Adidas India Marketing Pvt. Ltd. Vs National E-Assessment (ITAT Delhi)
Facts- Assessee is a company stated to be engaged in distribution and marketing of a range of Adidas and tailor made branded athletic and lifestyle products. Assessee electronically filed its ROI for A.Y 2016-17 on 30.11.2016 declaring total income at Rs. 67,85,52,440/-. The case was selected for scrutiny and accordingly notices u/s 143(2) and 142(1) of the Act were issued.
AO on perusing the Form 3CEB, noticed that assessee had entered into International Transactions (IT) with its Associated Enterprises (AE) aggregating to Rs.118.59 Crores. Accordingly, in view of the provision of Section 92CA of the Act, the IT entered into by the assessee with its AEs were referred to the Transfer Pricing Officer (TPO) for determining the ALP. The TPO vide order dated 31.10.2019 passed u/s 92CA(3) suggested some adjustments.
Draft assessment order was passed u/s 144C of the Act by the AO vide order dated 23.12.2019 determining the total income at Rs.142,55,16,753/-. Aggrieved by the draft assessment order passed by AO, assessee carried the matter before DRP. DRP vide order dated 04.03.2021 directed the AO to complete the assessment as per the directions contained in the order. Consequent to the directions of DRP, AO vide order dated 31.03.2021 passed u/s 143(3) r.w.s. 144C(13) r.w.s. 143(3A) and 143(3B) of the Act, determined the total income of the assessee at Rs.1,35,21,54,510/-. Aggrieved by the order passed by AO pursuant to DRP’s directions, assessee is now in appeal.
Conclusion- The issue in the present ground is with respect to the disallowance u/s 40(a)(i) of the Act of the payments in respect of buying agency charges paid by assessee to Adidas International Trading BV (‘aIBV’). We find that identical issue arose in assessee’s own case in A.Y. 2010-11 before the Coordinate Bench of Tribunal. The Co-ordinate Bench of Tribunal decided the issue in assessee’s favour by observing as under –
The main issue for consideration is whether the consideration received by the assessee from AIMPL under the Buying Agency Services Agreement (‘BAS’) could be characterized as ‘fees for technical services’ under section 9(1)(vii) of the Act and accordingly by taxed under the provisions of section 115A of the Act.
The copies of the Buying Agency Services agreement are placed on record, the nature of services have not been disputed. Department has only interpreted them to be amounting to ‘Fees for Technical Services’, in our considered opinion these are not technical services but routine services offered in the procurement assistance . The agreements demonstrate that the assessee was to receive commission for procuring the products of AIMPL and rendering incidental services for purchases.
The consideration received by the assessee was appropriately classified as ‘commission’ as against ‘fees for technical’. Accordingly, the same is not liable for deduction of tax at source and disallowance u/s 40(a)(i) is not warranted.
Before us, no material has been placed on record by the Revenue to demonstrate that the decision of the Tribunal in assessee’s own case in earlier years has been set aside, stayed or overruled by higher judicial forum. Further, Revenue has also not pointed to any distinguishing feature in the facts of the case in the year under consideration and that of earlier years. We therefore following the decision of the Co-ordinate Bench of Tribunal, are of the view that no addition is called for in the present ground. Thus the grounds of assessee are allowed.
FULL TEXT OF THE ORDER OF ITAT DELHI
This appeal filed by the assessee is directed against the order of the Addl. Commissioner of Income Tax, Income-tax Officer, National e-Assessment Centre, Delhi under section 143(3) r.w.s. 144C(13) and 144C(13) read with Section 143(3A) & 143(3B) of the Income Tax Act pursuant to the direction of Dispute Resolution Panel (DRP) – 1, New Delhi order dated 15.03.2021 for Assessment Year 2016-17.
2. The assessee has also filed a Stay Application (SA) seeking stay of disputed tax demand for A.Y. 2016-17.
We first proceed with disposing of the appeal of assessee in ITA No.487/Del/2021 :
3. The relevant facts as culled from the material on records are as under :
4. Assessee is a company stated to be engaged in distribution and marketing of a range of Adidas and tailor made branded athletic and lifestyle products. Assessee electronically filed its return of income for A.Y 2016-17 on 30.11.2016 declaring total income at Rs. 67,85,52,440/-. The case was selected for scrutiny and accordingly notices u/s 143(2) and 142(1) of the Act were issued.
5. AO on perusing the Form 3CEB, noticed that assessee had entered into International Transactions (IT) with its Associated Enterprises (AE) aggregating to Rs.118.59 Crores. Accordingly, in view of the provision of Section 92CA of the Act, the International Transactions entered into by the assessee with its AEs were referred to the Transfer Pricing Officer (TPO) for determining the Arm’s Length Price. The TPO vide order dated 31.10.2019 passed u/s 92CA(3) suggested following adjustments:
