No Tangible Evidence to Prove GE Steam Power has PE in India: Delhi HC sets aside Reassessment Notices [Read Order]

The Delhi High Court, quashed a series of reassessment notices issued under Section 148 of the Income Tax Act, 1961 as there was not tangible evidence to prove GE Steam Power and its other group of entities has a Permanent Establishment ( PE ) in India.

A Division Bench comprising Justice Vibhu Bakhru and Justice Tejas Karia held that the income tax department failed to furnish tangible evidence demonstrating that the foreign petitioners had a Permanent Establishment (PE) in India during the relevant assessment years, which is a necessary condition to tax business income of non-residents in India.

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A batch of petitions filed by multiple GE entities, including those based in the United States, France, China, Germany, Malaysia, Switzerland, and Poland, challenging reassessment proceedings for Assessment Years 2013-14 to 2017-18.

The Revenue had relied on a survey conducted under Section 133A at the premises of GE Power India Ltd. and GE T&D India Ltd., both domestic companies within the GE Group. Based on employee statements recorded during the survey, the Assessing Officer alleged that the foreign petitioners had either a Dependent Agent PE or Fixed Place PE in India. On this basis, reassessment notices were issued, claiming that income attributable to such PEs had escaped assessment.

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However, the High Court found no concrete material in the recorded reasons to establish that a PE actually existed. The petitioners had either already filed returns disclosing Fee for Technical Services (FTS) that were taxable in India, or had reasonably concluded that no taxable income arose in India.

The court noted that mere reliance on internal group linkages and survey statements, without independent and tangible material pointing to the existence of a PE, could not justify reopening of concluded assessments under Section 147 of the Act.

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The Bench also cited several of its earlier rulings including Grid Solutions OY, UK Grid Solutions Ltd., GE Hydro France, GE Grid (Switzerland) GmbH, and GE Renewables Grid LLC where it had adopted a consistent view that absent tangible evidence, reassessment on the ground of an alleged PE is not sustainable in law.

Accordingly, the court held that the impugned reassessment notices lacked legal validity and accordingly set them aside.

To Read the full text of the Order CLICK HERE

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