ADOBE SYSTEMS SOFTWARE IRELAND LIMITED,IRELAND vs. ACIT/ DCIT, CIRCLE 1(1)(1), NEW DELHI

ITITA 1748/DEL/2025Status: DisposedITAT Delhi29 June 2026AY 2022-2324 pages
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What were the facts?

The assessee, Adobe Systems Software Ireland Ltd., is an Irish tax resident and a subsidiary of Adobe Software Trading Company Limited. The assessment year in question is 2022-23. The Assessing Officer (AO) initiated scrutiny based on several reasons, including large value refunds and discrepancies in reported income. The AO noted that Adobe India, a subsidiary of Adobe USA, provided marketing support services to the assessee. The Transfer Pricing Officer (TPO) had made significant adjustments concerning Adobe India's services. The Dispute Resolution Panel (DRP) subsequently sustained only the adjustment for interest on receivables, deleting others. The AO, following DRP directions, reduced the adjustment. The AO then proposed an addition of Rs. 380,15,01,653/- for income attributable to a Permanent Establishment (PE) in India, citing similarities with the previous assessment year (AY 2021-22) where Adobe India was held to be a dependent agent PE and fixed place PE. The assessee objected to the DRP, which broadly based its directions on the AY 2021-22 order.

What did the Tribunal hold?

The Tribunal held that Ground No. 1 of the appeal, concerning the assessment order being bad in law and barred by limitation, was dismissed as not pressed by the assessee. Regarding Ground Nos. 2 to 3.3, the Tribunal followed the order of its coordinate bench for AY 2021-22 and the decision of the Hon'ble Delhi High Court in the assessee's own case, which held that the addition of Rs. 3,80,15,01,653/- on account of income attributable to PE @ 35% made by the AO was not sustainable and deleted it. The Tribunal also agreed with the assessee that the MLI cannot alter the India-Ireland DTAA without a specific notification under Section 90(1) of the Act, thus rejecting the DRP's and CIT(DR)'s submissions on this point. Therefore, Ground Nos. 2 to 3.3 were allowed. For Ground No. 4, the AO was directed to verify the TDS claim of Rs. 10,27,176/- and allow it as per law, allowing the ground for statistical purposes. Ground No. 5, concerning initiation of proceedings under Section 270A, was dismissed as premature. The overall appeal was partly allowed.

What were the issues?

1. Whether the final assessment order passed by the AO is bad in law and barred by limitation, pursuant to the directions of the DRP. (This issue was not pressed by the assessee). 2. Whether the addition of Rs. 3,80,15,01,653/- on account of income attributable to a Permanent Establishment (PE) in India is sustainable, considering the factual matrix is similar to AY 2021-22 and the assessee's contention that transactions with its Indian Associated Enterprise (AE) were at arm's length. - Assessee's contention: The addition is not sustainable as the facts are similar to AY 2021-22, where a coordinate bench deleted such an addition, and this was affirmed by the Delhi High Court. The assessee also argues that the Multilateral Instrument (MLI) cannot alter the India-Ireland DTAA without a specific notification under Section 90(1) of the Act. - Revenue's contention: The revenue argued that the MLI is applicable and that the assessee failed to discharge its onus to provide data for ascertaining PE receipts not covered by the TP study. The revenue also questioned the ITAT's decision in not following the Supreme Court's ruling in DIT v. Morgan Stanley Co. regarding the onus on the assessee to prove arm's length remuneration for risk-taking functions of a PE, and whether Adobe India constitutes a PE. 3. Whether the AO erred in not allowing credit of TDS amounting to INR 10,27,176/-. 4. Whether the AO erred in mechanically initiating proceedings under Section 270A of the Act.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 144C(13),Section 144C(5),Section 92CA(3),Section 142(1),Section 90(1),Section 270A

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI BENCH, D: NEW DELHI

Before: SHRI VIKAS AWASTHY & SHRI BRAJESH KUMAR SINGH

For Appellant: Shri Ravi Sharma, CA & Ms. Shruti
For Respondent: Shri M.S. Nethrapal, CIT(DR)
Hearing: 02.04.2026Pronounced: 29.06.2026

PER BRAJESH KUMAR SINGH, AM: This appeal has been preferred by the assessee against the Final Assessment Order dated 22.01.2025 passed by the Assessing Officer (AO) under Section 143(3) read with Sections 144C(13) of the Income-tax Act, 1961 (“the Act”), pursuant to the directions of the Hon'ble Dispute Resolution Panel (DRP) order dated 26.12.2024 u/s 144C(5) of the Act for the Assessment Year 2022-23. IT(IT)A No.1748/Del/2025

1.

1 Ground No. 1 of the appeal is reproduced as under: “On the facts and circumstances of the case & in law, the final assessment o

The order continues below.

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