A.T. Kearney Ltd. Vs DCIT (ITAT Delhi)
The appeal arose from the Final Assessment Order dated 27.01.2025 passed under Sections 143(3) read with 144C(13) of the Income-tax Act, 1961, pursuant to the DRP’s directions dated 17.12.2024 under Section 144C(5), for AY 2022-23. A.T. Kearney Limited, a UK-incorporated company engaged in management consultancy, had filed its return declaring total income of Rs. 1,27,76,240 and claimed a refund of Rs. 3,30,40,420 against taxes paid through TDS.
During the year, the assessee transferred the entire business of its India Branch Office to its wholly owned subsidiary, A.T. Kearney Consulting (India) Private Limited, under a Business Transfer Agreement on a going-concern basis with effect from 1 April 2021. The AO noted that the assessee earned interest of Rs. 3,99,79,892 on income-tax refunds and claimed expenses of Rs. 2,72,03,648 against that income. The expenses included legal and professional expenses and other employee, finance and audit costs.
The AO proposed disallowance of the expenses on the ground that no business was conducted during the year and that the business had ceased following the transfer. The AO relied upon Section 28(i), read with Section 29, and held that business expenses could be allowed only where business was carried on during the relevant previous year. The AO characterised the circumstances as cessation of business rather than a temporary lull, slump or slowdown and made an addition of Rs. 2,72,03,648. The assessee’s alternative claim for taxation of the interest income at 15% under Article 12 of the India-UK DTAA was also rejected by the AO, relying on Goetze (India) Ltd. v. CIT (2006) 284 ITR 323 (SC).
