TaxTMI 
TaxTMI 
2026 (7) TMI 874
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....69,42,350; Final assessment order barred by limitation: 2. erred in not appreciating that the time limit prescribed under section 153 is the outer time limit for passing the final assessment order, and hence, the final assessment order dated 14 July 2025 is time barred and liable to be quashed; Addition of Buying Commission of INR 1,01,83,84,561: 3. erred in making an addition in respect of the Buying Agency Commission of INR 1,01,83,84,561 by recharacterizing it as Fees for Technical Services ('FTS') as per Article 12 of the Double Taxation Avoidance Agreement between India and the Swiss Confederation ('India-Swiss DTAA'); 4. erred in holding that the services rendered by Skechers SARL are in the nature of 'managerial', 'technical', or 'consultancy' services as per Article 12 of India-Swiss DTAA, 5. ought to have held that the Buying Agency Commission income constitutes business income as per the provisions of Article 7 of India-Swiss DTAA, and in the absence of any Permanent Establishment in India, it would not be chargeable to tax in India, and hence, not liable to tax in India; Levy of interest under section 234B of....
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.... wherein the assessee acted as the buying representative of SSAPL in China and Vietnam for procurement related activities. A detailed examination of the agreement and the functions performed by the assessee indicated that the services rendered extended beyond mere buying agency functions and encompassed a broad spectrum of managerial, consultancy, and technical services etc. He further opined that such services provided by the assessee to SSAPL required a high degree of expertise and specialized knowledge in areas such as supply chain management, regulatory compliance, quality control, and technical assessment and could be categorized into managerial, consultancy, and technical services. 6.3 The AO examined the taxability of the above receipts under Section 9(1)(vii) of the Act which provides for the taxability of income by way of Fees for Technical Services (FTS), including managerial, technical, or consultancy services. Further, as per Article 12(4) of the India-Switzerland DTAA, FTS is:"... payments of any kind to any person in consideration for the rendering of any managerial, technical or consultancy services, including the provision of services by technical or other person....
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....at 10% as per provisions of Article 12 of India-Swiss DTAA. 8. Before us, the ld.AR intimated that exactly same issue was deliberated in assesses own case for AY 2022-23 in ITA No. 2028/Mum/2025 dated 03.11.2025 by the coordinate bench of ITAT, Mumbai in its favour, deleting the addition made and therefore, the matter is squarely covered by this decision. A copy of the said order was also placed on record. The ld.DR did not controvert this contention. 9. We have carefully gone through the relevant orders, submissions made and also perused the ITAT order(supra).We agree with the ld.AR that the facts being identical, the ratio of the decision indeed applied to the instant appeal as well. Relevant parts of the said order are extracted as under: "The present appeal filed by the assessee arises out of final assessment order dated 15/01/2025 passed by ACIT 4(2)(1), Mumbai for assessment year 2022-23 on following grounds of appeal; Addition of Buying Commission of INR 35,13,00,269: 3. The AO erred in making addition in respect of Buying Agency Commission of INR 35,13,00,269 as Fees for Technical Services ('FTS') as per Article 12 of the Double Taxa....
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....essee contended that, the services are rendered outside India and not in India. It was submitted that, such services do not fall within the ambit of royalty or FTS, in absence of grant of any copyright, license, trademark, patent, or similar intangible right, or provision of any managerial, technical, or consultancy services. It was thus submitted that the said income shall qualify as business income. It was also further stated that, in the absence of PE/ business connection in India, the said business income shall not be liable to tax in India as per Article 7 of India-Swiss Double Taxation Avoidance Agreement (India- Swiss DTAA). 3.5 In the draft assessment order, the Ld.AO proposed to deny beneficial provisions of India-Swiss DTAA on the ground that, the Tax Residency Certificate (TRC') submitted by the Assessee pertains to Korea-Swiss Treaty. 3.6 Further, the Ld.AO proposed to tax the receipt as business income on the ground that the assessee constitutes Significant Economic Presence ('SEP') in India on account of provisions of Explanation 2A to section 9(1)(i) of the Act. 3.7 Further, in the draft assessment order, the Ld.AO noted that, t....
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....o furnish Tax Residency Certificate (TRC) for the year under consideration. However, in this case during the course of assessment proceedings the assessee had failed to furnish valid TRC. The TRC submitted by assessee is in respect of DTAA between Republic of Korea and the Swiss Confederation which is irrelevant to the DTAA between in India and Swiss Confederation. Further, from the additional evidence filed before your good self, it is seen that the assessee has filed certificate of registration issued by Swiss Authority and not tax residency certificate. Therefore, in the absence of relevant TRC, the assessee is ineligible for taxation benefit under DTAA between India and Switzerland. Accordingly, to establish assessee's permanent establishment (PE) in accordance with DTAA is not needed. Consequently, the assessee's income is taxable under the provisions of the Act and not under the DTAA. In accordance with the provisions of section 9(1)(i) read with Explanation 2A and Rule 11UD, the assessee has business connection in lieu of "significant economic presence in India as the transaction value with Indian entity Skechers South Asia Pvt. Ltd. (SSAPL) exceeds prescribed thresh....
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....the above and various decisions precedents listed out under para 1.14 of the said submission dated 19 December 2024, 2024, it can be concluded that the sale of goods and buying commission do not fall under the definition of FTS/Royalty as per provisions of the Act and India-Swiss DTAA. 2. Validity of Tax Residency Certificate 2.1 As per paragraph B of the remand report, the Ld.AO has stated that the assessee has filed Certificate of Registration issued by the Swiss authority and not Tax Residency Certificate (TRIC). Therefore, in absence of relevant TRC, the assessee is ineligible for taxation benefit under DTAA between India and Switzerland 2.2 In this regard, the Assessee wishes to invite your Honour's attention to the TRC submitted along with the application for admission of additional evidence dated 11 November 2024 (refer pg. no. 204 of the Paper Book (PB) wherein & has been stated that Skechers SARL is subject to the Swiss federal, cantonal and municipal taxes in accordance with the applicable law. Therefore, Skechers SARL is a Tax Resident of Switzerland and is eligible to avail the benefits of India-Swiss DTAA. 3. Applicability of pro....
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....no involvement of any digital means in the sale transaction and does not involve any download of data/software in India. Thus, the Assessee does not have any SEP in India and consequently there is no business connection as per the provisions of section 9(1)(i) of the Act. We shall be pleased to furnish any other information or clarifications in this regard that the Hon'ble Panel may require. 4.4 The DRP, after considering of the submissions of the assessee accepted the TRC and held that, the assessee is eligible to claim beneficial provisions of India-Swiss DTAA. The DRP also held that the buying commission cannot be brought to tax in India as business income. Instead the DRP recharacterized the buying commission as FTS under Article 12 of the India-Swiss DTAA, on the ground that the services rendered fell within the scope of managerial, technical, or consultancy services. 4.5 The DRP issued directions, vide order dated 24/12/2024, and directed the Ld.AO to treat the buying commission received by the assessee as Fees for Technical Services ('FTS') in accordance with Article 12 of the India-Swiss DTAA, and deleted other additions proposed by the Ld.AO i....
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....eipt as business income on the ground that the assessee constitutes Significant Economic Presence ('SEP') in India on account of provisions of Explanation 2A to section 9(1)(i) of the Act. 6.4 The Ld.AR submitted that the DRP on the contrary, accepted the TRC submitted by the assessee and held that the assessee is eligible to claim the beneficial provisions of India- Swiss DTAA based on the reasons in para 7.3.6 of the DRP direction. He submitted that, the DRP observed that, the Ld.AO failed to establish existence of PE in India. The DRP thus held that in the absence of PE, profit attribution does not arise. The Ld.AR submitted that the DRP thus rejected the findings of the Ld.AO on the nature of the buying commission to be Business income, and was held to be taxable in India by virtue of Article 5 of India Swiss DTAA r.w. Sec. 9(1)(i) of the Act. 6.5 He submitted that the DRP thereafter recharacterized the buying commission as FTS under Article 12 of India-Swiss DTAA, on the ground that the services rendered fell within the scope of managerial, technical, or consultancy services. 6.6 The Ld.AR submitted that, the services in respect of buying com....
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....ancy services, including the provision of services by technical or other personnel. 6.12 He submitted that, as per the provisions of the Act as well as India-Swiss DTAA, for any stream of income to be characterized as 'fees for technical services', it is necessary that some kind of 'managerial', "technical' or 'consultancy' services should have been rendered in consideration. He submitted that the terms 'managerial', 'technical' or 'consultancy' are neither defined under the Act nor the Treaty. It is a settled law that they need to be interpreted based on their understanding in common parlance. It is submitted that the services provided by the 18 ITA 2028/Mum/2025; A.Y. 2022-23 Skechers Sarl assessee do not fulfill the definition of managerial, technical or consultancy services and therefore cannot be treated as FTS. He relied on following decisions wherein the terms; managerial, technical and consultancy services has been defined: (i) Decision of coordinate bench of Hon'ble Delhi Tribunal in case of Adidas Sourcing Ltd. Vs. ACIT reported in [2012] [21 ITR(T) 697] dated 18 September 2012. Hon'ble Delhi Tr....
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....form as a primary executor, any supervisory function whatsoever............ 19. Further, would be incongruous to hold that the non- resident was providing technical services. The non-resident had not undertaken or performed 'technical services', where special skills or knowledge relating to a technical field were required. Technical field would mean applied sciences or craftsmanship involving special skills or knowledge but not fields such as arts or human sciences................. 21. The word 'consultant' refers to a person, who is consulted and who advises or from whom information is sought. In Black's Law Dictionary, Eighth Edition, the word 'consultation' has been defined as an act of asking the advice or opinion of someone (such as a lawyer). It may mean a meeting in which parties consult or confer. For consultation service under Explanation 2, there should be a provision of service by the non- resident, who undertakes to perform it, which the acquirer may use. The service must be rendered in the form of an advice or consultation given by the non- resident to the resident Indian payer............. 22. The skill, business ....
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....uld subsequently be used in carrying on the business of allowing consumers to play this game on the internet for a fee. Similarly, special skill or knowledge is used to create a troubleshooting database that customers will pay to access over the Internet. In these examples, however, the relevant special skill or knowledge is not used when providing the service for which the fee is paid, i.e., allowing the consumer to play the computer game or consult the troubleshooting database. 42. Many categories of e-commerce transactions similarly involve the provision of the use of, or access to, data and software (see, for example, categories 7, 8, 9, 11, 13, 15, 16, 20 and 21 in annex 2). The service of making such data and software, or functionality of that data or software, available for a fee is not, however, a service of a technical nature. The fact that the development of the necessary data and software might itself require substantial technical skills is irrelevant as the service provided to the client is not the development of that data and software (which may well be done by someone other than the supplier) but rather the service of making the data and software available to....
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....ould well be provided by a consultant. (iii) Decision of Hon'ble Madras High Court in case of Skycell Communication Ltd. v. DCIT reported in (2001) 251 ITR 53 observed that the meaning associated with the word 'technical' is 'involving or concerning applied and industrial science'. The Ld.AR submitted that in the present case, the services are not technical in nature as no technical knowledge belonging to art, science or profession was required. It is submitted that the assessee was facilitating SSAPL in procuring the merchandise from outside India and ensuring smooth transmission of the merchandise to SSAPL. The said activity was only liaising, coordination, facilitator or supervision service to ensure that the merchandise which SSAPL wants to purchase meet their specifications. 6.13 The Ld.AR further brought to our notice that, the assessee has entered into an intangible license agreement with SSAPL as per which, the assessee grants SSAPL the right to use its Marketing Intellectual Property ('IP'). Marketing IP includes trademarks and trade names, as well as copyrights material, service marks, etc. In consideration for use of Marketin....
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....e of Linde AG vs. ITO reported in (1997) 62 ITD 330 • Decision of coordinate bench of this Tribunal in case of DCIT vs. Samsung Engg. Co. Ltd reported in (2011) 43 SOT 38 • Decision of coordinate bench of this Tribunal in case of Endemol South Africa (Proprietary) Ltd. Reported in (2018) 67 ITR(T) 520 • Decision of coordinate bench of this Tribunal in case of ITP Publishing India P Ltd vs. ACIT in ITA No. 4407/Mum/2019 vide order dated 13/01/2023 • Decision of coordinate bench of this Tribunal in case of DCIT vs. BASF India Limited in ITA No. 6507/MUM/2024 vide order dated 20/02/2025 • Decision of coordinate bench of this Tribunal in case of Adidas India Marketing (P.) Ltd. v. National E Assessment Centre in ITA No. 487/Del/2021 vide order dated 05/04/2022 • Decision of coordinate bench of Hon'ble Delhi Tribunal in case of DCIT vs. Adidas Sourcing Ltd in ITA No. 2667/Del/2015 dated 05/04/2022. • Decision of coordinate bench of Hon'ble Bangalore Tribunal in case of Jeans Knit (P) Ltd. Vs. DCIT in ITA No. 19/Bang/2010 vide order dated 29/06/2012 • Decision of coordinate ben....
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....on; • As per Clause 2(i) of the Buying Agency Agreement, the assessee assists SSAPL in returning defective merchandise and recovering dues from vendors; • As per Clause 2(j) of the Buying Agency Agreement, the assessee ensures supplier quotations include complete details; • As per Clause 2(k) of the Buying Agency Agreement, the assessee certifies the origin of goods in line with SSAPL's anti-transshipment policy ; • As per Clause 2(I) of the Buying Agency Agreement, the assessee vets suppliers for transshipment violations and avoids dealing with flagged entities. 7.1 Form the above the nature of services rendered by the assessee in a nutshell are that: The assessee acts as a buying agent for SSAPL (its Indian affiliate) on a non-exclusive basis; The assessee provides support functions such as vendor identification, quality assurance, logistics coordination, order placement, price negotiation, and compliance support; The assessee receives commission at 10% of FOB value on purchases made by SSAPL. 7.2 These services in our view are essentially procurement support / sourcing services, ....