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TMI Blog2018 (3) TMI 791X X X X Extracts X X X X X X X X Extracts X X X X ..... t:- As AR, at the outset, submitted that the issue requires re-appreciation by lower authorities since these expenses were mere reimbursements in nature without any profit element and therefore, the assessee be afforded another opportunity to demonstrate the same. The Ld. DR did not raise any serious objections against the same. Resultantly, the issue stands remitted back to the file of Ld. AO for re-adjudication in the light of submissions made by Ld. AR. - I.T.A. Nos.1748/Mum/2016, I.T.A. No.1749/Mum/2016, I.T.A. No.1750/Mum/2016, I.T.A. No.1751/Mum/2016, I.T.A. No.1752/Mum/2016, I.T.A. No.1753/Mum/2016, I.T.A. No.1754/Mum/2016, I.T.A. No.1755/Mum/2016, I.T.A. No.1758/Mum/2016, I.T.A. No.1759/Mum/2016 - - - Dated:- 14-3-2018 - SHRI C.N. PRASAD, JM AND SHRI MANOJ KUMAR AGGARWAL, AM I.T.A. No.1762/Mum/2016, I.T.A. No.1763/Mum/2016, I.T.A. No.1764/Mum/2016, I.T.A. No.1765/Mum/2016, I.T.A. No.1766/Mum/2016, I.T.A. No.1767/Mum/2016, I.T.A. No.1756/Mum/2016, I.T.A. No.1757/Mum/2016, I.T.A. No.1760/Mum/2016 And I.T.A. No.1761/Mum/2016 For The Revenue : V. Vidhyadhar, Ld. DR For The Assessee : Porus Kaka Divesh Chawla,Ld.AR s ORDER Per Bench 1. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O/Hon ble DRP has erred in concluding that regional corporate finance charges in the nature of fees for included services and hence, taxable under Article 12 of the India-US Tax Treaty and under section 9(1) (vii) of the Act. 10. Without prejudice to the Appellant s primary contention that the receipts in respect of loaned service fee, firm function service fee, firm committee charges, knowledge pool charges and regional corporate finance charges are not taxable in India, the Learned AO/Hon ble DRP has erred in estimating the net profit of the Appellant in respect of these receipts at the rate of 35.52% of the total receipts, on an adhoc basis, and taxing the same accordingly under the provisions of the Act. 11. Without prejudice to the above, on the facts and in the circumstances of the case and in law, the learned AO/Hon ble DRP has filed to appreciate and apply the order passed by the Competent Authorities of India and United States of America as per Article 27 of the India-US Tax Treaty in the case of the Appellant for prior years wherein it has been held that income from loaned services, knowledge pool, firm committee services and regional corporate finance servi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce Income 2. Firm Function Service Charges 3. Firm Committee Charges 4. Regional Corporate Finance charges 5. Knowledge Pool Charges 6. Firm Training Charges 7. Reimbursement of other Expenses The assessee treated the above receipts (except Firm Training Charges) as Business Profits under Article-7 of India-US Double Taxation Avoidance Agreement [DTAA / Treaty] and in the absence of any Permanent Establishment [PE] in India, claimed the same to be not chargeable to tax in India. However, Ld. AO, in the draft assessment order, opined that the same constituted Royalty / Fees for included Services under Article-12 of India-US Treaty and accordingly taxable in the hands of the assessee. The Ld. DRP, on factual matrix and relying on the stand of DRP in earlier assessment years confirmed the stand of Ld. AO vide directions dated 28/12/2015. Pursuant to the said directions, final assessment order dated 06/01/2016 u/s 143(3) read wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ven effect to by the revenue vide orders dated 18/12/2015 21/12/2015 as placed on record. 5. Proceeding further, we find that Tribunal has accepted the applicability of MAP settlement for AYs 2011-12 2012-13 with respect to payment made by Mckinsey India to various Mckinsey entities incorporated in USA by way of following judicial pronouncements:- (i) Mckinsey Co. Inc. Others Vs. DCIT [ITA Nos. 702-705/M/2015, ITA Nos. 711-713/M/2015 ITA No. 659/M/2015 dated 16/12/2016 AYs 2011-12 2012-2013] (ii) Mckinsey Inc. Others Vs. DDIT [ITA Nos. 5406-5407/Mum/2014 dated 08/08/2016 AY 2011-12] (iii) Mckinsey Co. Inc. Others Vs. DCIT [ITA Nos. 853-858/Mum/2015, ITA Nos. 860-862/Mum/2015 dated 01/08/2017 AYs 2010-11 2011-12] (iv) Mckinsey Co. Others Vs. DCIT [ITA Nos. 660-662/Mum/2015 dated 23/06/2017 AY 2011-12] The Ld. Senior Counsel also placed on record documents dated 27/07/2016 evidencing initiation of MAP settlement for AYs 2010-11 to 2012-13 with respect to assessee and its various group concerns. Upon perusal of the same, we find that the assessee and its various concerns have already approached competent authorities to undertake MAP ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8377; 58.84 Lacs. The Ld. DRP has held that fee for borrowed service rendered by the assessee were in the nature of Royalty / Fees for included Services under Article-12 of the Treaty and further the assessee was not entitled to claim Treaty Benefit. 11. So far as the issue of reimbursement of royalty / fees for included services is concerned, Ld. AR, on similar lines, submitted that the assessee be provided with another opportunity to demonstrate that the same were mere reimbursements in nature and hence not taxable in the hands of the assessee. The Ld. DR fairly conceded with the same. Resultantly, the issues stands remitted back to the file of Ld. AO on similar lines for re-adjudication in the light of the submissions made by the Ld. AR. This ground stands allowed for statistical purposes. 12. The Ld. Sr. AR pointed out that Loaned Service Income was nothing but Borrowed Service Charges and the assessee was a foreign company incorporated in USA and therefore, governed by India-USA Treaty and also covered by the MAP settlement in similar manner. Our attention is drawn to the order of Tribunal in the case of group concerns for AY 2011-12 ITA No. 853 others/Mum/2015 dated 0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... McKinsey Incorporated 2012-2013 3,43,19,859/- 25,660/- 1755/Mum/2016 McKinsey Company Inc. Norway 2012-2013 1,04,31,548/- Nil 1758/Mum/2016 McKinsey Company Inc. Switzerland 2012-2013 2,24,59,416/- 38,370/- 1759/Mum/2016 McKinsey Company Inc. Italy 2012-2013 1,37,74,860/- Nil 1762/Mum/2016 McKinsey Compan, Inc. Japan 2011-2012 2,59,87,776/- 17,016/- 1763/Mum/2016 McKinsey Asia Inc. 2012-2013 1,88,08,091/- Nil 1764/Mum/2016 McKinsey Company Inc. International 2012-2013 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income stood in assessee s favour by several orders of the Tribunal in earlier years in assessee s own case where it has been held that the impugned services qualifies as Business Income under Article-7 of the Treaty and not taxable since the assessee do not have any PE in India. The relevant portion from latest order of the Tribunal rendered in ITA No. 660-662/Mum/2013 dated 23/06/2017 is extracted as follows:- 3. At the time of hearing the parties addressed the facts in ITA No. 662/Mum/2015 which is governed by India-Canada Treaty. The remaining appeals namely ITA No. 660/Mum/2015 and ITA No. 661/Mum/2015 are governed by India-Spain and India-Sweden Treaties respectively. It was a common stand of the parties that the relevant clauses were identical to the India-US Treaty. Reverting to the facts in ITA No. 662/Mum/2015 the assessee is a foreign company incorporated in Canada. As in the earlier years, it had entered into international transactions with the its associates concern, Mckinsey Co., Inc. (Indian Branch) and had provided assistance in the form of borrowed services to Mckinsey India. In consideration for which the assessee received an amount for ₹ 7,615,310/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctions to the Standing Counsel of the Mumbai High Court were acted upon. Referring to paper book page 117 and 118 it was submitted that the Hon ble Bombay High Court vide its order dated 23rd January, 2013 in I.T.Appeal No. 1218 of 2011 and others in the case of Director of Income Tax (International Taxation) V. Mckinsey Company Inc. dismissed the appeals filed by the Revenue as withdrawn. It was further submitted that the similar directions were given to the CIT-DR in the ITAT and he was requested to withdraw the appeals filed before the ITAT in the following cases on the basis of Mutual Agreement Procedure of India-USA DTA:- 1. M/s Mckinsey Company Inc. United States A.Y.2004-05 2. M/s Mckinsey international, Inc. A.Y.2003-04 3. M/s Mckinsey Company Inc. Austria A.Y.2004-05 4.1 The ld. Counsel also invited our attention to the order of the ITAT placed at paper book pages 120 to 122 whereby the appeals filed by the Revenue were dismissed as withdrawn. 4.2 In the said background, our attention was invited to paper book page 36 to 45 and it was submitted that the ITAT vide its order dated 17.4.2015 in ITA No. 7646/Mum/2012, ITA No. 7654 to 7 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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