Income Tax Appellate Tribunal - Delhi
Mckinsey Knowledge Centre Pvt. Ltd.,, ... vs Dcit, New Delhi on 2 February, 2018
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH 'FRIDAY' NEW DELHI
BEFORE SH.R.S.SYAL, VICE PRESIDENT
AND
SMT. BEENA A. PILLAI, JUDICIAL MEMBER
M.A.No.-187/Del//2017
(In ITA No.154/Del/2016)
(ASSESSMENT YEAR: 2011-12)
McKinsey Knowledge Centre India Pvt. vs DCIT,
Ltd., 3rd Floor, Block-III, Vatika Circle-16(2),
Business Park, Sector-49, New Delhi.
Sohna Road, Gurgaon.
PAN-AACCM2356G
(Appellant) (Respondent)
Appellant by Sh. Porus Kaka, Sr. Adv. &
Sh. Manish Kanth, Adv.
Respondent by Sh. Rajesh Kumar, Sr. DR
Date of Hearing 02.02.2018
Date of Pronouncement 02.02.2018
ORDER
PER R.S. SYAL, VICE PRESIDENT This Miscellaneous application has been filed against the order passed by the Tribunal on 15.12.2016 in ITA No. 154 & 499/Del/2016 pertaining to the Assessment Year 2011-12.
2. The assessee, through the present rectification application, is aggrieved against its characterization as Knowledge Process M.A.No.-187/Del//2017 (In ITA No.154/Del/2016) Outsourcing (in short "KPO") for the services rendered in the international transaction of `Provision for Research and Information Services'. The Tribunal while dealing with this international transaction observed that the assessee was rendering Research and information services to its group concerns in their projects. As against the assessee's stand that it was providing merely Business process outsourcing (in short "BPO") services, the Tribunal, after making a thorough analysis, came to conclusion that the nature of services provided by the assessee under this international transaction was KPO and not BPO. The assessee is aggrieved in the instant M.A. against such decision.
3. Having heard both the sides and perused the material on record, we find that the Tribunal has elaborately discussed the nature of services from para 5 page 6 of the impugned order up to para 22 page 21 before coming to a specific conclusion against the assessee. Para 22 of the impugned order is as under : -
`It is thus established that the assessee is carrying on research from the internet based databases or other sources to compile the data, which is then customized/processed in accordance with the Page | 2 M.A.No.-187/Del//2017 (In ITA No.154/Del/2016) requirements of the requestor through a series of operations carried out by its Research Managers, Knowledge Experts, Practice Specialists and Senior Research Analyst etc. before finally transmitting it outside India after organizing into templates in Excel, Power Point etc. Thus, it is evident that the assessee is making value addition to the information accessed by it from databases etc. When we apply the requisites of KPO to the services rendered by the assessee under this segment, there remains hardly any doubt that the assessee is rendering KPO services under this segment involving huge expertise and skills.'
4. It is amply borne out that the tribunal after considering all the relevant aspects, came to a clear-cut conclusion that the services rendered by the assessee were in the nature of KPO.
5. The Ld. Senior Counsel argued in the extant proceedings that the Tribunal overlooked the judgment of the Hon'ble High Court as well as the Tribunal order in its own case for the Assessment Year 2006-07. We are afraid that this contention is sans merits as these decisions have not only been considered but also discussed in para 20 of the impugned order, whose relevant part is reproduced as under : -
`Copies of the tribunal order passed for the A.Y. 2006-07 reversing the view of the AO on the denial of deduction u/s 10A and then the judgment of the Hon'ble High Court affirming the view of the tribunal Page | 3 M.A.No.-187/Del//2017 (In ITA No.154/Del/2016) have been placed by the ld. AR in its paper book. It can be seen from the tribunal order, that the AO denied deduction by holding that the services undertaken by the assessee were not I.T. Enabled Services as the added value for customer was not generated, least significantly, through the use of information and communication technologies using network software. ..... The AO observed that there was no value addition through the network software which is most vital aspect for determination of service as I.T. enabled service or otherwise..... The assessee, inter alia, contended in first appeal, as has been reproduced on page 5 of the tribunal order, that the assessee, after receiving the request was collating the information from specialized data sources/data bases. `(d) The data was then customized/processed in accordance with the requirements of the requestor; (e) The customized/processed data was then organized into templates in Excel, Power Point etc. and was transmitted outside India through electronic means; (f) Thus, the assessee was engaged in data processing/customization of data as it enabled conversion of data into information by use of computer system based on the requirements of the requestor and the information was exported electronically'. Allowing the assessee's claim, the CIT(A) held : `that it is evident that the appellant is customizing data, what is accessed by the appellant in the databases and what is delivered to its parent company are two different products, i.e. data is customized to suit the needs of the requester and thereafter exported out of India'.... After recording the observations of the AO and CIT(A), the tribunal noted on page 7 of its order that :`It is clear from the modus operandi that what was accessed by the assessee at the STP Unit and what was delivered to McKinesey (Parent Company) after the conversion took place were two different products/services which is described as customization of data/data processing. The STP Unit undertook the series of operation of the data received form various databases before it was finally delivered to the customer. Thus, there was value addition made by the STP Unit on the data. We, therefore, are not in agreement with the findings of AO that there was no value of addition on the data obtained from various data bases from parent company'. The appeal filed by the Revenue against the tribunal order has been dismissed by the Hon'ble High Court vide Page | 4 M.A.No.-187/Del//2017 (In ITA No.154/Del/2016) its judgment dated 27.3.2015, thereby countenancing the conclusions drawn by the CIT(A) and the tribunal overturning the view of the AO.'
6. It is palpable from the above discussion that the issue involved in such decisions was the denial of deduction u/s 10A of the Income Tax Act, 1961. While arguing for deduction u/s 10A of the Act, the assessee urged that it made a great value addition to the data received from databases before exporting it and hence was eligible for deduction u/s 10A of the Act. However, when the issue of its nature of business came up for benchmarking, the assessee adopted a contrary approach to contend that its services were simply in the nature of BPO and not involving any knowledge process. Such a contrary approach cannot be countenanced. Once it has been found and held that the assessee rendered value addition in services, which qualified for deduction u/s 10A, a contrary view could not have been canvassed by the assessee when the question of determination of the ALP came. This is the reason for the Tribunal respectfully following the judgment of the Hon'ble High Court and the Tribunal order for earlier year in so far as nature of services rendered by the Page | 5 M.A.No.-187/Del//2017 (In ITA No.154/Del/2016) assessee is concerned, by holding the same to be adding value and resultantly KPO. Relevant discussion has been made in para 21 of the Tribunal's order.
7. The ld. Senior AR then argued that Safe Harbour Rules were not taken into consideration by the Tribunal, whose copy was placed on record in the instant proceedings. We find that primarily it is impermissible to bring on record a fresh material in the rectification proceedings. Be that as it may, these Rules are dated 04.09.2013 and hence applicable from the Assessment Year 2014-15. As against this, the assessment year under consideration is 2011-12.
8. It is thus clear that the Tribunal, after considering all the relevant things, came to a positive conclusion that the assessee was rendering KPO services under this international transaction. Presuming, if now we accept the argument of the Ld. Senior AR that the assessee was involved in rendering BPO services, the same will amount to review of the earlier order, which is impermissible within the ken of the provision of section 254(2) of Page | 6 M.A.No.-187/Del//2017 (In ITA No.154/Del/2016) the Act. This provision requires rectification of a mistake apparent from the record and no review of the earlier order.
9. In view of the foregoing discussion, we are satisfied that there is no mistake much less a mistake apparent from record in the impugned order warranting any rectification.
10. In the result, the M.A. filed by the assessee is dismissed.
The order is pronounced in the open court on 02nd February, 2018.
(BEENA A. PILLAI) (R.S.SYAL)
JUDICIAL MEMBER VICE PRESIDENT
*Amit Kumar*
Date:- 02.02.2018
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT
ASSISTANT REGISTRAR
ITAT NEW DELHI
Page | 7
M.A.No.-187/Del//2017
(In ITA No.154/Del/2016)
Date
1. Draft dictated on 02.02.2018 PS
2. Draft placed before author 02.02.2018 PS
3. Draft proposed & placed before the second member JM/AM
4. Draft discussed/approved by Second Member. JM/AM
5. Approved Draft comes to the Sr.PS/PS PS/PS
6. Kept for pronouncement on .02.2018 PS
7. File sent to the Bench Clerk .02.2018 PS
8. Date on which file goes to the AR
9. Date on which file goes to the Head Clerk.
10. Date of dispatch of Order.
* Page | 8