SKECHERS SARL ,MUMBAI vs. THE ASSISTANT COMMISSIONER OF INCOME TAX 4(2)(1), MUMBAI

Per: Smt. Beena Pillai, J.M.:

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:

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“
On being aggrieved by the order dated 15 January 2025 passed by the Assistant Commissioner of Income Tax, International Tax
Circle 4(2)(1), Mumbai ('herein referred to as the Ld. AO') under section 143(3) read with section 144C(13) of the Income-tax Act,
1961 ('the Act'), the present appeal is preferred on the following grounds, which it is prayed may be considered without prejudice to one another
On the facts and circumstances of the case and in law, the Ld. AO and the Hon'ble Dispute Resolution Panel-2, Mumbai ('DRP'):
General Ground:
1. erred in assessing the total income at INR 52,06,95,454 instead of income offered to tax as per Return of Income ('ROI') at INR
16,93,95,185,
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 15 January
2025 is time barred and liable to be quashed;
Addition of Buying Commission of INR 35,13,00,269:
3. 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 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 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 the Act
6. erred in levying interest of INR 1,19,85,816 under section 234B of the Act,
Initiation of penalty proceedings under section 270A of the Act:

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The Appellant respectfully craves leave to add, amend, alter, vary, omit or substitute the aforesaid ground of appeal at any time before the hearing of the appeal, as may be advised”
2.1 The Ld.AR submitted that the above ground is a legal issue and goes to the root cause of the case and no new records needs to be looked into for disposing off the issue.
2.2 The Ld.DR though could not object to the submission of the assessee did not support admission of additional ground.
We have perused the submissions advanced by both sides in the light of records placed before us.
2.3 Considering the submissions and respectfully following the decisions of Hon’ble Supreme Court in case of National Thermal
Brief facts of the case are as under:
3. The assessee is a company incorporated under the laws of the Swiss Confederation and is a tax resident of Switzerland. The assessee filed its original return of income on 24/11/2022
declaring total income of Rs.16,93,95,185/-. Subsequently, notice under section 143(2) of the Act was issued to the assessee along with 142(1) and show cause notice. The assessee, in response, submitted various details as called for.

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Skechers Sarl proposing, addition of INR 35,13,00,269 on account of buying commission, by treating it as business income, received from assessee's affiliate, Skechers South Asia Private Limited ('SSAPL') along with various additions.
Aggrieved by the draft assessment order, the assessee preferred objections before the DRP.
4. The assessee vide submission dated 19/12/2024 provided various clarifications and additional documents were submitted during the course of hearing. The additional evidences filed by the assessee were remanded to the Ld.AO for a report.
4.1 While remanding, the DRP directed the Ld.AO to examine the evidences and called upon the Ld.AO to give his comments on following issues:
(i) Whether there is a PE as per treaty. Examine and report. Do not copy past from draft assessment order.
(ii) In case PE is absent, how the sums can be brought to tax in India as business income?
(iii) Entire proceeds have been taxed as income. Examine the profitability and attribution due to India and report.
(iv) Why the sums should not be treated as FTS/or Royalty examine and explain
4.2 The Ld.AO in the remand report stated as under:
5. The Buying Agency Agreement has been examined and looking into technical, managerial and consultancy services endered by assessee to SSAPL under Buying
Agency
Agreement for instance Design-for-
Manufacturability, Technical
Support for Commercialization, Quality Assurance and Control,
Logistics and Freight Management, Vendor Identification and 8
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Order
Placement,
Buying
Office
Services,
Social and Environmental Compliance, etc the buying commission income is in the nature of fees for technical services u/s 9(1)(vii) of the IT Act.
6. Further, in accordance with the provisions of section 90 of the Income tax Act, 1961 (hereinafter referred to as the Act), in order to claim benefit of taxation under DTAA being more beneficial, an asscasce has to 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 goodself, 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 threshold of Rs.2 crores. Therefore, the income received by assessee from SSAPL on account of sale of goods to it of Rs.4,47,18,608 is taxable u/s 9(1)(i) of the Act and buying commission of Rs. 35,13,00,269 is taxable as business income in India under aforesaid provisions on without prejudice basis. In absence of India specific account, Rule 10 of IT Rules may be invoked to compute taxable income u/s 9(1)(i) of the Act on account of sale of goods and buying commission.
4.3 The DRP provided a copy of the remand report to the assessee vide notice dated 20/12/2024. In response, the assessee filed its rejoinder vide letter dated 24/12/2024, wherein it submitted as under:
1. Taxability of sale of goods and buying commission as Fees for Technical Services
1.1. As per paragraph 5 of the remand report, it has been stated that buying commission is in nature of fees for technical services under section 9(1)(vii) of the Act.

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Skechers Sarl 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 in the draft assessment order.
5. On receipt of the DRP direction, the Ld.AO passed the impugned order on 15/01/2025, making addition for buying commission as FTS, and taxed at 10% as per provisions of Article
12 of India-Swiss DTAA.
Aggrieved by the order of the Ld.AO, the Assessee preferred an appeal before this Tribunal.
6. The Ld.AR submitted that pursuant to an agreement dated
27/08/2012 (enclosed at Pg. 235 to 245 of FPB), assessee was appointed as the buying agent representative of its Indian affiliate i.e. SSAPL and received commission for such services at 10% of the FOB value of products purchased by SSAPL from manufacturers in China, Vietnam and other countries for distribution to third-party customers in India.
6.1 The Ld.AR submitted that, as per the said agreement, assessee acts as a buying agent for SSAPL on non exclusive basis for purchase of footwear and related items from third party

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Skechers Sarl manufacturers in China, Vietnam and other such countries under supervision, control, guidance from SSAPL. It was submitted that under the agreement, the assessee is contractually obligated to perform certain functions such as identification of vendors in China Vietnam etc., placing order, technical support, quality assurance and control, logistics, anti- transshipment compliance, accounts, operation and administrative support.
6.2 The Ld.AR submitted that, the assessee does research for potential new factors, including evaluating their capabilities, sampling limitations and assessing financial stability. He submitted that considering the same SSAPL communicates the requirement for goods to the assessee. The Ld.AR submitted that the assessee collates requirements from across the globe and places order by issuing
Purchase
Order
(PO) to the manufacturers. He emphasised that the assessee is responsible to group the order and submit the same to the concerned factories. The assessee also reviews the component price list provided by factories and negotiates Freight on Board (FOB) price and the final quote is sent to SSAPL for approval.
6.3 The Ld.AR submitted that, in the draft assessment order, the Ld.AO proposed to deny benefit under India-Swiss DTAA on the ground that the Tax Residency Certificate (TRC) submitted by the Assessee pertains to Korea-Swiss Treaty. The Ld.AO in the draft assessment order 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.

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India. The Ld.AR thus submitted that, in the absence of PE/
business connection in India, the said business income shall not be liable to tax in India as per the provisions of Article 7 of India-
Swiss Treaty.
6.8 The Ld.AR contended that, the 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.
The Ld.AR submitted that, the said income qualify as business income. It was also submitted 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 DTAA.
6.9 On the contrary, the Ld.DR submitted that, the assessee has Dependent Agency PE in India. He submitted that based on the agreement and various obligation on the part of the assessee, the array of services rendered by the assessee qualify as technical services and are taxable as FTS under Article 12 of India Swiss
DTAA. He submitted that, the nature of services and extensive use of expertise, skill and technical knowledge satisfy the definition of technical or consultancy services as per the treaty.
He placed reliance on the observation of the DRP in Para 8.3.4 to 8.3.5. 6.10 The Ld.DR relied on the following written submission filed in support of his argument.
SI.
No.
Nature of Services
Rendered by appellant.
Classification as Technical/Manage rial/Consultancy
Reasons for such classification
Page No. of DRP Order
1
Buying
Services Office
Technical
These services require deep industry knowledge, expertise
80

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Skechers Sarl in supply chain management and technical insight into vendor capabilities and compliance.
2
Source Support
Services
Technical
These services require specialized engineering and compliance skills as well as expertise in testing and quality assurance.
80
3
Vendor identification,
Order
Placement and Validation.
Technical
These functions involve scientific analysis, technical evaluation and exclusive domain expertise in materials and factory capabilities.
81
4
Technical support for commercializat ion.
Technical
The technical expertise required includes in-depth knowledge of manufacturing processes, design specifications and production techniques.
81
5
Quality
Assurance and Control
Technical
These services demand proficiency in quality control methodologies, defect identification and process improvement.
81
6
Logistics and Anti-Trans- shipment
Policy
Compliance.
Technical
These activities involve expertise in international trade regulations, logistic management and compliance.
82
7
Social and Environment
Compliance
Technical
These functions require regulatory expertise, technical knowledge of environmental standards and monitoring systems.
82

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11
Vendor
Certification
Program
Consultancy
Para
8.3.5.2:
Consultancy
84
services involve providing professional advice and recommendations based on specialized expertise.
84
12
Improving
Delivery and Operations
Consultancy
84
13
Compliance
Consultancy
Consultancy

14
Design for Manufacturability
Technical
Para
8.3.5.3:
Technical services require application of specialized knowledge, experience and expertise.
84
15
Final
Testing and Inspections
Technical
85 and 86

(d) initiating steps to change policies when they are judged to be less effective than they ought to be.

Management thus pervades all organizations
15. The services rendered, the procurement of export orders, etc. cannot be treated as management services provided by the non-resident to the respondent-assessee. The non- resident was not acting as a manager or dealing with administration.
It was not controlling the policies or scrutinising the effectiveness of the policies. It did not perform 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 acumen and knowledge acquired by the non-resident were for his own benefit and use. The non- resident procured orders on the basis of the said knowledge, information and expertise to secure 'their commission. It is a case of self-use and benefit, and not giving advice or consultation to the assessee on any field, including how to procure export orders, how to market their products, procure payments etc. The assessee upon receipt of export orders, manufactured the required articles/goods and then the goods produced were exported.
There was no element of consultation or advice rendered by the non-resident to the respondent-assessee.

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….…..
24. The OECD Report on e-commerce titled, Tax Treaty

Characterisation Issues arising from e-commerce: Report to Working Party No.1 of the OECD Committee on Fiscal Affairs dated 01st February 2001, has elucidated:-
'Technical services
39. For the Group, services are of technical nature when special skills or knowledge related to a technical field are required for the provision of such services. Whilst techniques related to applied science or craftsmanship would generally correspond to such special skills or knowledge, the provision of knowledge acquired in fields such as arts or human sciences would not. As an illustration, whilst the provisions of engineering services would be of a technical nature, the services of a psychologist would not.
40. The fact that technology is used in providing a service is not indicative of whether the service is of a technical nature. Similarly, the delivery of a service via technological means does not make the service technical.
This is especially important in the e-commerce environment as the technology underlying the internet is often used to provide services that are not, themselves, technical (e.g. offering online gambling services through the internet).
41. In that respect, it is crucial to determine at what point the special skill or knowledge is used. Special skill or knowledge may be used in developing or creating inputs to a service business. The fee for the provision of a service will not be a technical fee, however, unless that special skill or knowledge is required when the service is provided to the customer. For example, special skill or knowledge will be required to develop software and data used in a computer game that would 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, ie., 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 21
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Skechers Sarl 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 that client. For example, the mere provision of access to a troubleshooting database would not require more than having available such a database and the necessary software to access it. A payment relating to the provision of such access would not, therefore, relate to a service of a technical nature.
Managerial services
43. The Group considers that services of a managerial nature are services rendered in performing management functions. The Group did not attempt to give a definition of management for that purpose but noted that this term should receive its normal business meaning. Thus, it would involve functions related to how a business is run as opposed to functions involved in carrying on that business. As an illustration, whilst the functions of hiring and training commercial agents would relate to management, the functions performed by these agents (ie.
selling) would not 44. The comments in paragraphs 40 to 42 above are also relevant for the purposes of distinguishing managerial services from the service of making data and software (even if related to management), or functionality of that data or software, available for a fee. The fact that this data and software could be used by the customer in performing management functions or that the development of the necessary data and software, and the management of the business of providing it to customers, might itself require substantial management expertise is irrelevant as the service provi ded to the client is neither managing the client's business, managing the supplier's business nor developing that data and software (which may well be done by someone other than the supplier) but rather making the software and data available to that client. The mere provision of access to such data and software does not require more than having available such a database and the necessary software. A 22
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Skechers Sarl payment relating to the provision of such access would not, therefore, relate to a service of a managerial nature.
Consultancy services
45. For the Group, "consultancy services" refer to services constituting in the provision of advice by someone, such as a professional, who has special qualifications allowing him to do so. It was recognized that this type of services overlapped the categories of technical and managerial services to the extent that the latter types of services could 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 Marketing IP,
SSAPL pays royalty to the assessee. He submitted that the said royalty income has been offered to tax in India, and the Ld.AO accepted the same during assessment proceedings.
6.14 The Ld.AR also indicated that, SSAPL has entered into a separate design intellectual property license agreement with Skechers USA, Inc. II. As per the terms of the agreement,
Skechers USA, Inc II grants SSAPL the right to use the Design IP.

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Design
IP includes all know-how, inventions, updates, adaptations, software, technical data, trade secrets, etc. In consideration for use of Design IP, SSAPL pays royalty to Skechers USA, Inc II. In consideration for use of Design IP,
SSAPL pays royalty to Skechers USA, Inc II and such decision is supplied by SSAPL to third party vendors while manufacturing the goods.
6.15 Thus, the the Ld.AR submitted that, the the assessee is the owner of 'Skechers' Trademark but not the owner of the know- how that is involved in developing the design for the products.
The owner of the know-how is Skechers USA, Inc II. He submitted that the assessee is merely acting as an agent to ensure that the products confirm to the standard design and quality of the brand. As a result, the beneficiary of the services provided by the Assessee is not SSAPL but the Assessee itself. HE submitted that these services are rendered to sustain and improve the brand value of Skechers of which the Assessee is the owner. Further, all the functions are being performed by the Assessee on the instructions of SSAPL, thus substantiating the fact that the Assessee is acting in the capacity of the agent.
6.16 The Ld.AR also placed reliance on following decisions wherein it has been held that buying commission is not covered under the definition of managerial, technical and consultancy services and shall not be taxable as FTS:
• Decision of Hon’ble Supreme Court in case of PCIT vs. Puma Sports
India (P.) Ltd. Reported in (2022) 285 Taxman 191
• Decision of Hon’ble Delhi High ourt in case of CIT vs. Springer
Nature Customer Services Centre GMBH reported in 458 ITR 728

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• Decision of Hon’ble Karnataka High Court in case of PCIT vs. Puma
Sports India (P.) Ltd. Reported in(2021) 434 ITR 69
• Decision of cooridate bench of this Tribunal in case of Linde AG vs.
ITO reported in (1997) 62 ITD 330
• Decision of cooridate bench of this Tribunal in case of DCIT vs.
Samsung Engg. Co. Ltd reported in (2011) 43 SOT 38
• Decision of cooridate bench of this Tribunal in case of Endemol
South Africa (Proprietary) Ltd. Reported in (2018) 67 ITR(T) 520
• Decision of cooridate 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 cooridate 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 cooridate 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 cooridate 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 cooridate 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 cooridate bench of Hon’ble Bangalore Tribunal in case of Puma Sports India (P.) Ltd vs. DCIT in IT(TP)A No. 1611/Bang/2017
vide order dated 28/09/2017
We have perused the submissions advanced by both sides in light of records placed before us.
7. It is noted that the services rendered by the assessee as per the terms of Buying Agency Agreement in brief are as under:
• As per Clause 1 of the Buying Agency Agreement the services rendered by the assessee are provided solely in its capacity as a buying agent of SSAPL and the assessee do not exercise any Independent authority over SSAPL's decisions. All final decision- making powers rest exclusively with SSAPL
• In Clause 2 of the Buying Agency Agreement, it noted that the assessee agrees to perform services on behalf of and pursuant to the direction and control of the Principal.
• As per Clause 2(a) of the Buying Agency Agreement, the assessee assists in identifying manufacturers and negotiating prices, subject to SSAPL's final approval This service is rendered under SSAPL's control assessee does not exercise discretion or provide strategic advice, and there is no transfer of technical knowledge or consultancy:

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• As per Clause 2(b) of the Buying Agency Agreement, assessee surveys potential manufacturers to match SSAPL's requirements. It is noted that this is a routine sourcing function, aimed at aligning vendor offerings with SSAPL's needs. It does not involve any technical or managerial input.
• As per Clause 2(c) of the Buying Agency Agreement, assessee places orders with manufacturers only upon explicit written instructions from SSAPL and has no authority to bind SSAPL.
• As per Clause 2(d) of the Buying Agency Agreement, assessee quotes ex-factory prices and negotiates payment terms under SSAPL's supervision.
• As per Clause 2(e) of the Buying Agency Agreement, assessee arranges logistics and documentation for importation, subject to SSAPL's prior approval.
• As per Clause 2(f) of the Buying Agency Agreement, assessee inspects merchandise at vendor sites and reports non-conformities to SSAPL;
• As per Clause 2(g) of the Buying Agency Agreement,assessee undertakes various support functions such as production oversight, costing, R&D coordination, and commercialization;
• 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;

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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, i.e., commercial agency functions.
Article 12(4) of the India Switzerland DTAA defines FTS as:
“For the purposes of this Article, ‘fees for technical services’ means payments of any kind to any person in consideration for rendering of any managerial, technical or consultancy nature, including the provision of services of technical or other personnel.”
7.3 Applying Article 12(4) of the India–Switzerland DTAA to the facts of the present case, the commission received by the assessee for acting as a buying agent of SSAPL cannot be regarded as “fees for technical services.” The assessee’s activities such as, identifying and coordinating with vendors, placing purchase orders, performing quality checks, assisting with logistics, and providing administrative and operational support are essentially in the nature of procurement facilitation and commercial agency functions. These activities, though require business acumen and coordination, do not involve any technical knowledge, experience, skill, know-how or process to SSAPL as these services are rendered for and on behalf of SSAPL, and the benefit remains confined only to the execution of the transactions. Therefore the receipts are not taxable in India as FTS u/Article 12(4) of Inida-Swiss DTAA.
7.4 Accordingly, the income earned by the assessee constitutes business income, in the hands of the assessee. However such income is taxable in India only if the assessee has a PE in India as per Article 7 of the India–Switzerland DTAA. It is further noted

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Skechers Sarl that the DRP itself has observed that the assessee does not have a PE in India and also does not have significant economic presence in India. In the absence of PE, and given that the nature of services rendered do not fall within the ambit of Article 12(4), the commission income earned by the assessee cannot be brought to tax in India.
Accordingly Ground No. 4 raised by the assessee stands allowed.
Additional Ground No.8-9
8. The Ld.AR submitted that the DRP exceeded its powers and tried to review order of the Ld.AO. He submitted that the DRP enhanced the issue which was already verified, adjudicated and accepted by the Ld.AO and Assessee and was not in dispute before the Hon'ble DRP. He submitted that the DRP acted beyond the powers provided by the Legislature.
We have heard the rival submissions of both sides on this issue.
8.1 The powers of DRP are provided in section 144C of the Act which is reproduced as under for ready reference:
"(5) The Dispute Resolution Panel shall, in a case where any objection is received under sub-section (2), Issue such directions, as it thinks fit, for the guidance of the Assessing Officer to enable him to complete the assessment.
(6) The Dispute Resolution Panel shall issue the directions referred to in sub-section (5), after considering the following, namely:—
(a) draft order;
(b) objections filed by the assessee; .
(c) evidence furnished by the assessee;
(d) report, if any, of the Assessing Officer, Valuation Officer or Transfer
Officer or any other authority;
(e) records relating to the draft order

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(f) evidence collected by, or caused to be collected by, it; and (g) result of any enquiry made by, or caused to be made by, it.
(7) The Dispute Resolution Panel may, before issuing any directions referred to in subsection (5),—
(a) make such further enquiry, as it thinks fit; or (b) cause any further enquiry to be made by any income-tax authority and report the result of the same to it.
(8) The Dispute Resolution Panel may confirm, reduce or enhance the variations proposed in the draft order so, however, that it shall not set aside any proposed variation or issue any direction under sub-section (5) for further enquiry and passing of the assessment order.
Explanation.—For the removal of doubts, it is hereby declared that the power of the Dispute Resolution Panel to enhance the variation shall include and shall be deemed always to have included the power to consider any matter arising out of the assessment proceedings relating to the draft order, notwithstanding that such matter was raised or not by the eligible assessee."
8.2 Prior to insertion of Explanation to section 144C(8) by the Finance Act, 2012, various judicial precedents held that the powers of DRP was restricted to the issues raised in the draft assessment order and therefore it was not possible to enhance any variation proposed in the draft assessment order as a result of any new issue which comes to notice during the proceedings before DRP.
8.3 The Finance Act, 2012 inserted Explanation to section 144C(8) to clarify the scope of the powers of the DRP. The legislative intent, as reflected in the Explanatory Notes to the Finance Bill, 2012, was to ensure that the DRP’s powers were not narrowly confined only to the issues raised in the draft assessment order but extended to any matter arising out of the assessment proceedings. The relevant extract of explanatory notes as clarified by the parliament the DRP’s juri iction to the 29
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Power of the DRP to enhance variations
Dispute Resolution Panel (DRP) had been constituted with a view to expeditiously resolve the cases involving transfer pricing issues in the case of any person having international transactions of in case of a foreign company. It has been provided under sub-section (B) of section 1440 that DPP may confirm, reduce or enhance the variations proposed in the craft order of the Assessing Officer.
In a recent judgement, it was held that the power of DRP is restricted only to the issues raised in the craft assessment order and therefore it cannot enhance the variations proposed in the order as a result of any new issue which comes to the notice of the panel during the course of proceedings before it This is not in accordance with the legislative intent
It is accordingly proposed to insert an Explanation in the provisions of section 144C to clarify that the power of the DRP enhance the variation shall include and shall always be deemed to have included the power to consider any matter arising out of the assessment proceedings relating to the all assessment order
This power to consider any issue would be irrespective of the fact whether such matter was raised by the eligible assessee or not The amendment will be effective retrospectively from the 1st day of April, 2009 and will accordingly apply to assessment year
2009-10 and subsequent assessment years
8.4 Accordingly, the Explanation inserted to subsection (8) to section 144C expressly provides that the DRP’s powers to “enhance the variation” shall include and shall always be deemed to have included the power to consider any matter arising out of the assessment proceedings relating to the draft assessment order, regardless of whether such matter was raised by the assessee or not. This amendment was given retrospective effect from 1 April 2009, making it applicable from AY 2009–10
onwards.

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8.11. The Ld. AR relied upon the decision of the Hon’ble
Karnataka High Court in GE India Technology Centre (P.) Ltd. v.
DRP reported in (2011) 12 taxmann.com 442, wherein Hon’ble
Court considered whether the DRP could hold that a deduction under section 10A was not available, even though the draft assessment order had merely proposed a partial reduction of such deduction and not its complete denial. Hon’ble High Court, in the specific factual context of that case, held that the DRP had travelled beyond the scope of the variation proposed in the draft assessment order and, accordingly, acted without juri iction.
8.12. From the facts recorded in that judgment, it is not evident whether the DRP therein had adhered to the principles of natural justice by granting the assessee a fair and reasonable opportunity of being heard before enhancement. The ratio of that case, therefore, is confined to its peculiar facts and cannot be applied where the DRP has acted within its enlarged statutory powers under the amended provision and has ensured due compliance with procedural fairness.
8.13. Be that as it may, it is pertinent to note that, the said judgment was rendered prior to the insertion of the Explanation to sub-section (8) of Section 144C by the Finance Act, 2012, which expressly clarifies that the power of the DRP to enhance the variation shall include, and shall be deemed always to have included, the power to consider any matter arising out of the 33
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9. In view of the foregoing, the reliance placed by the Ld. AR on the decision of the Hon’ble Karnataka High Court in GE India
Technology Centre (P.) Ltd.(supra) is misconceived. The said ruling, rendered prior to the insertion of the Explanation to Section 144C(8) by the Finance Act, 2012, does not govern the present legal position. Post-amendment, the DRP is statutorily empowered to consider any matter arising out of the assessment proceedings, including those not raised by the assessee, provided that due opportunity is afforded. Accordingly, the ratio of GE
India has no application in the post Finance Act, 2012
framework, wherein the DRP’s juri iction stands expressly broadened and procedurally safeguarded. We therefore do not find any merit in the legal issue raised by the assessee as it do not survive the test of law.
Accordingly additional grounds raised by the assessee stands dismissed.
10. The Ld.AR submitted that Ground Number 2 may be kept open as assessee wish to contest the appeal on other grounds alleged. Accordingly Ground Number 2 raised by the assessee is kept open in order to contest it in appropriate circumstances.

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(Asstt.