MCKINSEY AND COMPANY LME LIMITED,MUMBAI V. ACIT INTERNATIONAL TAXATION 3 2 1 MUMBAI, INCOME TAX DEPARTMENT MUMBAI

MA 96/MUM/2025

AI Insights

The case involves M/s. McKinsey & Company Lme Limited, which sought a recall of the Tribunal's order dated 08.10.2024 concerning the assessment year 2018-19. The original dispute centered on whether the borrowed service fees received from McKinsey India constituted 'fees for technical service' (FTS) or 'business profits' under Article 7 of the India-UK DTAA. The Tribunal had previously upheld the decision of the Learned Commissioner of Income Tax (Appeals), which classified the income as 'business profit' not taxable in India in the absence of a PE. The assessee argued that the issue of PE was not adequately addressed in the original proceedings and that the Tribunal had inadvertently applied precedents from cases under different DTAAs (India-Singapore) without considering the specific facts relevant to the India-UK DTAA.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 824688 (ITAT-MUMBAI)
• Duration Of Justice: 8 month(s) 13 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 29-12-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Assessment Year: 2018-2019
• Appeal Filed On: 15-04-2025
• Laws Referred To: Income Tax Act, 1961, India-UK DTAA
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRAVIN SALUNKHE
• Assessee Lawyers: PORUS KAKA AW DIVESH
• Keywords: Set aside; Business income; Tax effect; Double taxation relief; Permanent establishment

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “I” BENCH, MUMBAI BEFORE MS. KAVITHA RAJAGOPAL, JM AND SMT. RENU JAUHRI, AM MA No.96/M/2025 (Arising out of ITA No.1818/Mum/2024) (Assessment Year: 2018-19) M/s. Mckinsey & Company Lme Limited, C/o-M/s. Ernst & Young LLP, CAs 14TH Floor, The Ruby, Senapati Bapat Marg, Dadar, Mumbai- 400 028 Vs. Asst. Commissioner of Income Tax (IT)-3(2)(1), Room No.1613, 16th Floor, Air India Building, Nariman Point, Mumbai – 400 021 PAN:AAKCM0197M (Appellant) : (Respondent) Assessee by : Shri Porus Kaka a/w Shri Divesh Chawla, A.R. Respondent by : Shri Pravin Salunkhe, Sr. DR Date of Hearing : 14.11.2025 Date of Pronouncement : 29.12.2025 O R D E R Per Kavitha Rajagopal, JM: This miscellaneous application is filed by the assessee/applicant, seeking for recall of the order of the Tribunal dated 08.10.2024 in ITA No.1818/M/2024 for assessment year 2018-19. 2. The facts of the case are that the Revenue had filed the appeal challenging the order of Learned Commissioner of Income Tax (Appeals) [‘Ld. CIT(A)’ for short], National Faceless Appeal Centre (‘NFAC’ for short) passed u/s. 250 of the Income Tax Act, 1961 Printed from counselvise.com MA No.96/M/2025 (Arising out of ITA No.1818/Mum/2024) M/s. Mckinsey & Company Lme Limited 2 (‘the Act') on the ground that the Ld. CIT(A) has erred in holding that the borrowed service fees received by the assessee from Mckinsey India is not fee for technical service and the same would fall within the ambit of “business profit” as per Article 7 of India-UK DTAA where the Ld. CIT(A) held that income is “business profit” which is not taxable in India in the absence of Permanent Establishment (“PE” for short). The Tribunal by a consolidated order dated 08.10.2024 upheld the order of the Ld. CIT(A) by holding the same to be “business income” as per Article 7 of the treaty but had remanded the issue to the Learned Assessing Officer (“Ld. AO” for short) for the limited purpose of examining whether the assessee had a PE during the impugned year for considering whether the said receipt is taxable in India as per Article 7 of the treaty. It is observed that the assessee/applicant during the assessment proceedings has contended that the borrowed service fees was not in the nature of FTS and was a business receipt which has been consistently followed by the Tribunal in earlier years as well. The Ld. AO rejected the assessee’s contention and held the same to be FTS and hence did not get into the issue of whether there was a PE in India during the year under consideration. The Ld. CIT(A) further held the same to be a “business income” with no PE by following the earlier years’ orders in the case of group companies where the Tribunal has held that the business income is not taxable in the absence of PE in India and the same is not fees for included services. 3. The Revenue preferred an appeal before the Tribunal and the Tribunal reiterated the finding of the Ld. CIT(A) that the same tantamounts to “business income” as per Article 7 of the treaty and not FTS/FIS/royalty in the group cases of the assessee which pertains to Printed from counselvise.com MA No.96/M/2025 (Arising out of ITA No.1818/Mum/2024) M/s. Mckinsey & Company Lme Limited 3 India-Singapore DTAA. Since the facts were identical, the same finding was applied mutatis mutandis to the present assessee/applicant also. 4. The assessee/applicant has filed the present miscellaneous application for recall of the Tribunal’s order on the ground that inadvertently the captioned appeal was heard instead of appeals pertaining to A.Y. 2017-18 and 2019-20 which were below the prescribed mandatory limit in ITA No.1821/M/2024 and 1817/M/2024 respectively, which then were subsequently heard and dismissed against the Revenue on low tax effect. The assessee/applicant aggrieved by the same has challenged the order of the Tribunal on the ground that the assessee was not heard on the issue of the existence of PE during the year under consideration and prayed that the order of the Tribunal be recalled. 5. The Learned Authorized Representative (“Ld. A.R.” for short) for the assessee/applicant contended that the issue of existence of PE was never disputed nor was it the ground of the Revenue as the Ld. A.R. contends that this fact has not been controverted by the Ld. AO during the assessment proceedings. The Ld. A.R. further argued that Tribunal ought not to have followed the order of the group companies as it pertained to India-Singapore treaty and the present assessee was covered by India-UK DTAA. The Ld. A.R. argued that the assessee should have been given proper opportunity of hearing before remanding the limited issue to the Ld. AO for verifying the existence of PE for the year under consideration. The Ld. A.R. prayed that the order of the Tribunal be recalled. The Ld. A.R. relied on catena of decisions in support of his claim. Printed from counselvise.com MA No.96/M/2025 (Arising out of ITA No.1818/Mum/2024) M/s. Mckinsey & Company Lme Limited 4 6. The Learned Departmental Representative (“Ld. DR” for short), on the other hand, controverted the same and contended that the Revenue has specifically raised a ground of whether the income would be “business profit” without PE, whereas in assessment year 2016-17 the Revenue had not raised this ground in its ground of appeal. The Ld. DR stated that there were distinguishing facts in the present case with that of the order for A.Y. 2016- 17 and contended that the Tribunal had rightly set aside the issue to the Ld. AO for verification of existence of PE in the year under consideration. The Ld. DR further stated that even otherwise the Ld. AO did not look into the facts of the existence of PE for the reason that he had held the receipt to be in the nature of FTS and the Ld. CIT(A) though has held this to be “business income” has not gone into the facts of the existence of PE and had merely relied on the order of earlier years. The Ld. DR also contended that the issue of PE has to be seen qua the facts of each year and not merely verbatim follow the earlier assessment years where facts could be distinguishable for each assessment year depending upon various circumstances. The Ld. DR reiterated that there is no mistake apparent on record in the order of the Tribunal and prayed that the assessee’s miscellaneous application be dismissed. 7. We have heard the rival submissions and perused the materials available on record. It is observed that the Tribunal has passed a consolidated order in the case of the group companies as well as the assessee which no doubt is on different DTAAs where the group companies pertained to India-Singapore DTAA and the present assessee/applicant is of India-UK treaty. Though the nature of receipt is the same and where the Ld. CIT(A) is Printed from counselvise.com MA No.96/M/2025 (Arising out of ITA No.1818/Mum/2024) M/s. Mckinsey & Company Lme Limited 5 also said to have followed the earlier years’ orders pertained to different DTAAs the fact remains that the impugned receipt was held as “business profit/receipt” and not in the nature of FTS, the issue of existence of PE in India is nevertheless crucial for determining whether the same is taxable or not in the hands of the assessee. The Tribunal in its order has remanded this issue only to the limited purpose of examining whether or not the existence of PE in India for the relevant year under consideration. We are also conscious of the fact that this was a consolidated order where the lead year was pertaining to the group companies of the assessee, considering the grievance of the assessee that there was no argument commenced by the assessee with regard to the facts of the present assessee/applicant which pertained to India-UK treaty, we deem it fit to extend the assessee with one more opportunity to present its case before the Tribunal on all the issues including the existence or non existence of PE in India for the year under consideration qua the facts of the impugned year under consideration. We hereby recall the order of the Tribunal as prayed for by the assessee on the above observations. 8. In the result, the miscellaneous application filed by the assessee/applicant is allowed on the above terms. Order pronounced in the open court on 29.12.2025 Sd/- Sd/- (RENU JAUHRI) (KAVITHA RAJAGOPAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai; Dated: 29.12.2025 * Kishore, Sr. P.S. Printed from counselvise.com MA No.96/M/2025 (Arising out of ITA No.1818/Mum/2024) M/s. Mckinsey & Company Lme Limited 6 Copy of the Order forwarded to: 1. The Appellant 2. The Respondent 3. CIT- concerned 4. DR, ITAT, Mumbai 5. Guard File BY ORDER, (Dy./Asstt.Registrar) ITAT, Mumbai Printed from counselvise.com "