12 2009 - 10 USA 10 76 55 /M/12 2009 - 10 USA 11 76 56 /M/12 200 9 - 1 0 USA 12 76 57 /M/12 2009 - 10 USA 13 76 58 /M/12 2009 - 10 USA 14 76 59 /M/12 2009 - 10 USA 15 7660 /M/12 2009 - 10 USA MCKINSEY & COMPANY, INC. SWITZERLAND AND 23 OTHER GROUP APPEALS ITA S 7646 TO 7669 /MUM/2012 6 16 76 61 /M/12 2009 - 10 USA 17 76 62 /M/12 2009 - 10 USA 18 76 63 /M/12 2009 - 10 USA 12. ACCORDING TO THE AR SERIAL NO. 1 TO 18 FALL UNDER ONE CATEGORY, WHERE THE PARENT COMPANY IS INCORPORATED IN THE US AND THE SERVICES ARE ROUTED THROUGH US. 13 . THE AR SUBMITTED THAT IN SO FAR AS SERVICES FROM US ARE CONCERNED, THE ISSUE WAS SETTLED UNDER MUTUAL AGREEMENT PROCEDURE ( MAP ) , WHEREIN GO VERNMENT OF INDIA AND GOVERNMENT OF US AGREED THAT THE SERVICES PROVIDED BY THE ASSESSEE WOULD NOT FALL IN THE CATEGORY O F FEE FOR INCLUDED SERVICES, BUT SHALL BE FTS , AND F T S SHALL NOT BE TAXABLE. 14 . THE AR ALSO SUBMITTED THAT MAP PROCEEDINGS COVERED UP TO ASSESSMENT YEAR 2007 - 08 AND SINCE IDENTICAL SERVICES AND IDENTICAL FACTS ARE AVAILABLE, THE IMPUGNED ASSESSMENT YEAR MUST ALSO FOLLOW AND HONOUR THE GOVERNMENT TO GOVERNMENT AGREEMENT. THE AR IN ANY CASE REFERRED THE CASES OF RADHASOAMI SATSANG VS CIT, REPORTED IN 193 ITR 232 (SC) AND CIT VS J K CHARITABLE TRUST KAMAL TOWER, REPORTED IN 308 ITR 161, TO BRING HOME THE ARGUMENT, THAT CONSISTENCY MUST BE FOLLOWED BY THE REVENUE AUTHORITIES. THE AR IN ANY CASE SUBMITTED THAT ONCE SETTLEMENT HAS BEEN ARRIVED AT IN MAP PROCEEDINGS NO OTHER VIEW CAN BE POSSIBLE. 15 . THE NEXT BLOCK OF ASSESSEE PERTAINS TO ASSESSEE INCORPORATED I N CANADA, SINGAPORE AND SPAIN: S. NO. ITA NO. ASSESSMENT YEAR COUNTRY OF INCORPORATION 19 7673/M/12 2009 - 10 CANADA 20 7674/M/12 2 009 - 10 SINGAPORE 21 7675/M/12 2009 - 10 SINGAPORE 22 7676/M/12 2009 - 10 SPAIN 16 . IN SO FAR AS THESE ARE CONCERNED, THE AR SUBMITTED THAT IN ASSESSMENT YEAR 2007 - 08, THE ISSUE REACHED THE ITAT AND THE MCKINSEY & COMPANY, INC. SWITZERLAND AND 23 OTHER GROUP APPEALS ITA S 7646 TO 7669 /MUM/2012 7 COORDINATE BENCH FOLLOW I NG MAP HELD THAT BORROWED SERV ICES , BEING PART OF FTS WERE NOT TAXABLE. THE DEPARTMENT FILED APPEAL BEFORE THE HONBLE BOMBAY HIGH COURT U/S 260A . THIS APPEAL U/S 260A WAS LATER ON WITHDRAWN , AS THE ISSUE WAS ALREADY DECIDED AND THE CBDT/CHIEF COMMISSIONER OF INCOME TAX ACCEPTED THE DE CISION OF THE C OORDINATE BENCH OF ITAT, MUMBAI . 1 7 . THE NEXT BLOCK CONSISTED OF ASSESSEE IN C ORPORATED IN THAILAND AND GREECE : S. NO. ITA NO. ASSESSMENT YEAR COUNTRY OF INCORPORATION 23 7677/M/12 2009 - 10 THAILAND 24 7678/M/12 2009 - 10 GREECE 1 8 . TH E AR SUBMITTED THAT THE ISSUE IS COVERED BY THE ITAT ORDERS , WHERE IT WAS HELD THAT AS PER ARTICLE 7 DOES NOT COVER THE CHARGING PROVISIONS & IN ANY CASE PROVISIONS OF THE INCOME TAX ACT, 1961 GETS RULED OUT (AS FILED IN ITA NO. 7624/MUM/2010) (WHEN ONE OF US WERE A PARTY ) . 1 9 . THE AR THEREFORE SUBMITTED THAT NO ADDITION IS CALLED FOR. 20 . THE DR ON THE OTHER HAND SUBMITTED THAT THE ORDER S OF THE REVENUE AUTHORITIES ARE VERY REASONABLE. THE DR SUBMITTED THAT THOUGH THE ISSUE BEFORE MAP PERTAINED UPTO 2007 - 08, THE CURRENT YEAR IS 2009 - 10, THUS IS NOT COVERED BY MAP. THE DR PLACED RELIANCE ON THE DECISION OF COCHIN BENCH OF ITAT IN THE CASE OF US TECHNOLOGY RESOURCES PVT . LTD . IN ITA NO. 222/COCH/2013. 21 . WE HAVE HEARD THE ARGUMENTS AND HAVE PERUSED THE VA RIOUS ORDERS RELIED UPON BY THE CONTESTING SIDES. 22 . AT THE OUTSET, SINCE THERE ARE ORDERS FROM COORDINATE BENCH AT MUMBAI IN ASSESSEES OWN CASE ON THE ISSUE IMPUGNED, WE CANNOT CONSIDER OR PLACE RELIANCE ON THE DECISION OF COORDINATE BENCH AT COCHIN IN SOME OTHER CASE, UNLESS THE ORDERS RELIED UPON BY THE AR ARE PERVERSE AND/OR OUT OF CONTEXT AND ISSUE. MCKINSEY & COMPANY, INC. SWITZERLAND AND 23 OTHER GROUP APPEALS ITA S 7646 TO 7669 /MUM/2012 8 23 . W E ALSO FIND OURSELVES BOUND BY THE SETTLEMENT ARRIVED AT GOVERNMENT TO GOVERNMENT LEVEL UNDER MAP PROCEEDINGS , WHICH WE MUST HONOUR AND FOLLOW . 2 4 . IN SUCH A CASE WE SET ASIDE THE ORDER S OF THE REVENUE AUTHORITIES AND DIRECT THE AO TO DELETE THE ADDITIONS SO MADE. 25 . AS MENTIONED HERE ABOVE , WHEN THERE IS A DECISION OF THE COORDINATE BENCH AT MUMBAI IN ASSESSEES OWN CASE, JUDICIAL PROPRIETY DEMA NDS THAT SIMILAR ORDER MUST PREVAIL ON THE ISSUE FOR THE SAKE OF CONSISTENCY. IT IS ALSO A FACT THAT THE REVENUE AUTHORITIES OR THE DR DID NOT SHOW US ANYTHING WHICH COULD BE TERMED DIFFERENT OR LOOKED AT DIFFERENTLY OR WERE A DIFFERENT FACT. 26 . IN SUCH A CASE, WE ARE OF THE OPINION THAT ASSESSEE INCORPORATED IN CANADA, SINGAPORE, SPAIN, THAILAND AND GREECE, WE SET ASIDE THE ORDERS OF THE REVENUE AUTHORITIES AND DIRECT THE AO TO DELETE THE ADDITIONS IN THOSE ORDERS : 2 7 . AS A RESULT, THE APPEALS AS FILED IN THE FOLLOWING APPEALS ARE ALLOWED. ITA S NO. ASST . YEAR 7646/M/12 2009 - 10 7647/M/12 2009 - 10 7648/M/12 2009 - 10 7649/M/12 2009 - 10 7650/M/12 2009 - 10 7651/M/12 2009 - 10 7652/M/12 200 9 - 1 0 7653/M/12 200 9 - 10 7654/M/12 2009 - 10 7655/M/12 2009 - 10 7656/M/12 200 9 - 1 0 7657/M/12 2009 - 10 7658/M/12 2009 - 10 7659/M/12 2009 - 10 7660/M/12 2009 - 10 7661/M/12 2009 - 10 7662/M/12 2009 - 10 7663/M/12 2009 - 10 76 64 /M/12 2009 - 10 76 65 /M/12 2009 - 10 MCKINSEY & COMPANY, INC. SWITZERLAND AND 23 OTHER GROUP APPEALS ITA S 7646 TO 7669 /MUM/2012 9 76 66 /M/12 2009 - 10 76 6 7/M/12 2009 - 10 76 68 /M/12 2009 - 10 76 69 /M/12 2009 - 10 ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH APRIL , 2015. SD/ - SD/ - ( . . ) ( ) ( R C SHARMA ) ( VIVEK VARMA ) ACCOUNTANT MEMB ER JUDICIAL MEMBER MUMBAI, DATE: 17 TH APRIL , 201 5 / COPY TO: - 1) / THE APPELLANT. 2) / THE RESPONDENT. 3) THE D RP - I , MUMBAI. 4) THE CIT /DIT - CONCERNED______ , MUMBAI . 5) , , / THE D.R. L BENCH, MUMBAI. 6) COPY TO GUARD FILE. / BY ORDER / / TRUE COPY / / / , DY. / ASSTT. REGISTR AR I.T.A.T., MUMBAI * . . *CHAVAN, SR.PS