GE Energy Parts Inc. v. A. Director of Income Tax, Circle1 (2), International Taxation, New Delhi

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The Tax Publishers2017 TaxPub(DT) 0509 (Del-Trib) : (2017) 184 TTJ 0570 : (2017) 056 ITR (Trib) 0051 GE Energy Parts Inc. v. Asstt. DIT International Taxation INCOME TAX ACT, 1961 --Income deemed to accrue or arise in India--Under section 9(1)(i)Permanent establishment--Agents working in dependent status through fixed place of business--Where assessee was a part of the GE Group and expatriate, and employees of GEIIPL were appointed to act as agent of multiple GE overseas enterprises acting as agent in dependent status through a fixed place of business, the AO was justified in treating them as PE and consequently income earned on sales made by them was taxable in India. --Assessee was a part of the GE Group, which sells equipments to the customers in India relating to oil and gas business, energy business, transportation business and aviation business. A survey under section 133A was conducted at its liaison office and certain incriminating material/documents were found. Statements of two persons were also recorded during the course of survey. Certain post-survey enquiries were conducted. Thereafter, AO issued notices under section 148 to 24 entities of the GE Group. A return declaring nil income was filed. According to AO, the reason for reassessment was that assessee was making sales in India with the involvement of Expatriate of GEII and employees of GEIIPL whose activities constitute agency PE in India and, accordingly, the profits attributable to such PE were chargeable to tax and which had escaped assessment. *Held:* Expatriate of GEII and employees of GEIIPL were appointed to act as agent of multiple GE overseas enterprises. They acted as agents of dependent status in the first place itself. Although the number of GE overseas entities looked after by each of them was more than one, however, the fact that such entities were in one of the three broader lines of businesses of GE group, makes them agents of dependent status per se. OECD Commentary also acknowledges that a fixed place of business, which renders services to more than one company, would not fall in exemption and hence, impliedly constitute a PE. Rate of 10% applied by AO by drawing strength from sections 44BB and 44BBB, for computing profits and gains in connection with the business of exploration, etc., was perfectly in order. Income Tax Act, 1961, Section 9(1)(i) *REFERRED :* CIT v. Gupta Abhushan (P) Ltd. (2009) 312 ITR 166 (Del), SGS India Pvt. Ltd. v. ACIT & Anr. (2007) 292 ITR 93 (Bom), GKN Drive Shafts (India) Ltd. v. ITO and Ors. (2003) 259 ITR 19 (SC), Crown Consultants Pvt. Ltd. v. CIT (2014) 362 ITR 368 (Bom), ACIT v. Rajesh Jhaveri Stock Broker (P) Ltd. (2007) 291 ITR 500 (SC), Areva T & D, SA v. Asstt. DIT (2012) 349 ITR 127 and Jebon Corporation India, Liaison Office v. CIT (International Taxation) and Another (2011) 245 CTR 300 (Karn). FAVOUR : Against the assessee. A.Y. : 2001-02 IN THE ITAT DELHI BENCH 'C' R.S. SYAL, A.M. & MS. SUCHITRA KAMBLE, J.M. GE Energy Parts Inc. v. A. Director of Income Tax, Circle-1 (2), International Taxation, New Delhi IT Appeal No. 671 (Del) of 2011 A.Y. 2001-02 27 January, 2017 Appeal Allowed Appellant by: S. Ganesh, Sr. Advocate Sachit Jolly, Rashi Dhir, Gautam Swarup, Sidhartha Singh and Rahul Sateeja, Advocates Respondent by: Sanjeev Sharma and Anuj Arora ORDER *R.S. Syal, A.M.* This appeal by the assessee is directed against the order passed by the Commissioner (Appeals) on 30-9-2010 in relation to the assessment year 2001-02. 2. At the outset, it is imperative to mention that there is a batch of 139 appeals by the GE group overseas entities under consideration. The group has chosen the extant as the lead case. It has been fairly admitted that there are four broader issues in all or some of the appeals. Two issues, namely, existence of PE and attribution of profits are common in all the appeals; issue of reassessment is specific to more than one hundred appeals, wherever the orders have been passed under section 147 read with section 143(3) of the Income Tax Act, 1961 (hereinafter also called 'the Act'); and the last issue of interest under section 234B is in relation to some of the appeals for the assessment years 2007-08 and 2008-09.Submissions were made by both the sides on all the four issues in this lead case and it was candidly admitted that the other appeals involve mutatis mutandis similar issues. In fact, the same arguments were adopted by both the sides and no separate submissions were made for the remaining 138 appeals. As such, we are espousing the instant appeal for consideration and ex consequenti, the decision taken on all the four issues will apply to the remaining 138 appeals to the relevant extent. SUBSCRIBE FOR FULL CONTENT

The Tax Publishers2017 TaxPub(DT) 0509 (Del-Trib) : (2017) 184 TTJ 0570 : (2017) 056 ITR (Trib) 0051

GE Energy Parts Inc. v. Asstt. DIT International Taxation

INCOME TAX ACT, 1961

--Income deemed to accrue or arise in India--Under section 9(1)(i)Permanent establishment--Agents working in dependent status through fixed place of business--Where assessee was a part of the GE Group and expatriate, and employees of GEIIPL were appointed to act as agent of multiple GE overseas enterprises acting as agent in dependent status through a fixed place of business, the AO was justified in treating them as PE and consequently income earned on sales made by them was taxable in India. --Assessee was a part of the GE Group, which sells equipments to the customers in India relating to oil and gas business, energy business, transportation business and aviation business. A survey under section 133A was conducted at its liaison office and certain incriminating material/documents were found. Statements of two persons were also recorded during the course of survey. Certain post-survey enquiries were conducted. Thereafter, AO issued notices under section 148 to 24 entities of the GE Group. A return declaring nil income was filed. According to AO, the reason for reassessment was that assessee was making sales in India with the involvement of Expatriate of GEII and employees of GEIIPL whose activities constitute agency PE in India and, accordingly, the profits attributable to such PE were chargeable to tax and which had escaped assessment. Held: Expatriate of GEII and employees of GEIIPL were appointed to act as agent of multiple GE overseas enterprises. They acted as agents of dependent status in the first place itself. Although the number of GE overseas entities looked after by each of them was more than one, however, the fact that such entities were in one of the three broader lines of businesses of GE group, makes them agents of dependent status per se. OECD Commentary also acknowledges that a fixed place of business, which renders services to more than one company, would not fall in exemption and hence, impliedly constitute a PE. Rate of 10% applied by AO by drawing strength from sections 44BB and 44BBB, for computing profits and gains in connection with the business of exploration, etc., was perfectly in order.

Income Tax Act, 1961, Section 9(1)(i)

REFERRED : CIT v. Gupta Abhushan (P) Ltd. (2009) 312 ITR 166 (Del), SGS India Pvt. Ltd. v. ACIT & Anr. (2007) 292 ITR 93 (Bom), GKN Drive Shafts (India) Ltd. v. ITO and Ors. (2003) 259 ITR 19 (SC), Crown Consultants Pvt. Ltd. v. CIT (2014) 362 ITR 368 (Bom), ACIT v. Rajesh Jhaveri Stock Broker (P) Ltd. (2007) 291 ITR 500 (SC), Areva T & D, SA v. Asstt. DIT (2012) 349 ITR 127 and Jebon Corporation India, Liaison Office v. CIT (International Taxation) and Another (2011) 245 CTR 300 (Karn).

FAVOUR : Against the assessee.

A.Y. : 2001-02

IN THE ITAT DELHI BENCH 'C'

R.S. SYAL, A.M. & MS. SUCHITRA KAMBLE, J.M.

GE Energy Parts Inc. v. A. Director of Income Tax, Circle-1 (2), International Taxation, New Delhi

IT Appeal No. 671 (Del) of 2011

A.Y. 2001-02

27 January, 2017

Appeal Allowed

Appellant by: S. Ganesh, Sr. Advocate Sachit Jolly, Rashi Dhir, Gautam Swarup, Sidhartha Singh and Rahul Sateeja, Advocates

Respondent by: Sanjeev Sharma and Anuj Arora

ORDER

R.S. Syal, A.M.

This appeal by the assessee is directed against the order passed by the Commissioner (Appeals) on 30-9-2010 in relation to the assessment year 2001-02.

2. At the outset, it is imperative to mention that there is a batch of 139 appeals by the GE group overseas entities under consideration. The group has chosen the extant as the lead case. It has been fairly admitted that there are four broader issues in all or some of the appeals. Two issues, namely, existence of PE and attribution of profits are common in all the appeals; issue of reassessment is specific to more than one hundred appeals, wherever the orders have been passed under section 147 read with section 143(3) of the Income Tax Act, 1961 (hereinafter also called 'the Act'); and the last issue of interest under section 234B is in relation to some of the appeals for the assessment years 2007-08 and 2008-09.Submissions were made by both the sides on all the four issues in this lead case and it was candidly admitted that the other appeals involve mutatis mutandis similar issues. In fact, the same arguments were adopted by both the sides and no separate submissions were made for the remaining 138 appeals. As such, we are espousing the instant appeal for consideration and ex consequenti, the decision taken on all the four issues will apply to the remaining 138 appeals to the relevant extent.