Case Law Details
ACIT Vs GE Steam Power Systems (Supreme Court of India)
The Supreme Court dismissed the Special Leave Petitions filed by the Revenue against the Delhi High Court judgment in matters relating to reassessment notices issued under Section 148 of the Income Tax Act to several foreign entities of the GE Group for Assessment Years 2013-14 to 2017-18. The Supreme Court stated that, after hearing the parties and examining the record, it found no good ground to interfere with the High Court’s orders. Accordingly, the SLPs were dismissed and pending applications were disposed of.
The underlying proceedings before the Delhi High Court concerned reassessment notices issued to various foreign entities including companies incorporated in the USA, France, China, Germany, Malaysia, Switzerland, and Poland. These entities were engaged in businesses relating to power generation equipment, technical support services, power plant systems, generators, turbines, and engineering services. None of the petitioners were tax residents of India.
Some of the entities had filed returns of income in India for income characterized as Fees for Technical Services (FTS), while others claimed that they had not earned any income chargeable to tax in India during the relevant years and therefore had not filed returns.
The reassessment notices under Section 148 were based primarily on a survey conducted under Section 133A at the premises of GE Power India Ltd. and GE T&D India Ltd. in June 2019. According to the Assessing Officer (AO), the survey revealed that companies of the erstwhile Alstom Group engaged in the “Power” business had a Permanent Establishment (PE) in India in the form of a Dependent Agent PE and a Fixed Place PE.
The AO further alleged that the petitioners had made supplies to Indian entities, but taxes had not been deducted on such payments and the corresponding income had not been declared in India. The AO relied upon statements recorded during the survey proceedings from employees of GE Power India Ltd. and GE T&D India Ltd. to conclude that the foreign entities had dependent agent and fixed place PEs in India, making business income attributable to such PEs taxable in India.
The petitioners challenged the reassessment proceedings, contending that there was no tangible material to support the AO’s belief that they had a PE in India during the relevant assessment years. They argued that the reassessment notices were unsustainable because the material relied upon by the AO did not establish the existence of either a Dependent Agent PE or a Fixed Place PE.
The Delhi High Court examined the reasons recorded for reopening the assessments and observed that a plain reading of those reasons indicated absence of tangible material for forming a belief that the petitioners had dependent agent or fixed place PEs in India during the relevant previous years.
The High Court further noted that the issue was already covered in favour of the petitioners by earlier decisions of the Court, including Grid Solutions OY (Ltd.) v. ACIT, UK Grid Solutions Ltd. v. ACIT, GE Hydro France v. ACIT, GE Grid (Switzerland) GmbH v. ACIT, and GE Renewables Grid LLC v. ACIT.
In view of these findings, the Delhi High Court allowed the petitions and set aside the reassessment notices issued under Section 148.
The Supreme Court subsequently upheld the High Court’s decision by refusing to interfere with the orders passed by the Delhi High Court and dismissing the Revenue’s Special Leave Petitions.
Read Delhi HIgh Court Judgment in this case: Reassessment Notices Quashed Due to Lack of Tangible Material for PE Allegation
FULL TEXT OF THE SUPREME COURT JUDGMENT/ORDER
1. Delay condoned.
2. Having heard the learned counsel appearing for the parties and having gone through the materials available on record, we do not find any good ground to interfere with the impugned order(s) passed by the High Court.
3. The Special Leave Petitions are, accordingly, dismissed.
4. Pending application(s), if any, shall stand disposed of.
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