GE GLOBAL PARTS & PRODUCTS GMBH,SWITZERLAND vs. ACIT CIRCLE 1(3)(1) INTERNATIONAL TAXATION, NEW DELHI

IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH: ‘D’ NEW DELHI

BEFORE SHRI SAKTIJIT DEY, VICE-PRESIDENT AND SHRI M. BALAGANESH, ACCOUNTANT MEMBER

ITA No.736/Del/2023 Assessment Year: 2020-21

GE Global Parts & Products Vs. ACIT, GmbH, Circle-1(3)(1), International C/o-Plot No. 1-14, Tower 5, Taxation, Jaypee Wishtown, Sector-128, New Delhi Noida PAN :AAGCC3668K (Appellant) (Respondent)

Assessee by Sh. K.M. Gupta, Advocate Ms. Shruti Khimta, Advocate Ms. Saloni Shital, AR Department by Sh. Vizay B. Vasanta, CIT(DR)

Date of hearing 15.11.2023 Date of pronouncement 29.11.2023

ORDER PER SAKTIJIT DEY, V.P.

Captioned appeal has been filed by the assessee challenging

the final assessment order dated 20.01.2023 passed under

section 143(3) read with section 144C(13) of the Income-tax Act,

1961 (in short ‘the Act’) pertaining to assessment year 2020-21,

in pursuance to the directions of learned Dispute Resolution

Panel (DRP).

ITA No.736/Del/2023 AY: 2020-21

assessee had a Permanent Establishment (PE) in India in terms of

Article 5 of India – Switzerland Double Taxation Avoidance

Agreement (DTAA) and in case there is a PE, attribution of profit

to the said PE.

entity and a tax resident of Switzerland. The assessee has entered

into certain contracts with certain Government undertakings in

India for offshore supply of plants, equipments, goods etc. Before

the Assessing Officer, the assessee pleaded that since offshore

supplies were made from outside India and the sale event get

completed outside India, the amounts received from Indian

entities are not taxable in India. The Assessing Officer, however,

did not accept the plea of the assessee. Relying upon the past

assessment history of the assessee emanating in assessment

years 2018-19 and 2019-20, the Assessing Officer observed that

the assessee has a PE in India and the offshore supplies were

connected to the said PE. Accordingly, he attributed the entire

receipts to the PE and treating it as business income brought to

tax applying the rate of 40%, while framing the draft assessment

order. The objections raised by the assessee against the draft 2 | P a g e

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assessment order were rejected by learned DRP following their

directions in assessment years 2018-19 and 2019-20.

submitted that the issue is squarely covered by the decision of the

Tribunal in assessee’s own case in assessment years 2018-19 and

2019-20, wherein, the Tribunal has held that the assessee had no

PE in India in terms of Section 5 of India – Switzerland DTAA.

Hence, the receipts are not taxable in India in terms of Article 7 of

the said DTAA.

the issue is covered by the decision of the Tribunal in assessment

years 2018-19 and 2019-20, however, he relied upon the

observations of the Assessing Officer and learned DRP.

materials on record. There is no dispute that the factual position

qua the issue whether the assessee had a PE in India in the

impugned assessment year, is identical to assessment years

2018-19 and 2019-20 as the departmental authorities, while

coming to conclusion that the assessee had a PE in India, have

entirely relied upon the assessment history of the assessee in

assessment years 2018-19 and 2019-20. It is observed, while 3 | P a g e

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deciding identical issue of existence or otherwise of PE of the

assessee in India, the Tribunal in ITA Nos. 2035 &

2036/Del/2022, dated 25.07.2023 has dealt with identical issue

and held as under:

“6. We have considered rival submissions and perused the materials on record. As discussed earlier, the short issue arising for consideration is whether the assessees had PE in India during the assessment years under consideration? From the facts and materials on record, it is observed, not only before the Assessing Officer, but even before learned DRP, the assessees have vehemently urged that since the factual position in the impugned assessment years have substantially changed, the decision taken in past assessment years cannot be followed blindly. It was the case of assessees before the departmental authorities that as per the facts of the impugned assessment years, the assessees had no PE in India as the AIFACS building considered as the PE of the assessees was vacated by GEIOC on 01.05.2012. It was pleaded by the assessee that in these years, no expatriates have visited in India. As it appears, the departmental authorities have turned a blind eye to all the submissions and facts brought on record by the assessee. Merely following the decision taken by the appellate authorities and Hon’ble High Court in past assessment years, the departmental authorities have concluded the existence of PE without looking into or examining the facts and evidences brought on record, which are very much relevant for deciding the existence of PE in the impugned assessment years. It is observed, while deciding identical issue in case of Nuovo Pignone International SRL Vs. DCIT (supra) involving identical facts, the Coordinate Bench has held as under:

“10. We have considered rival submissions and perused materials on record. We have also applied our mind to the judicial precedents cited before us. The short issue arising for consideration is whether the assessee had a PE, either fixed place PE or dependent agent PE, 4 | P a g e

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in India during the year under consideration. No doubt, the past assessment history of the assessee reveals that existence of PE in India was upheld by the Tribunal and Hon’ble jurisdictional High Court in assessment years 2002-03 to 2006-07 and 2008-09. Perusal of facts on record including the discussion made by the Assessing Officer and learned DRP would reveal that the reason why the existence of PE was upheld in earlier assessment years are as under: (i) The assessee has an office premises at AIFACS building; (ii) Expatriates along with employees of GEIIPL have engaged themselves in the activities of soliciting business and concluding contracts. (iii) Remuneration paid to GEIIPL was at arm’s length. 11. However, as far as the facts relating to impugned assessment year are concerned, AIFACS building, which earlier constituted the fixed place PE of the assessee in India, was vacated on 01.05.2012. In fact, this was brought to the notice of both the Assessing Officer and learned DRP in course of proceedings before them. In fact, on 29th May, 2018, the assessee has furnished annual statement u/s. 285 of the Act in Form 49C for the financial year 2017-18, clearly indicating that since no activity was undertaken by the liaison office, the Management does not intend to continue the liaison office and is to file for closure of the liaison office. Thus, the fact that AIFACS building has been vacated, no expatriates visited India during the year and the liaison office has been closed were brought to the notice of the departmental authorities in course of proceedings to demonstrate that the reasons for which the departmental authorities as well as the Tribunal and Hon’ble jurisdictional High Court held existence of PE, no longer exists in the impugned assessment year. 12. This is clearly evident from the submissions made and documents filed before the departmental authorities. Despite such submissions and evidences produced by the assessee, the departmental authorities have remained oblivious to such facts and materials brought on record and proceeded to conclude existence of PE merely relying upon the past orders passed by them and higher appellate authorities. It is trite law, the existence or otherwise of PE has to be determined on year to year basis, as the existence of PE has to be decided based on the definition of PE in the relevant tax treaty. Merely because in one year, the assessee had a PE in India, that by itself cannot lead to the conclusion that the assessee must be having a PE in subsequent assessment year, without looking into the relevant facts. In this context, we refer to the decision in the case of M/s. Bentley Nevada Inc. (supra). Further, in case of E-Funds IT Solution Inc. (supra), Hon’ble Supreme Court has very clearly and categorically held that the onus is entirely on the Revenue to establish existence of PE. 13. Adverting to the facts of the present appeal, undisputedly, the assessee brought on record all material and evidences to establish 5 | P a g e

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that it does not have any PE in India. As it appears from the respective orders of the departmental authorities, without dealing with the submissions of the assessee and evidences brought on record through proper reasoning or by bringing any contrary material to controvert them, the departmental authorities have merely followed their earlier decision without making any effort to look into the specific facts of the impugned assessment year. As discussed earlier, the assessee has brought on record cogent evidence to demonstrate that there is substantial change in facts in impugned assessment year qua the existence of PE. The specific averment of the assessee regarding vacation of office premises at AIFACS building and no visit by expatriates in India during the year, have not been controverted by the departmental authorities by any specific factual finding. In case of Blackstone Capital Partners (Singapore) VI FDI Three Pte. Ltd. (supra), Hon’ble jurisdictional High Court, while dealing with the issue of reopening of assessment based on information received from third party, observed, though such information can form basis for an examination/investigation by the Assessing Officer, but the decision to reopen the assessment has to be of the Assessing Officer and not of the third party. The Assessing Officer cannot merely do a cut and paste job for reopening the assessment without independent application of mind or verification or investigation. The aforesaid ratio laid down by Hon’ble jurisdictional High court squarely applies to the facts of the present appeal, as the departmental authorities have merely followed the decision taken by them and higher appellate authorities in assessee’s cases in past assessment years without independent application of mind to the facts brought on record by the assessee or making proper verification/investigation of the evidences. 14. Thus, essentially, the evidences brought on record by the assessee remain uncontroverted. When the evidences brought on record by the assessee are before the departmental authorities, it is the duty of the departmental authorities to examine them on merits and thereafter, either to accept them or to reject them with proper reasoning by bringing on record contrary material/evidence. In the facts of the present appeal, the departmental authorities have failed to undertake such exercise. Therefore, in our view, it has to be concluded that the departmental authorities have not found anything amiss or adverse in the facts and material brought on record by the assessee. In such a scenario, we do not find any reason to again remit the matter back to the Assessing Officer to provide him a second inning to improve upon the deficiencies in the original assessment order. In view of the aforesaid, we are inclined to hold that keeping in view the facts and materials peculiar to the impugned assessment year, it has to be concluded that the assessee did not have any PE, either fixed place PE or dependent agent PE, in India in the year under consideration. We again reiterate, our

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aforesaid conclusion is purely based on the facts involved in the impugned assessment year.”

respectfully following the decision of the Coordinate Bench, we

hold that the assessee had no PE in India in the year under

consideration. Hence, no profit can be attributed to such non-

existent PE. The Assessing Officer is directed to delete the

addition.

Order pronounced in the open court on 29th November, 2023 Sd/- Sd/- (M. BALAGANESH) (SAKTIJIT DEY) ACCOUNTANT MEMBER VICE-PRESIDENT Dated: 29th November, 2023. RK/- 7 | P a g e

ITA No.736/Del/2023 AY: 2020-21