TaxTMI 
TaxTMI 
2025 (2) TMI 1177
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....ssued against the writ petitioner. As is manifest from a reading of the notice dated 19 March 2021, the same was based on various survey reports and the findings that came to be recorded in the course thereof pertaining to various constituents of the GE group. 4. Since, we are in the present case concerned with the reassessment regime which existed prior to the promulgation of Finance Act, 2021, the respondents appear to have followed the procedure as mandated by the Supreme Court in GKN Driveshafts (India) Ltd. v. Income Tax Officer and Ors (2003) 1 SCC 72. The reasons which are stated to have formed the basis for the formation of opinion that income had escaped assessment appear on our record as Annexure-C. From a reading thereof, we find that the reopening was principally founded on the survey, which was conducted on 06-07 June 2019 on various entities forming part of the Energy and Transmission & Distribution (Grid) business of the erstwhile Alstom Group which was subsequently acquired by GE. This becomes apparent from a reading of paragraphs 2 and 3 of the reasons and which are reproduced hereinbelow:- "2. In this case Survey I 33A(l) was conducted on 06-07 June, 2....
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.... a survey which was conducted in 2019. It also appears to have been urged by the petitioners that the earlier judgments rendered by the Court in GE Energy Parts Inc vs. Commissioner of Income-tax (International Taxation) 2018 SCC OnLine Del 13256 and which had emanated from a survey which was conducted in 2007 would also clearly not be applicable nor could the same be mechanically applied. Insofar as the question of the existence of a PE is concerned, the petitioner explained that it had admittedly set up a Project Office in respect of onshore supplies and that all revenues attributable to that Project Office had been duly offered for taxation and had, in fact, been duly assessed and accepted. 8. It was further contended that insofar as the revenue of the petitioner was concerned, the same was confined to offshore supplies which were undertaken in the relevant AYs' and thus clearly not exigible to tax, in light of the judgment of the Supreme Court in Ishikawajma-Harima Heavy Industries Ltd vs DIT 2007 SCC 2481. This becomes evident from a reading of the following extract of the objections which were submitted:- "(j) No income escaping assessment It is further subm....
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....untry. (5) There exists a distinction between a business connection and a permanent establishment. As the permanent establishment cannot be said to be involved in the transaction, the aforementioned provision will have no application. The permanent establishment cannot be equated to a business connection, since the former is for the purpose of assessment of income of a non-resident under a Double Taxation Avoidance Agreement, and the latter is for the application of Section 9 of the Income Tax Act. (6) Clause (a) of Explanation 1 to Section 9(1)(i) states that only such part of the income as is attributable to the operations carried out in India, is taxable in India. (7) The existence of a permanent establishment would not constitute sufficient "business connection", and the permanent establishment would be the taxable entity. The fiscal jurisdiction of a country would not extend to the taxing of entire income attributable to the permanent establishment. (8) There exists a difference between the existence of a business connection and the income accruing or arising out of such business connection. (9) Para 6 of the Protocol to the DTAA is....
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....t of the contract was transferred outside India..........................." (emphasis supplied) AAR in the case of Mitsubishi Electric Corporation: 278 Taxman 395 (AAR, Delhi) held as under: "3. We do not find any design to avoid tax by any illegal or improper means. The submission of the Revenue is mostly on the merits of the case which has to be considered in the course of merit hearing. Merely because the applicant has taken over the responsibility of risk of loss or damage till the equipments were delivered in Delhi and also that of insurance etc; it does not establish that the transaction was designed prima facie for avoidance of tax................." (emphasis supplied) Since no income with regard to offshore supplies is taxable in India, no income in any case be attributed to alleged PE of the assessee in India. In view of the foregoing, it is submitted that reassessment proceedings initiated in the present case in absence of any income chargeable to tax escaping assessment renders the same without jurisdiction, bad in law and liable to be dropped." 9. Those objections ultimately came to be rejected by the respondents in ter....
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....itself u/s 133A(1) of the Act. To claim otherwise is incorrect. Further, the statement of Mr. Vijay Sharma, CFO of GEPIL was recorded, who said: "There are 4 streams worldwide in the business of the GE group. These are GE Aviation, GE Power, GE Healthcare and GE Renewables. Each of these verticals is run by a global 'President and CEO', called 'GE officer'. These 'GE officers' are responsible for the business of their respective verticals. Each vertical has Tier-2 businesses. GEPIL has regional organization of Steam Power Tier 2 Business and Hydropower Tier-2 business of GE Renewables. The steam power tier 2 business is led by Mr Andreas Lusch, President and CEO. The Hydropower Tier 2 business is led by Mr Pascal Radue, President and CEO." Thus, clearly, the assessee's vertical is covered directly by the survey findings. Further, the statement of Mr. Apratim Sen, as presented in the reasons, is reproduced below: "I work in the tendering segment of the business. I propose the bids in response to the tenders issued by clients. I deal with bids related to tenders for services. I also interact with customers for potential future contracts. [...] ....
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....rded by National Hydroelectric Power Corporation Limited (NHPC) for Exworks supply of all equipment & materials for Subansiri Project and Chamera Hydroelectric Project. Its business description and group membership are squarely covered under the facts emanating from the survey findings, reproduced both above and in the reasons supplied to the assessee. In similar facts, the hon'ble Delhi High Court in the case of GE Energy Parts Inc. vs. CIT [ITA No. 621 of 2017] had held that even though the survey action was conducted on the premises of General Electric International Operations Company Inc. ('GEIOC'); GE India Industrial Pvt. Ltd and ('GEIIPL'), the PE as held by the court was for all GE Group companies. The court held that where 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 a client, can, in certain circumstances, be sufficient, by it....
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....case of Rolls Royce Plc. V. DDIT (2008) 113 TIJ 446 and seeking guidance from section 44BBB of the Income-tax Act, 1961, the Assessing Officer, in the reasons recorded, has clearly stated in paragraph 12, "I have reason to believe that income [...] has escaped assessment [...]" Consequently, the assessee's objections are misplaced. The assessee's reliance on Ishikawajma-Harima Heavy Industries Ltd vs DIT: [2007] 288 ITR 408 (SC) is premature and incorrect. In any case, it is differentiable on facts as that case involved a consortium of unrelated parties. The assessee's reliance on Linde AG, Linde Engineering Division vs DDIT: [2014] 365 ITR 1 (Del) is premature and incorrect. In any case, it is differentiable on facts as the consortium was dealt with as an Association of Persons. The assessee's reliance on Adobe Systems Incorporated (supra), is once again, incorrect. In that case, the reasons to believe referred to income-escapement arising from the transfer pricing analysis leading to inadequate compensation arising from a cost-plus model, whereas the Revenue's contention was premised on a greater share of income in the hands of the non-resident company ....
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....ion 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 the judgment of this Court in GE Energy, the AO was justified in proceeding on the "assumption" that facts had remained unchanged and that the business model had remained unaltered. Learned counsel in this respect also sought to draw sustenance from the decision of the Supreme Court in Raymond Woollen Mills Ltd. v ITO 1997 SCC OnLine SC and to the following passages as appearing therein:- "1.⁠ The challenge in this case is to the reopening of the assessment of Raymond Woollen Mills Ltd. We have been shown the recorded reasons for reopening under Section 147-A (sic Section 147). The case of the Revenue was that the assessee was charging to its profit and loss account fiscal duties paid during the year as well as labour charges, power, fuel, wages, chemicals, etc. However, while valuing its closing stock, the elements of fiscal duty and the other....
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....anent 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 years." "39. Whether the appellant had permanent establishment or not, during the assessment year in question, is a disputed factual issue, which has to be determined on the basis of the scope, extent, nature and duration of activities in India. Whether project activity in India continued for a period of more than nine months, for taxability in India in terms of the Agreement for Avoidance of Double Taxation, is a question of fact, that has to be determined separately for each assessment year. (2010) 327 ITR 456 (SC)." 19. In order to appreciate what the Supreme Court held in National Petroleum, it would be apposite to notice the more elaborate discussion which appears in the judgment of this Court in National Petroleum Con. Co. v. Deputy CIT, the relevant parts whereof are extracted hereunder:- "24. The respond....
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....aced, 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 against the petitioner. It is wellsettled proposition that in tax jurisprudence, the principle of res judicata is not applicable to income tax proceedings. "In matters of recurring annual tax a decision on appeal with regard to one year's assessment is said not to deal with eadem question as that which arises in respect of an assessment for another year and consequently not to set up an estoppel". [Ref: New Jehangir Vakil Mills Co. Ltd v. CIT (1963) 49 ITR (SC) 137]. "It is well settled that in matters of taxation there is no question of res judicata because each year's assessment is final only for that year and does not govern later years, because it determines only the tax for a particular period". [Ref: Installment Supply P. Ltd. v. Union of India [1962] AIR 1962 SC 53 (Constitution Bench)]. 25. The petitioner has argued that the need for c....
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....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 India services. The installation permanent establishment will come into existence, if "project or activity continues for a period of more than 9 months" under Indo-UAE Double Taxation Avoidance Agreement. This question of fact will have to be determined separately for each assessment year, and we This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above are informed that for the assessment year 2016-17 and the assessment year 2017-18, the determination is presently against the petitioner. We cannot accept the petitioner's contention that the assessment proceedings for the assessment years 2007-08, 2008-09 and 2009-10 have already determined this question in favour of the petitioner and there is no change in any circumstances. This question would require to be dete....
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....he 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 in which business is carried on evolves over the years so that the facts and arrangements applicable at one point in time may no longer be relevant after a change in the way that the business activities are carried on in a given State. Clearly, whether or not a permanent establishment exists in a State during a given period must be determined on the basis of the circumstances applicable during that period and not those applicable during a past or future period, such as a period preceding the adoption of new arrangements that modified the way in which business is carried on." 23. It is in the aforesaid backdrop that the observations of the Supreme Court in CIT v Gupta Abhushan (P) Ltd 2008 SCC ....