GE Global Parts & Products GMBH vs. ACIT, Circle-1(3)(1) Int. Taxation, New Delhi – PE Controversy for AY 2019-20

Case Summary: GE Global Parts & Products GMBH vs. ACIT, Circle-1(3)(1) Int. Taxation, New Delhi

Case Number: ITA No. 2035/DEL/2022

Appellant: GE Global Parts & Products GMBH, Switzerland

Respondent: ACIT, Circle-1(3)(1) Int. Taxation, New Delhi

Assessment Year: 2019-20

Date of Case Filing: 2022-08-26

Order Type: Final Tribunal Order

Date of Order: 2023-07-25

Date of Pronouncement: 2023-07-25

Introduction

The case titled GE Global Parts & Products GMBH vs. ACIT, Circle-1(3)(1) Int. Taxation, New Delhi involves an appeal against the assessment order for the year 2019-20, focusing on the issue of Permanent Establishment (PE) in India.

Background

GE Global Parts & Products GMBH, a tax resident of Switzerland, is engaged in the offshore supply of plants, equipment, spare parts, and related services for the maintenance of power plants in India. The controversy revolves around whether the appellant had a PE in India for the assessment year 2019-20.

Facts of the Case

In past assessments, notably from 2002-03 to 2006-07 and 2008-09, the Assessing Officer (AO) had determined that GE Global Parts & Products GMBH had a PE in India through its association with General Electric International Operation Company (GEIOC) at the AIFACS building in New Delhi. This conclusion was based on the premises being used for soliciting orders and concluding contracts, supported by expatriate employees and GE India Industrial Pvt. Ltd. (GEIIPL).

For the assessment years under consideration (2018-19 and 2019-20), the AO continued to attribute profits to the alleged PE. However, the appellant contended that the factual scenario had significantly changed:

• The AIFACS building had been vacated by GEIOC on May 1, 2012.
• No expatriate employees were present in India during these years.
• The remuneration paid to GEIIPL increased from cost + 5% to cost + 25%.

Departmental Proceedings

Despite these changes, the departmental authorities upheld the existence of a PE in India for the assessment years 2018-19 and 2019-20, following the earlier judgments without fully examining the current facts presented by the appellant.

Tribunal’s Findings

The Tribunal considered the submissions and evidence presented by the appellant, noting that the facts had indeed changed significantly since the earlier assessments. The key points were:

• The AIFACS building was vacated in 2012, and no business activities were conducted from there in the assessment years under review.
• No expatriate employees were deputed to India during these years.
• The remuneration model for GEIIPL had changed substantially.

The Tribunal emphasized that the existence of a PE must be assessed on a year-to-year basis, and past conclusions cannot be applied blindly without considering the current facts. It highlighted the importance of independent application of mind by the departmental authorities.

Conclusion

The Tribunal concluded that the appellant did not have a PE in India for the assessment years 2018-19 and 2019-20. Consequently, no profits could be attributed to an alleged PE. All other issues raised in the appeals were rendered academic and did not require adjudication.

Final Judgment: The appeals were partly allowed, and it was held that GE Global Parts & Products GMBH did not have a PE in India for the assessment years 2018-19 and 2019-20.

Order Pronounced: 25th July, 2023

Signed by:

Shri G.S. Pannu, Hon’ble President

Shri Saktijit Dey, Vice President

GE Global Parts & Products GMBH vs. ACIT, Circle-1(3)(1) Int. Taxation, New Delhi – PE Controversy for AY 2019-20