M/s. MCKINSEY KNOWLEDGE CENTRE INDIA PVT. LTD. v. PR. COMMISSIONER OF INCOME TAX, DELHI-6

1. The appellant preferred this review petition urging that the final judgment rendered under Section 260A of the Income Tax Act contains errors apparent on the face of the record.

2. The question of law framed by this Court was with respect to exclusion of relative comparables held to be relevant for the purpose of ALP determinations. The assessee was involved in IT enabled services 2019:DHC:2173-DB which the judgment noticed was broadly categorised into a) Research and Information Services Division and b) IT Support Services Division. It had challenged the ITAT’s order of 15.12.2016 for AY 2011-12. The Revenue had challenged the ITAT’s order for the same year, by which the assessee’s appeal was partly allowed and the exclusion of 4 comparables were excluded from consideration. The other two questions which this Court answered were in favour of the assessee and against the Revenue in ITA 590/2017 and ITA 82/2018. No review is sought in respect of that part of the judgment.

3. The main grounds on which the assessee seeks review are firstly that the question of charging interest on delayed receipt of receivables is a separate international transaction under Explanation to Section 92B of the Act which was inapplicable as it was introduced for the period 2013-14 onwards. It is also pointed out that this question was never framed by the court in the earlier order and in fact on 07.02.2018 when the question was framed, the assessee was involved in knowledge management system. This Court had referred to the decision in Pr. Commissioner of Income Tax v Kusum Health Care Pvt. Ltd. (2017) 398 ITR 66 (Del).

4. The second ground urged is that the finding that the nature of services provided by the review petitioner are specialized and therefore the services provided akin to that of KPO is erroneous. On this aspect, it is submitted that for the previous year 2006-07, in ITA No. 217/2014, the court had by an order dated 27.03.2015 approved that the nature of the assessee’s services were back-office operations akin to a BPO. It is furthermore urged that not all material brought on record was considered. The learned counsel pointed out that the services related to knowledge management system and infrastructure form part of the IT Support segment which has been benchmarked separately. It is also urged that the judgment is erroneous inasmuch as it did not consider the effect of the decision in Ameriprise India Pvt. Ltd. v Additional Commissioner of Income Tax (2016)

5. On the other hand, the court relied upon the Special Bench decision in Maersk Global Centres (India) Pvt. Ltd. v Additional Commissioner of Income Tax [2014] 161 TTJ 137. It is argued that the Special Bench decision was disagreed with by this Court in Rampgreen Solutions Pvt. Ltd. v Commissioner of Income Tax 2015 SCC OnLine Del 11310.

6. Learned counsel for the Revenue objected to the maintainability of the review petition firstly arguing that the assessee had approached the Supreme Court, which had rejected its petition. Counsel argued that in such circumstances, the decision in Khoday Distilleries Ltd. (Now Known as Khoday India Limited) and Others v Sri Mahadeshwara Sahakara Sakkare Karkhane Ltd., Kollegal (Under Liquidation) Represented by the Liquidator 2019 SCC OnLine SC 308 is squarely applicable and compares maintainability of the present petition.

7. It is submitted on merits that the grounds urged for review are not tenable because this Court considered the merits of the submissions of both the parties and delivered a reasoned judgment.

8. On the first the question of maintainability, in Khoday India Ltd (supra), the Supreme Court held as follows:

47 Rule 1 CPC act as guidelines) are not necessarily the same on which this Court exercises discretion to grant or not to grant special leave to appeal while disposing of a petition for the purpose. Mere rejection of a special leave petition does not take away the jurisdiction of the court, tribunal or forum whose order forms the subject-matter of petition for special leave to review its own order if grounds for exercise of review jurisdiction are shown to exist. Where the order rejecting an SLP is a speaking order, that is, where reasons have been assigned by this Court for rejecting the petition for special leave and are stated in the order still the order remains the one rejecting prayer for the grant of leave to appeal. The petitioner has been turned away at the threshold without having been allowed to enter in the appellate jurisdiction of this Court. Here also the doctrine of merger would not apply. But the law stated or declared by this Court in its order shall attract applicability of Article 141 of the Constitution. The reasons assigned by this Court in its order expressing its adjudication (expressly or by necessary implication) on point of fact or law shall take away the jurisdiction of any other court, tribunal or authority to express any opinion in conflict with or in departure from the view taken by this Court because permitting to do so would be subversive of judicial discipline and an affront to the order of this Court. However this would be so not by reference to the doctrine of merger.” It is evident that the above observation is applicable in the present case, because the rejection of the special leave petition by a non-speaking order, did not preclude the maintainability of the present writ petition.

9. As far as the first argument by the review petitioner, i.e., the answer to the question of bringing to tax the interest amounts goes, this Court is of the opinion that the fact that the order of 07.02.2018 referred to Kusum Health Care had expressly remitted the matter for consideration to the ITAT supports the assessee’s submission. All that the court had stated on 07.02.2018 was that the matter required re-examination by the ITAT in the light of the Kusum Health Care (supra). For these reasons, the judgment to the extent it deals with adjustments made by the TPO, and regarding interest on delayed receipt of receivables, is a clear error. The court also furthermore notes the submissions made with respect to inapplicability to Explanation of Section 92B and its prospective operation. As the order of 07.02.2018 reserved by contentions, this Court does not propose to disturb the effect of that matter. The matter will be considered by the ITAT on its own merits.

10. With respect to the main submission regarding the error on the question framed, i.e., exclusion of comparables and whether the assessee rendered services were akin to that of KPO rather than a BPO as was contended, here too the court is of the opinion that two clear errors have crept into the judgment. The reliance on Maersk Global (supra) was clearly an error in view of the submission that Rampgreen (supra) had disagreed with the view of the Special Bench. Furthermore, the court also overlooked the judgment dated 27.03.2015 in the assessee’s case (ITA No.217/2014). Lastly, the Court also is of the opinion that the assessee’s argument with respect to separate benchmarking of the knowledge management system, as part of the IT Support segment, is an aspect that requires examination.

11. In Rampgreen (supra), this Court’s view was as follows: