Facts of the Case

The petitioner, GE Renewables Grid LLC, formerly known as Alstom Grid Inc./Alstom Grid LLC, is a company incorporated in the United States of America and is not a tax resident of India. It is engaged in the business of development and deployment of power grid transmission and distribution management software and applications, as well as engineering services in relation to software products. The petitioner was part of the Alstom Group until 02.11.2015, after which the Alstom Grid business was acquired by the GE Group.

For Assessment Years 2013-14 and 2014-15, the petitioner did not file returns of income in India as it claimed that it did not receive any income chargeable to tax in India. For Assessment Years 2015-16 and 2016-17, it filed returns declaring income chargeable to tax as fees for technical services or royalty.

Notices under Section 148 were issued between 19.03.2021 and 31.03.2021 seeking to reopen assessments for AYs 2013-14 to 2016-17. The reasons recorded for reopening were primarily based on a survey conducted under Section 133A on 06–07.06.2019 at the premises of GE Power India Ltd., an Indian group company. Based on statements recorded during the survey, the Assessing Officer alleged that the petitioner had a Dependent Agent Permanent Establishment and a Fixed Place Permanent Establishment in India, and that its business income attributable to such PE had escaped assessment.

The petitioner objected to the reopening on several grounds, including absence of tangible material, non-supply of survey material, undated reasons, and lack of valid sanction. The objections were rejected, leading to the present writ petitions.

Issues Involved

Whether reassessment proceedings under Sections 147 and 148 could be validly initiated against a foreign company based solely on survey findings and employee statements recorded in the case of an Indian group entity, whether such material constituted tangible material to form a reason to believe that the petitioner had a dependent agent or fixed place permanent establishment in India, and whether the impugned notices were liable to be quashed.

Petitioner’s Arguments

The petitioner contended that the reasons recorded did not disclose any tangible material specific to the petitioner to establish the existence of a permanent establishment in India. It was argued that statements of employees of GE Power India Ltd. and survey findings in the case of another entity could not be mechanically applied to the petitioner. The petitioner submitted that there was no material to show that it carried on business through a fixed place or dependent agent in India, and that the reopening was based on mere assumptions and conjectures.

Respondent’s Arguments

The Revenue argued that the survey conducted at GE Power India Ltd. revealed functional and operational links between the Indian entity and the petitioner, and that statements of employees indicated that activities of the petitioner were carried out in India. On this basis, it was contended that the Assessing Officer had sufficient material to form a belief that the petitioner had a permanent establishment in India and that income attributable thereto had escaped assessment.

Court Order / Findings

The Delhi High Court examined the reasons recorded for reopening and held that a plain reading of the reasons clearly showed absence of any tangible material relating specifically to the petitioner. The Court observed that the reasons merely reproduced general findings from the survey conducted on GE Power India Ltd. and statements of its employees, without establishing how such material demonstrated that the petitioner itself had a dependent agent or fixed place permanent establishment in India during the relevant years.

The Court noted that the issue was squarely covered in favour of the petitioner by earlier decisions of the Delhi High Court, including Grid Solutions OY (Ltd.) v. ACIT, UK Grid Solutions Ltd. v. ACIT, GE Hydro France v. ACIT, and GE Grid (Switzerland) GmbH v. ACIT. Applying these precedents, the Court held that reassessment proceedings cannot be initiated against a foreign entity in the absence of tangible material showing existence of a permanent establishment in India.

Accordingly, the Court held that the impugned notices under Section 148 were without jurisdiction.

Important Clarification

The High Court clarified that survey findings and employee statements recorded in the case of an Indian group company do not, by themselves, constitute tangible material to form a belief that a foreign group entity has a permanent establishment in India. For valid reassessment, there must be specific and cogent material linking the foreign entity to a PE in India.

Final Outcome

All the writ petitions were allowed. The notices issued under Section 148 of the Income-tax Act for Assessment Years 2013-14 to 2016-17 were quashed, and all reassessment proceedings initiated pursuant thereto were set aside.

Link to download order  https://www.mytaxexpert.co.in/uploads/1769756086_GERENEWABLESGRIDLLCFORMERLYKNOWNASALSTOMGRIDINCALSTOMGRIDLLCVsASSISTANTCOMMISSIONEROFINCOMETAXINTERNATIONALTAXATIONCIRCLE111ANR..pdf 

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