TaxTMI 
TaxTMI 
2025 (1) TMI 911
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.... by virtue of Finance Act, 2021, it was the procedure as prevalent prior thereto which was followed by the respondents. In light of the above, although the notices under Section 148 had been issued initially, the reasons to believe which constituted the foundation for formation of opinion that income had escaped assessment was provided to the writ petitioner subsequently. The petitioner is stated to have filed its objections to the assumption of jurisdiction which have ultimately come to be dismissed by the Assessing Officer [AO], leading to the filing of the instant writ petitions. 3. According to the disclosures made in the petition, the petitioner was formally known as Alstom Grid OY and was part of the Alstom Group till 02 November 2015. On or about the said date the Grid business of Alstom was taken over by GE. It is in the aforesaid backdrop that the petitioners aver that at least up to November 2015 it was not even a constituent of the GE Group. This fact assumes significance in light of the following. 4. As is manifest from a reading of the reasons which appear to have weighed upon the respondents and were communicated to the writ petitioner, a survey under Section 13....
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....ties, 90 through the pre-bid and bid stage, negotiate the terms of the contract, enter into the contract and execute the contract. Do you provide any assistance to these companies in some of these steps?".Sh Zanzaria answered as follows: "As part of the sales Junction, we provide support in some of the steps above. The sales team provide support like participation in meeting with clients when representatives of overseas companies are visiting, closing loop for open communication between customers and overseas units." 4.3 Thus, the person in charge of securing orders in GETDIL has accepted in his statement that the sales team of GETDIL in India supports the foreign companies in securing orders. The personnel of GETDIL also participate in meetings and negotiations and serve as communication channel between the foreign companies and Indian customers. 4.4 During the survey, a copy of the email records of Sh Zanzaria for the last one year was taken. The primary and principal role of the teams in India in securing of contract /orders in India for foreign companies in the Power and T&D (also called "Grid" business within the group) Sectors is established from the interna....
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....lished from the emails of the senior functionaries, there are monthly and quarterly sales targets for different countries and regions. These targets are for the whole Group (i.e. GE Group) in Grid segments and the teams based in each country, though on the payroll of the locally registered companies (in case of India, GETDIL), work towards meeting of those global sales* targets and not just for their own local company. Their appraisal is also done based on their success and contribution towards meeting those targets. This proves that teams in India do contribute to sales of foreign companies in India. 5. Hon'ble High Court of Delhi in its recent judgement in GE Energy Parts v. CIT (ITA 621/2017) dated 21.12.2018 has held existence of a dependent agent PE in similar circumstances where the personnel in India, even when they do not themselves sign the contract and are not the deciding authority for entering into contracts, play a role that is not auxiliary in the entering of the contract. Importantly, the Court cites India's position on the OECD commentary which is as follows: "a person has attended or participated in negotiations in a State between an enterprise and....
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.... President and CEO as Mr. Reinaldo Garcia, who is based out of Paris. Grid Solutions Tier-2 vertical is divided into various regions, of which South Asia is one. This region covers India, Bangladesh, Sri Lanka, Nepal and Bhutan. The South Asia has a regional head, designated as regional President, CEO and MD. This post is held by Sh. Sunil Wadhwa at present Sh. Sunil Wadhwa reports to the Chief commercial officer of the Grid Solutions Tier-2 vertical, who is Mr. Emanuel Bertoloni. The Chief Commercial Officer reports to Mr. Reinaldo Garcia." 6.1 These statement, similar in the case of CFOs of both the Indian companies, acid to the already clear conclusion that in reality, the Indian AEs serve as mere Indian branches of the foreign companies of the GE Group (erstwhile Alstom group) Power and Grid bus1nesses. The employees of the Indian AEs function not just for the Indian companies (that employ them), but also for foreign companies of the Group that make sales and render services in India. This fact leads to the conclusion that the Indian AE GETDIL, (which share the same main office premises with GEPIL, i.e., the headquarters of both of which are located in Axis House, Sect....
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....hus spans the period noted above. 7. The subsequent survey which formed the basis for the reassessment initiated and impugned in these writ petitions, however, was one which was independently undertaken in 2019. The issue which thus consequently arises is whether the findings and conclusions which came to be rendered and drawn for the aforesaid block of AYs' would have constituted sufficient ground to reopen assessments pertaining to AYs 2013-14 to 2017-18. 8. Mr. Vohra learned senior counsel appearing in support of these writ petitions had submitted that the petitioner is in fact based in Finland and the only contracts which cover the period forming the subject matter of the impugned reassessment proceedings were concerned with off-shore supplies. It was in the aforesaid backdrop that Mr. Vohra submitted that the respondents were clearly unjustified in seeking to base their decision to reopen on surveys conducted in 2007 and 2019. It was further pointed out that the survey of 2007 was not even concerned with the verticals of GE engaged in the T&D sector and was restricted to the business undertaken by constituents of GE forming part of its aviation vertical. In any case, Mr.....
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....M/S ALSTOM GRID OY (LIMITED) P.O. BOX 4 , KMPELIKATU 3, TAMPERE, FOREIGN PAN:MKCA9196Q Sub:-: Assessment proceedings in your case for Assessment Year 2013-14 - Regarding- Sir/Madam, In connection with the assessment proceedings pending in your case for Assessment Year 2013-14, you are requested to furnish following information: - 1. Please give detailed background of the company and its activities and sources of revenue with particular reference to business model and activities carried out in India during the year under consideration. Give a detailed note regarding nature of your business activities and furnish details in respect of the works undertaken/executed in India during the year. 2. Please file copy of last assessment orders including copies of Assessment Orders framed in your case on or after 01.04. 2011. 3. Please intimate as to whether you had a Permanent Establishment or Business Connection in India during the year. If so, please furnish names and complete addresses of such concerns. Also furnish details of Branch Offices/Project offices/Liaison office/Godowns and Warehouses and construction or other busines....
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....ted India during the year and also explain who paid for their expenses in India. 15. Furnish the details of salary paid during the year along with name and addresses of the persons to whom the salary was paid exceeding Rs. 5 Lakhs and functions/job done by each of them during the said period. 16. Please give a note on completion of various projects and method/manner of accounting being done w.r.t the same. 17. Please submit the names and addresses of sub contractors of the assessee, in connection with the India projects with their PAN nos. and details of their subcontracted activity along with copy of contracts. 18. Furnish a brief summary of the expenses incurred during the year along with relevant documentary evidence. 19. Copy of the tax residency certificate for the relevant Assessment year if Treaty benefits are being claimed. 20. Please confirm whether you have maintained books of accounts for your Indian operation as required u/s 4AA of the Act. If yes, please confirm whether they have been audited as required u/s 44AB of the Act. Please furnish hard u/sA4AA and u/s 44AB of the Act. 21. Furnish computation of inc....
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....f accounting for recording its income, if any earned in India. During the relevant assessment year, the assesse has been awarded a contract by Power Grid Corporation of India Limited ('PGCIL') dated 04 September 2012 to supply equipments from outside India. The scope of work includes design, engineering, manufacture, testing at manufacturer's works, dispatch, shipment, marine transportation and insurance and CIF Indi an Port of Entry supply of all Off-shore equipments and materials from outside India, including mandatory spares, Type testing to be conducted outside India and training to be imparted abroad. xxxx xxxx xxxx 3. Please furnish copies of all contracts and agreements operative during the year in respect of your activities in India. Copy of agreement/Contracts entered into with Indian customers/clients or any other party in India from whom any payment is received during the year or has accrued or arisen during the year may also be provided. (Question No. 7) The copy of contract entered with PGCIL during the relevant assessment year is enclosed as Annexure 2 for your goodself reference. 4. Details of invoices raised to the Ind....
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....L') dated 04.09.2012 to supply equipments from outside India. The scope of work includes design, Engineering, manufacture, testing at manufacture's works, dispatch, shipment, marine transportation and insurance and CIF India port of Entry supply of all off-shore equipments and materials from outside India, including mandatory spares, type testing to be conducted outside India and training to be imparted abroad. Assessee claimed to have received payment of only 10% advance during the year from the PGCL and, accordingly, has shown nil income. This fact was verified from the PGCL. After considering replies and documents and facts and circumstances of the case, assessee's income as shown in the return of income is accepted. 4. Assessment is, accordingly, made on Nil income. Credit for prepaid taxes is given after due verification. Detail of computation of tax and interest charged as provisions of law is given in the enclosed ITNS-150 which is part of this order. Issue necessary forms." 13. It was in the aforesaid backdrop that Mr. Vohra submitted that the respondents have clearly acted arbitrarily in drawing proceedings for reassessment despite the complete and ....
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....d existed in the years in question. It is in the aforesaid light that we would have to evaluate and examine whether the findings as recorded in the course of the 2007 or 2019 survey could have been blindly applied and adopted, extrapolated and read as being an accurate recordal of facts as they obtained in the AYs in question. It was conceded before us by the respondents that the reasons as recorded in support of the formation of opinion that income had escaped assessment had not alluded to any facts specific to AYs' 2013-14 to 2017-18. Despite repeated queries Mr. Bhatia who represented the respondents failed to draw our attention to any facet or fact pertaining to the AYs' in question and which could have been read as demonstrative of an application of mind to the facts that prevailed or obtained in the years in question and thus justified a reassessment action being validly initiated. In fact, as we go through those reasons, it becomes more than apparent that the AO has merely proceeded to adopt and reiterate what was found in the course of the survey undertaken in 2007 and 2019 read alongside the judgment of this Court rendered in GE Energy. According to Mr. Bhatia, in light of....
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....pplicable to taxing disputes. Though this principle is well settled, we deem it appropriate to refer to the following enunciation of the well-settled legal position in National Petroleum Construction Co. v Dy. CIT (2022) 446 ITR 382 where the Supreme Court had held as follows:- "37. The High Court rightly held that the question of whether the appellant had permanent establishment, could not possibly be undertaken in an enquiry for issuance of certificate under section 197 of the Income-tax Act, having regard to the time-frame permissible in law for deciding an application, more so, when regular assessment had been completed in respect of the immediate preceding year and the appellant found to be taxable under the Income-tax Act at 10 per cent. of the contractual receipts. The assessing authority found that the appellant had permanent establishment in India in the concerned assessment years. The appeal of the appellant is possibly pending disposal." "38. As held by the High Court, it is well settled that the principle that res judicata is not applicable to Income-tax proceedings because assessment for each year is final only for that year and does not cover later y....
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....der section 197 of the Act. The reasons shown to us also take note of the fact that in the immediate preceding years, i.e., the assessment year 2016-17 and the assessment year 2017-18, for which regular assessment has been completed, the petitioner has been held to have a permanent establishment (PE) in India, and its total income from the contracts with the Oil and Natural Gas Corporation have been held to be taxable under the Income-tax Act. Section 44BB of the Act is applied, and 10 per cent. of the contractual receipts were considered as business profits. The rate of tax being 40 per cent., a certificate was, accordingly, issued at 4 per cent. For the other assessment years as well, assessment has been completed and appeal is pending before the appellate authorities. The petitioner, obviously, disputes the finding of the respondent as erroneous and misplaced, on the ground that for the assessment year 2015-16, the first appellate authority following the decision of this court in the petitioner's own case, has held that the petitioner has no permanent establishment in India. Be that as it may, for the assessment years 2016-17 and 2017-18, this question has been determined ag....
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....other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year." 27. In the present case, there cannot be any dispute that existence of permanent establishment is required to be determined by law for each year separately on the basis of the scope, extent, nature and duration of activities in each year. In this regard, the contracts in question, i.e., R-series contracts dated February 7, 2018 and LEWPP series contracts dated September 30, 2016 would have to be taken into consideration. Concededly, this court in its decision dated May 9, 2017 did not have the occasion to consider the R-series contract dated February 7, 2018. The court only considered the contract dated September 30, 2016 as noted in para-1 of the said decision. There is thus, a distinguishing feature - the R-series contract has not been considered by this court in its order dated May 9, 2017. Moreover, in the instant case, the reasons record that the two contracts are indivisible, and the petitioner cannot divide the contractual receipts in two categories, viz., inside India and outside Ind....
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....principle in Dwarkadas Kesardeo Morarka v Commissioner of Income Tax, Central 1961 SCC OnLine CS 221 where the Supreme Court had held as under:- "7. The conclusion of the Tribunal was amply supported by evidence. It cannot be said that because in the previous years the shares were held to be stock-in-trade, they must be similarly treated for Assessment Year 1949-50. In the matter of assessment of income tax, each year's assessment is complete and the decision arrived at in a previous year on materials before the taxing authorities cannot be regarded as binding in the assessment for the subsequent years. The Tribunal is not shown to have omitted to consider the material facts. The decision of the Tribunal was on a question of fact and no question of law arose which could be directed to be referred under Section 66 (2) of the Income Tax Act." 22. The position of a PE being a facts-specific issue and thus liable to be examined against the backdrop of what obtained in a particular tax period is one which is underscored even by the OECD Commentary on Article 5 and the relevant part whereof is reproduced hereunder:- "8. It is also important to note that the way i....