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

ITA 2028/MUM/2025Status: DisposedITAT Mumbai03 November 2025AY 2022-2334 pages
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What did the Tribunal hold?

The Tribunal admitted the additional grounds raised by the assessee, following the decisions in National Thermal Power Co. Ltd. Vs. CIT and Jute Corporation of India Ltd. Vs. CIT. Regarding the DRP's jurisdiction and natural justice (Grounds 8 and 9 of additional grounds), the Tribunal held that the DRP did not exceed its jurisdiction. It reasoned that the DRP, under section 144C(8) as amended by the Finance Act, 2012, has the power to consider any matter arising out of assessment proceedings, even if not raised by the assessee, provided due opportunity is afforded. The Tribunal found that the DRP had provided the assessee with an opportunity to object to the proposed recharacterization of income by calling for a remand report from the AO and seeking submissions from the assessee, thus adhering to the principles of natural justice. The Tribunal distinguished the case of GE India Technology Centre (P.) Ltd. v. DRP, stating it was rendered prior to the amendment of section 144C(8) and thus not applicable to the current legal position. Consequently, the additional grounds were dismissed. Ground Number 2 (limitation) was kept open. Grounds 1, 5, 6, and 7 were not adjudicated as they were general or consequential. The appeal was partly allowed.

What were the facts?

The assessee, Skechers Sarl, a Swiss tax resident, filed an appeal against the final assessment order dated 15/01/2025 passed by the Assistant Commissioner of Income Tax (ACIT), Mumbai, for Assessment Year 2022-23. The assessee had offered a total income of INR 16,93,95,185, but the final assessment order assessed the total income at INR 52,06,95,454. The dispute primarily concerns the taxability of buying agency commission of INR 35,13,00,269, which the Assessing Officer (AO) proposed to treat as Fees for Technical Services (FTS) under Article 12 of the India-Swiss Double Taxation Avoidance Agreement (DTAA). The assessee contended that this income should be treated as business income under Article 7 of the India-Swiss DTAA and, in the absence of a Permanent Establishment (PE) in India, should not be taxable in India. The assessee also raised grounds regarding the assessment order being barred by limitation, levy of interest under section 234B, and initiation of penalty proceedings under section 270A. The assessee also filed additional grounds challenging the Dispute Resolution Panel's (DRP) jurisdiction and adherence to natural justice.

What were the issues?

1. Whether the final assessment order dated 15 January 2025 is barred by limitation under section 153 of the Income-tax Act, 1961 (the Act)? 2. Whether the buying agency commission of INR 35,13,00,269 constitutes Fees for Technical Services (FTS) as per Article 12 of the India-Swiss DTAA, or business income as per Article 7 of the India-Swiss DTAA? 3. Whether the services rendered by Skechers SARL are in the nature of 'managerial', 'technical', or 'consultancy' services as per Article 12 of the India-Swiss DTAA? 4. Whether the Dispute Resolution Panel (DRP) exceeded its jurisdiction under section 144C of the Act by re-characterizing the taxability of buying agency commission as FTS, and whether it violated the principles of natural justice by not issuing a Show Cause Notice (SCN) before making an enhancement? 5. Whether interest under section 234B of the Act is leviable? 6. Whether penalty proceedings under section 270A of the Act were erroneously initiated? Assessee's Contentions: - The final assessment order is time-barred. - The buying commission income constitutes business income under Article 7 of the India-Swiss DTAA and is not taxable in India due to the absence of a PE. - The services are not managerial, technical, or consultancy services. - The DRP exceeded its jurisdiction and violated natural justice by re-characterizing the income without a prior SCN. - Interest under section 234B and penalty under section 270A are not leviable. Revenue's Contentions: - The revenue's contentions are not explicitly recorded in the provided text, except for the implicit disagreement with the assessee's grounds.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 144C(13),Section 153,Section 9(1)(i),Section 9(1)(vii),Section 234B,Section 270A,Section 144C,Section 144C(11),Section 144C(8)

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Income Tax Appellate Tribunal, “I” BENCH, MUMBAI

Before: SMT. BEENA PILLAI & SMT. RENU JAUHRI

For Appellant: Shri Nikhil Tiwari
For Respondent: Shri Krishna Kumar SR. D.R
05.08.

2025 03.11.2025 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: " ITA 2028/Mum/2025; A.Y. 2022-23 Skechers Sarl 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 circumst

The order continues below.

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