KPMG India Pvt. Ltd. Vs DCIT (ITAT Mumbai)
Summary: The Mumbai Bench of the Income-tax Appellate Tribunal adjudicated cross appeals filed by KPMG India Pvt. Ltd. and the Revenue for Assessment Year 2015-16. The appeals arose from orders of the National Faceless Appeal Centre dated 09.01.2026 passed under section 250 of the Income-tax Act, 1961. The assessee’s appeal concerned disallowance relating to reversal of opening accrued/unbilled income and billing done in earlier years, while the Revenue challenged deletion of a disallowance under section 40(a)(i) concerning professional fees paid to non-resident KPMG member firms. The order was pronounced on 12.08.2026.
On the assessee’s appeal, KPMG India Pvt. Ltd. had filed its return on 29.11.2015 declaring total income of Rs.42,25,370/-. The case was selected for scrutiny under CASS and notice under section 143(2) was issued on 25.07.2017. The assessee rendered management consultancy services in Finance, Environment Audit, Investment and Information Technology. The assessment under section 143(3) was completed on 28.12.2018 determining total income at Rs.30,73,92,848/- after various additions and disallowances.
During assessment, the Assessing Officer noticed unbilled revenue of Rs.32,38,60,326/- as at 31.03.2015. The assessee explained that it followed a rational accounting method based on working hours and allocation of sales according to the total contract value, with billing being undertaken on achievement of milestones. It stated that unbilled revenue of Rs.2,22,16,683/- had been reversed without raising invoices on clients. The AO did not accept the explanation, observing that the assessee had not substantiated the basis for reversal or produced correspondence showing that clients would not pay the amounts. The AO accordingly added Rs.2,22,16,683/- to income. The CIT(A) sustained the disallowance.
