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2018 (3) TMI 791

taxability of the receipts was to be determined as per the MAP settlement. Therefore, the afore-said receipts, being Business Profits was covered by Article-7 of the Treaty and was not in the nature of Royalty or Fees for included services. The revenue has nowhere disputed or established that the assessee had PE in India. Therefore, the said receipts were not chargeable to tax in India except Firm Function Service Charges of ₹ 63.02 Crores, which were to be accepted at a mark up of 3% as per MAP settlement of earlier years. Needless to say that the same may suitably be modified by the revenue, if required, on the basis of outcome of MAP settlement for impugned AYs. - Reimbursement of Firm Training Charges & Other expenses - Held that:- 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 mad .....

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ble DRP has erred in concluding that firm function service fees are 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. 7. The learned AO/Hon ble DRP has erred in concluding that firm committee charges are in the nature of royalty and hence, taxable under Article 12 of the Indian-US Tax Treaty and under section 9(1) (vi) of the Act. 8. The learned AO/Hon ble DRP has erred in concluding that knowledge pool charges are in the nature of royalty and hence, taxable under Article 12 of the India-US Tax Treaty and under section 9(1)(vi) of the Act. 9. The learned AO/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 profi .....

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E] in India amounted to ₹ 157.88 crores during impugned AY and the assessee benchmarked the same by following different methods, which were found to be at Arm s Length Price. The draft Assessment order u/s 144C(1) read with Section 143(3) dated 31/03/2015 was sent for the directions of Ld. DRP where the assessee raised objections against the draft assessment order. The services being provided by assessee to its AE in India could be categorized under the following broad heads:- No. Head 1. Borrowed Service charges/Loaned Service 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 i .....

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this Tribunal, which is quite evident from the orders of Tribunal ITA No. 7645/Mum/2012 dated 29/12/2015 for AY 2008-09 & ITA No.1598/Mum/2014 dated 11/04/2016 for AY 2009-10 as placed on Pages 171 to 173 in the Paper-Book. The terms of the MAP settlement for 2008-09 & 2009-10 has been given 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 al .....

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e assessee, being foreign company incorporated in USA, has been assessed at ₹ 138.58 Lacs vide final assessment order dated 06/01/2016, which comprised of Loaned Service Income (Fess for included Services) of ₹ 79.74 Lacs and Reimbursement of Royalty/Fees for included services for ₹ 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 a .....

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70/- 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 3,43,19,859/- 25,660/- 1765/Mum/2016 McKinsey & Company, Inc. Netherland 2012-2013 1,88,54,072/- 1,99,870/- 1766/Mum/2016 McKinsey & Company Inc. Hong Kong 2012-2013 2,19,47,397/- 9,72,610/- 1767/Mum/2016 McKinsey & Compan, Inc. Japan 2012-2013 1,08,00,414/- 1,07,950/- Facts being identical as in ITA 1748-1749/Mum/2016, taking the same stand, the issue of reimbursement of expenses stands remitted back to the file of Ld. AO for re-adjudication whereas the addition on account of Loaned Service Income stands deleted in terms of MAP settlement of earlier years. All these appeals stands partly allowed for statistical purposes. Appeal Nos. 17 to 20 15. The other non-US based group entities of the assessee are in further appeal before us against similar additions in the following manner:- Appeal No. Name of the Assessee Assessment Year Country of Incorporation Loaned Service Income Reimburseme .....

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from McKinsey India was in the .nature of fee for Technical Services. The Objections raised by the assessee before the DRP were also rejected following the view taken in the earlier years. 4. In the said background, the ld. A.R. submitted that both the A.O. and the DRP have followed the view taken in the earlier years on similar set of facts and circumstances. Referring to the impugned order dated 26th November, 2014 passed pursuant to the directions of the DRP by the A.O. u/s 143(3) r.w.s. 144C (13) of the Act our attention was invited to para 5, so as to highlight this fact. It was submitted that the Indo-Canadian Treaty is identical to the Indo-US Tax Treaty and the issue first arose in a group concern on similar set of facts and circumstances in A.Y. 2001-02 and considering identical set of facts the ITAT deleted the addition. Copy of the order placed at paper book pages 59 to 74 in the case of McKinsey & Co Inc (Philippines) vs. Assistant Director of Income Tax, [2006] 99 lTD 549 (Mum) (SMC) was relied upon. Our attention was invited to paper book page 75 to 88, which is a consolidated order passed in assessee's group case which came for consideration for different ass .....

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rs in identical group cases in ITA No. 702/Mum/2015 and others on similar ground, allowed the appeals of the assessee. Accordingly, it was submitted that the issue is fully covered by consistent orders of the ITAT in its favour. 5. The ld. D.R. did not dispute the factual position nor any contrary decision was referred to for consideration. 6. We have heard the rival submissions and perused the material available on record. We find that the issue pertaining to borrowed services in the respective group cases and in the assessees before us has been a subject matter for consideration on similar set of facts and consistently considered y the co-ordinate Mumbai Benches over a period of time. Apart from considering the documents to which our specific attention was drawn and the pages referred to in the paper book during the curse of the arguments, it is seen that copy of the consolidated orders pertaining to A.Y.2010-11 in ITA No. 1572/Mum/2014 and other order dated 21-10-2016 has also been placed on record at paper book page 13 to 23. Apart from that, the consolidated order dated 19th June, 2015 has also placed on record vide paper book pages 30-35 n a group case of assessee pertaining .....

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