Dismissing the iT department’s appeal against the Karnataka HC order in favour of Nike, the Supreme Court on Friday said that no income of the US sportswear firm is attributable to its liaison office?s activity of sourcing apparel from India even if fee for the service is received from overseas.
A bench headed by Justice Anil Dave upheld the HC judgment that Nike’s entire operations are confined to the purchase of goods in India for export purposes and the income derived fromt it cannot be deemed to accrue or arise in India. ?If at all he is earning income outside India under a contract which is entered outside India, no part of their income could be taxed in India…? the HC stated.
Solicitor-general Mohan Parasaran argued that the RBI, while granting permission to the firm for opening a liaison office in India, had restricted it from rendering consultancy or other services.
The department submitted that the nature of activity carried out by the liaison office of the assessee in India contravened the RBI licence.
Stating that 5% of the export value of the goods was attributable to India operations and chargeable to tax, the solicitor-general said these activities of Nike ? identifying exclusive manufacturers, designing products, supervising manufacture, quality and marketing the products (apparels) ? were beyond what was required by a liaison office, and this had resulted in income accruing or arising in India.