Mc Kinsey & Company Inc Thailand, Mumbai vs Assessee

1 McKinsey & Company INC Italy ITA No. 8769/Mum/2011 & 11 other Group Appeals

आयकर अपीलीय अिधकरण "एल" यायपीठ मुब ं ई म। IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH "L", MUMBAI ी बी. आर. बा करन, लेखा सद य एवं , ी अिमत शु ला, याियक सद य के सम । BEFORE SHRI B R BASKARAN, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBERITA ITA No. : 8769/Mum/2011 (Assessment year: 2008-09) McKinsey & Company INC Italy, Vs Asst. Director of Income Tax C/o. S R Batliboi & Co, (International Taxation) -4(1), 14th Floor, The Ruby, Scindia House, Senapati Bapat Marg, Ballard Estate, Dadar (West), Mumbai -400 001 Mumbai -400 028 थयी लेखा सं.:PAN: AAACM 7226 M अपीलाथ (Appellant) यथ (Respondent) Appellant by : Shri Porus Kaka Respondent by : Smt Vandana Sagar ITA No. : 8770/Mum/2011 (Assessment year: 2008-09) McKinsey Knowledge Centre Belgium Vs Asst. Director of Income Tax Inc, (International Taxation) -4(1), C/o. S R Batliboi & Co, Scindia House, 14th Floor, The Ruby, Ballard Estate, Senapati Bapat Marg, Mumbai -400 001 Dadar (West), Mumbai -400 028 थयी लेखा सं.:PAN: AADCM 3489 P ITA No. : 8771/Mum/2011 (Assessment year: 2008-09) McKinsey & Company INC Thailand, Vs Asst. Director of Income Tax C/o.

S R Batliboi & Co, (International Taxation) -4(1), 14th Floor, The Ruby, Scindia House, Senapati Bapat Marg, Ballard Estate, Dadar (West), Mumbai -400 001 Mumbai -400 028 थयी लेखा सं.:PAN: AABCM 0992 P ITA No. : 8772/Mum/2011 (Assessment year: 2008-09) McKinsey & Company INC Hongkong, Vs Asst. Director of Income Tax C/o. S R Batliboi & Co, (International Taxation) -4(1), 14th Floor, The Ruby, Scindia House, Senapati Bapat Marg, Ballard Estate, Dadar (West), Mumbai -400 001 Mumbai -400 028 थयी लेखा सं.:PAN: AAACM 7230 R 2 McKinsey & Company INC Italy ITA No. 8769/Mum/2011 & 11 other Group Appeals ITA No. : 8773/Mum/2011 (Assessment year: 2008-09) McKinsey & Company INC Vs Asst. Director of Income Tax The Netherlands, (International Taxation) -4(1), C/o. S R Batliboi & Co, Scindia House, 14th Floor, The Ruby, Ballard Estate, Senapati Bapat Marg, Mumbai -400 001 Dadar (West), Mumbai -400 028 थयी लेखा सं.:PAN: AAACM 7234 M ITA No. : 8774/Mum/2011 (Assessment year: 2008-09) McKinsey Incorporated, Vs Asst. Director of Income Tax C/o. S R Batliboi & Co, (International Taxation) -4(1), 14th Floor, The Ruby, Scindia House, Senapati Bapat Marg, Ballard Estate, Dadar (West), Mumbai -400 001 Mumbai -400 028 थयी लेखा सं.:PAN: AAACM 7221 N ITA No. : 8775/Mum/2011 (Assessment year: 2007-08) McKinsey & Company Singapore Vs Asst.

Director of Income Tax Pte Ltd, (International Taxation) -4(1), C/o. S R Batliboi & Co, Scindia House, 14th Floor, The Ruby, Ballard Estate, Senapati Bapat Marg, Mumbai -400 001 Dadar (West), Mumbai -400 028 थयी लेखा सं.:PAN: AACEM 4465 A ITA No. : 8777/Mum/2011 (Assessment year: 2008-09) McKinsey & Company Inc. Belgium, Vs Asst. Director of Income Tax C/o. S R Batliboi & Co, (International Taxation) -4(1), 14th Floor, The Ruby, Scindia House, Senapati Bapat Marg, Ballard Estate, Dadar (West), Mumbai -400 001 Mumbai -400 028 थयी लेखा सं.:PAN: AAACM 7232 P ITA No. : 8778/Mum/2011 (Assessment year: 2008-09) McKinsey & Company Inc. Sweden, Vs Asst. Director of Income Tax C/o. S R Batliboi & Co, (International Taxation) -4(1), 14th Floor, The Ruby, Scindia House, Senapati Bapat Marg, Ballard Estate, Dadar (West), Mumbai -400 001 Mumbai -400 028 थयी लेखा सं.:PAN: AAACM 7213 J ITA No. : 8779/Mum/2011 (Assessment year: 2008-09) McKinsey & Company Inc. France, Vs Asst. Director of Income Tax C/o. S R Batliboi & Co, (International Taxation) -4(1), 14th Floor, The Ruby, Scindia House, Senapati Bapat Marg, Ballard Estate, Dadar (West), Mumbai -400 028 Mumbai -400 001 थयी लेखा सं.:PAN: AAACM 7223 Q 3 McKinsey & Company INC Italy ITA No. 8769/Mum/2011 & 11 other Group Appeals ITA No. : 8780/Mum/2011 (Assessment year: 2008-09) McKinsey & Company Inc. Vs Asst.

Director of Income Tax International, (International Taxation) -4(1), C/o. S R Batliboi & Co, Scindia House, 14th Floor, The Ruby, Ballard Estate, Senapati Bapat Marg, Mumbai -400 001 Dadar (West), Mumbai -400 028 थयी लेखा सं.:PAN: AADCM 3403 K ITA No. : 8781/Mum/2011 (Assessment year: 2008-09) McKinsey Pacific RIM. Inc., Vs Asst. Director of Income Tax C/o. S R Batliboi & Co, (International Taxation) -4(1), 14th Floor, The Ruby, Scindia House, Senapati Bapat Marg, Ballard Estate, Dadar (West), Mumbai -400 001 Mumbai -400 028 थयी लेखा सं.:PAN: AAACM 7233 N

सन ु वाई क तार ख /Date of Hearing : 09-06-2015 घोषणा क तार ख /Date of Pronouncement : 19-06-2015

आदेश ORDER

PER BENCH:

The above captioned appeals have been filed by the separate assessees against separate impugned orders all relating to the assessment year 2008-09 and one case for the AY 2007-08. The sole issue raised in all the appeals is with regard to the taxability of borrowed service charges and the applicability treaty benefits under India-US Tax Treaty.

2. Before us, the Ld. Senior Counsel Shri Porus Kaka submitted that out of the twelve matters, in the eleven matters, all the assessees companies incorporated and Tax Residence of US and are eligible for the claim of benefits under Indo-US DTAA. All these assesses are part of McKinsey Group, which are engaged in providing strategic consultancy services to their clients. He further submitted that the similar issue had come-up for consideration, not only in the earlier years but also in the subsequent years, before the Tribunal in several cases of the concerned assessees. The Tribunal in all the cases invariably had held that, firstly, such 4 McKinsey & Company INC Italy ITA No. 8769/Mum/2011 & 11 other Group Appeals services do not fall within the ambit of fees for services under Article 12 of the Indo-US DTAA and moreover, this issue has been settled under the MAP proceedings settled between Government to Government, which must be honoured and followed. Further, in case of McKinsey & Company Singapore Pte. Ltd India in ITA No. 8775/Mum/2011, he submitted that the same is also covered by the decision of the Tribunal, wherein, similar view has been taken that the services rendered do not fall within the ambit of FTS as contemplated in the Indo Singapore Treaty.

3. Ld. DR also admitted to the aforesaid facts that the issue stands squarely covered.

4. In view of the admitted fact that the issue has been settled under the MAP proceedings arrived at settlement between Government to Government level and therefore, honouring the same, we hold that such a borrowed services is not part of FTS/FIS and hence not taxable in India. Not only this, the department in the appeal filed before the High Court in the earlier years u/s 260A have later on withdrawn the appeal on the ground that the issue has been settled under MAP. Further, the Tribunal invariably in the cases of the assessee have been consistently holding that the services rendered by the assessee do not fall within the ambit of FTS as defined in Article 12(4) of Indo-US DTAA. These orders have been followed in the subsequent year in AY 2009-10 by the Tribunal vide order dated 17th April, 2015 a copy of which have been filed in the paper book pages 1 to 9. Accordingly, respectfully following the judicial precedents and also the fact that in the present cases, the issue has been settled under the MAP proceedings, we hold that the services rendered by the assessees are not taxable in India under Article 12 and also it is an admitted fact that the assessee do not have any PE in India and therefore, the same is not taxable under the Treaty.

5 McKinsey & Company INC Italy ITA No. 8769/Mum/2011 & 11 other Group Appeals

5. Now coming to the McKinsey & Company Singapore, Pte Ltd, we find that this issue has been decided by the Tribunal in the assessment year 2006-07, wherein, the Tribunal have granted relief after observing and holding as under:

"Thus, it is clear that the issue involved regarding borrowed service charges was decided by this Tribunal in favour of the assessee and further the department has resolved that the issue under MAP and consequently withdrawn the appeals filed before the Hon'ble High Court. Further, the assessee has filed a letter dated 12/02/2014 thereby stated that the issue relating to taxability of firm function charges does not arise in case of these 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 involved in these appeals have already resolved under the Mutual Agreement Procedure, we direct the AO to grant the relief accordingly to the assessee after verification of fact that the issues have already been resolved under the Mutual Agreement Procedure".

6. Accordingly, following the same, we direct the AO to grant the relief accordingly.

7. In the result, all the appeals of the assessees are treated as allowed.

Order pronounced in the open court on 19th June, 2015.

Sd/- Sd/- (बी. आर. बा करन) (अिमत शु ला) लेखा सद य याईक सद य (B R BASKARAN) (AMIT SHUKLA) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai, Date: 19th June, 2015 6 McKinsey & Company INC Italy ITA No. 8769/Mum/2011 & 11 other Group Appeals त/Copy to:-

1) अपीलाथ /The Appellant. 2) यथ /The Respondent.

3) The CIT(A) -______Concerned, Mumbai/ DRP-II, Mumbai.

4) The CIT/DIT Concern___/DIT(International Taxation), Mumbai.

5) िवभागीय ितिनिध "एल", आयकर अपीलीय अिधकरण, मुंबई/ The D.R. "L" Bench, Mumbai.

6) गाड फाईल Copy to Guard File.

आदे शानस ु ार/By Order / / True Copy / /

उप/सहायक पंजीकार आयकर अपील य अ धकरण, मब ुं ई Dy./Asstt. Registrar I.T.A.T., Mumbai

*च हान व.िन.स *Chavan, Sr.PS