There must be a valid and acceptable basis for making a departure from Hierarchical Discipline while implementing fiscal legislation

Court: The Bombay High Court

Citation: Mc Kinsey & Company Inc, United States Vs. Union of India [2010-TII-09-HC-MUM-INTL]

Brief-  The Bombay High Court (“High Court”) has, in a recent ruling’ in the case of Mc Kinsey & Company Inc, United States v. Union of India [2010-TII-09-HC-MUM-INTL], held that there must be a valid and acceptable basis for making a departure from the order passed by a superior official and that the hierarchical discipline should be observed while implementing the fiscal legislation. In the absence of that, the exercise of the powers by the Assessing Officer (“AO”) would be arbitrary and open to challenge.

Facts

• The assessee is a non-resident company incorporated in the United States. The assessee forms a part of the Mc Kinsey Group and provides international management consultancy services. The parent company of the assessee has a branch office in India (“Mc Kinsey India”). The assessee provides two kinds of services to Mc Kinsey India:-

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