No Tangible Evidence of GE Renewables' Permanent Establishment in India: Delhi HC Quashes Income Tax Reassessment [Read Order]

In a recent judgment, the Delhi High Court quashed the reopening of income tax assessments initiated against GE Renewables Grid LLC (formerly known as Alstom Grid Inc/LLC), holding that the Assessing Officer (AO) failed to provide any tangible evidence of the company having a Permanent Establishment (PE) in India.

GE Renewables Grid LLC, a U.S.-incorporated entity engaged in providing power grid transmission software and engineering services, filed a series of writ petitions challenging the notices issued by the AO. The company stated that it had received royalty and fee-for-technical-services (FTS) income in India for AY 2015-16 and AY 2016-17, but it had no income chargeable to tax for AY 2013-14 and AY 2014-15, during which no returns were filed. Returns were filed for the later years.

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The AO based the reassessment on a survey conducted on 6-7 June 2019 under Section 133A of the Income Tax Act at the premises of GE Power India Ltd, an Indian company. Relying on statements from employees and documents collected during the survey, the AO concluded that GE Renewables Grid LLC had a Dependent Agent PE and a Fixed Place PE in India.

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The petitioner’s counsel argued that the reassessment was flawed due to the absence of a proper sanction, undated reasons, and the failure to share key documents such as survey findings and employee statements. The petitioner’s counsel also argued that the AO had no tangible basis to believe that the company had a PE in India.

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A two-judge bench comprising Justice Vibhu Bakhru and Justice Tejas Karia observed that these conclusions were general in nature and not based on any specific or direct material related to the petitioner and that similar reassessment attempts in related cases such as UK Grid Solutions Ltd., GE Hydro France, and GE Grid (Switzerland) GmbH had been struck down for the same reason.

The court held that the reassessment proceedings lacked the foundational requirement of demonstrable material and could not be sustained in law. The court explained that reassessment under Section 147 demands a reasonable belief based on specific information, which was entirely missing in this case. The court allowed the writ petitions and set aside the impugned notices issued under Section 148 of the Income Tax Act.

To Read the full text of the Order CLICK HERE

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