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TMI Blog2008 (10) TMI 584X X X X Extracts X X X X X X X X Extracts X X X X ..... and as they belong to the same group of the assessees, for the sake of convenience, they were heard together and are disposed of by way of this common order. Facts in brief : All the assessees herein belong to McKinsey and Co. Inc. group and have received money from the Indian branch of McKinsey and Co. Inc. for services rendered. The issue is whether the fees received by these assessees from the Indian branch office of McKinsey and Co. Inc. would constitute fees for included services within the meaning of article 12(4) of the India-US treaty. The Assessing Officer completed the assessment by observing as follows : 6.5 Further, it is seen from the records/assessments of the previous years, that the assessee has been making the same submission year after year. The explanations and the wordings are identical. Further, McKinsey India has made such payments not only to M/s. McKinsey and Co. Inc., United Kingdom, but also to 31 other subsidiaries/ branches of the McKinsey group in various countries of the world and this has been the position from the last many years. Also while giving examples of the nature of information sought by the Indian branch of McKinsey and Co. Inc., it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant-companies do not have any permanent establishment in India, the incomes so arising to them in India cannot be taxed under article 7 as business profits either. The appellant s case being similar is, therefore, decided in the appellant s favour. As a result, the appeal is allowed. Aggrieved, the Revenue is in appeal before us. Smt. Malati Sridharan, the learned Departmental representative submitted that on law, the issue is covered in favour of the assessee and against the Revenue by the decisions referred to by the first appellate authority as well as the decision of the Income-tax Appellate Tribunal in the case of McKinsey and Co., Inc. (Phillippines) v. Asst. DIT reported in [2006] 284 ITR (AT) 227 (Mum) ; [2006] 99 ITD 549 and other orders. Referring to paragraph 6.5 of the order of the Assessing Officer which is extracted above for ready reference she submitted that the assessee has not furnished any information before the Assessing Officer for the impugned assessment year, to enable him to come to a conclusion that the facts of this year are identical to the facts of other assessment years and thus, the law laid down by the Tribunal is applicable to that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the Bench, Shri Porus Kaka was fair enough to concede that no paper or evidence relevant to the impugned assessment year, i.e., the assessment year 2003-04 was filed with the Assessing Officer and on facts agreed that the submissions of Smt. Malati Sridharan that only old correspondence of 1997-98 and paper of 2006-07 were filed. At the same time, Shri Porus Kaka submitted that the issue cannot be set aside to the file of the Assessing Officer on this count for the following reasons : (a) The nature of business of McKinsey and Co. Inc. is known internationally and it only provides management consultancy services and providing management consultancy services does not fall within the term royalty and therefore article 12(3) of the Indo-US Double Taxation Avoidance Agreement is not attracted. Similarly, the nature of services are not fees for included services as per article 12(4) of the Indo-US tax treaty. He submits that these legal positions have been examined and followed by the Tribunal in various years in the assessee s own group cases ; (b) Model e-mail has been furnished by the assessee during the assessment year 1997-98 and the services in all the subsequent yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e nature of the activities of the assessee and that these are the same year after year and what decisions are taken based on the facts available in one particular year has to be necessarily applied to the other assessment years as well, as the facts would be similar. (e) He referred to memorandum of understanding to Indo-US tax treaty, particularly on article 12, and argued that obviously from the records, as well as the general knowledge of the services rendered by McKinsey and Co. Inc. it can be easily concluded that it has not rendered technical services. Thus, the case of learned counsel is that once the activity of McKinsey and Co. Inc. is well known and once the list of services which potentially make technology available are also known it can easily be concluded that the services rendered by McKinsey and Co. Inc. are not where technology is made available. He relies on the judgments of the hon ble Supreme Court in the case of Radhasaomi Satsang v. CIT [1992] 193 ITR 321 as well as the decision in the case of Parimisetti Seetharamamma v. CIT [1965] 56 ITR 31 for the propositions that there should be consistency in the decision when the same facts exist year after year. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y CIT v. Boston Consulting Group Pte. Ltd. [2005] 93 TTJ 293 the Assessing Officer had, in the case of the Indian branch of McKinsey and Co. Inc. assessed the income of the assessee from its Indian operations on net basis. He vehemently contends that when the services rendered by the Indian branch are not considered as services attracting article 12 of the Double Taxation Avoidance Agreement between India and the United States, the services obtained by the Indian branch from all these entities before us, will also not fall within the category of included services . On a question from the Bench on the issue as to whether there is a direct nexus between the services rendered and services obtained, he made a statement at the bar that the services rendered by all the assessees before us through the Indian branch of McKinsey and Co. Inc. are only in connection with and relatable to the services rendered by the Indian branch of McKinsey and Co. Inc. to the various customers listed out in the assessment order. He submits that when the Assessing Officer is same for the Indian branch of McKinsey and Co. Inc. as well as of the assessees before us he was fully aware of the nature of services ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvices rendered by the branch to various customers mentioned from pages 3-7 and the assessment order in the case of Indian branch of McKinsey and Co. Inc. for the assessment year 2003-04. She pointed out that Indian branch of McKinsey and Co. Inc. keep receiving services from its worldwide entities in anticipation of certain clients and also to update its data base and upgrade its knowledge centres and not necessarily in connection with a contract of service. She categorically states that services are not received by Indian branch of McKinsey and Co. Inc., only when the Indian branch has to render certain services to other customers. Smt. Malati Sridharan further submitted that all the evidence pertaining to the nature of services rendered are in the exclusive possession of the assessee and in those circumstances it would be impossible for the Revenue to discharge the burden cast on it, when the assessee does not provide any information or evidence whatsoever, when called for. As per Smt. Malati Sridharan, the Revenue is entitled to draw an adverse inference in case of non-cooperation by the assessee. She once again reiterated that it is not her case that the issues are not cov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... financial year 1997-98 assessment year 1998-99. To : NY-R and I Services, TK-R and I Services, DU-R and I Services, MA-R and I Services, ZH-R and I Professionals. UN-R and I Services, PA-R and I Services, ML-R and I Services, MO-R and I Professionals. WA-R and I Professionals. Gaurav Gupta, CC Dyestuff Companies. Hello from Mumbai : We are trying to put together some information on dyestuff companies across several countries. The companies that we are looking at are the mid-sized companies in tens of size, i.e., excluding the top six players such as BASF, Hoechst, Bayer, Crompton Knowles etc. While the attached excel sheet gives a list of such companies in various countries, this list is flexible. In India, there is something called the manufacturers directory for dyestuff companies which gives the basic profiles for such companies. You might have a similar directory for your country or an alternate publication/database for this information. Right now it would be sufficient if you restrict yourselves to secondary sources of information. It is important that you inform me who is handling the request. Also, it would be best if you could send in the replies by Tues ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntention was disclosed by the Revenue, an adverse inference could be drawn against the assessee if he failed to put before the Department material which was in his exclusive possession. This process is described in the law of evidence as shifting of the onus in the course of a proceeding from one party to the other. There is no reason why the said doctrine is not applicable to income-tax proceedings. While the income-tax authorities have to gather the relevant material to establish that the compensation given for the loss of agency was a taxable income, adverse inference could be drawn against the assessee if he had suppressed documents and evidence, which were exclusively within his knowledge and keeping. In all these cases, the Assessing Officer, had called for information which is in the exclusive possession of the assessees. When certain documentation and evidence could be furnished for the assessment year 199798 and also for the assessment year 2006-07 we do not see why similar evidence or documentation cannot be furnished by the assessee to the Assessing Officer for the impugned assessment years. The assessment order in the case of the Indian branch of McKinsey and Co. Inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... obody could refuse to furnish any information which is exclusively in their possession and then argue that the Revenue has not discharged the burden of proof. It is our conclusion that the services in question are included services . It might be true that same nature of services that have been rendered in the earlier assessment years are identical to the nature of services rendered in the impugned assessment year also. In such a case the issues are definitely covered on legal aspects by a series of orders of this Bench of the Tribunal. But to hold that a model e-mail of 1997 and some other correspondence of 2005-06 that too belonging to some other assessee of the same group have to be taken as evidence for the impugned assessment year and for all other intervening assessment years to come to a conclusion that the services are not included services , in our humble opinion, is not the correct position of law and thus cannot be accepted. These are multi-national management consultancy groups and documentation can and would have been maintained for each and every item. It is hard to accept the required documentation to demonstrate the nature of services is not maintained or cannot be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved by her in relevant years were gifts from certain people and supported it by certain evidences. It is not a case where no evidence whatsoever pertaining to that particular transaction, was furnished by the assessees, as in this case. Thus, in our humble opinion, none of those judgments apply to the facts on hand. Though we have given careful thought to the vociferous submissions of Shri Porus Kaka that the issue should not be set aside, and the facts of this year should be taken as identical or same as the facts of the earlier years from the evidence produced in the assessment years 1997-98 and 2007-08, as well as from the assessment order in the case of the Indian branch of McKinsey and Co. Inc. and the orders of the Tribunal, we are not able to accede to this request for the reason that we would be laying down a very wrong precedent. The learned Departmental representative was correct in pointing out that if such a view is taken by the Tribunal, the assesses would not in future also produce any document before any Assessing Officer on the argument that the facts are same as in the earlier years and the proposition of law laid down by the Tribunal in earlier years should be f ..... 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