GE Group Cos have PE in India, Must pay Income Tax: ITAT Delhi [Read Order]


The Delhi bench of Income Tax Appellate Tribunal has ruled that 24 group companies of GE Energy Parts Inc, the US-headquartered energy solutions company, have a permanent establishment in India. Consequently, the companies are liable to pay tax under the provisions of Income Tax Act.

The bench was hearing 139 appeals filed the companies against the demand of tax from Income Tax authorities.

The Department had claimed that during their survey, it was found that expatriates, who were working in India, were in full control of sales activities carried out in India. This basically created permanent establishment for the company in India and hence, the Companies must pay income tax. Permanent establishment (PE) is basically a concept whereby it is determined whether the company has a place of business in a country and whether domestic laws apply on such a company.

On behalf of the company, it was argued that since the expats were rendering services to several group companies they could not be said to be working for one particular company. The ITAT did not accept this argument.

The Tax Department argued that the marketing activities carried out by expats resulted in sales not just for one company but for several GE Overseas companies. Also GE India had an authority to conclude contracts on behalf of GE overseas.

Diving deeply into the facts of the case, the bench noted that the nature of jobs carried out by these employees of GEIIPL makes it amply clear that they were at the higher positions in the general administration and, more specifically, sales of GE Overseas, reporting directly to the expats, who, in turn, were India country heads or occupying the peak positions in GE Overseas in India.

Dismissing the appeal, the bench said that “when we consider all the survey documents in harmony with the Self appraisals, Manager assessments and Job responsibilities given under the signature of the expats and employees of GEIIPL working for GE Overseas entities in India, it becomes absolutely clear that GE India was conducting business of GE Overseas in India and was directly and wholly involved in negotiating and finalizing the contracts.”

It was further noted that “the marketing and sales are income yielding activities in themselves and if the core activity of marketing and sale has taken place in India, then profit from sale, accrues or arises in India alone and the same to that extent should be charged to tax accordingly.”

Read the full text of the order below.