2017 (1) TMI 1633 - AT - Income Tax

Validity of reopening of assessment - assessee was making sales in India with the involvement of its Permanent Establishment (PE) in India and accordingly the profits attributable to such PE were chargeable to tax - whether No name of the assessee business transactions and the relevant year appear in the reasons ? - Held that - Initiation of reassessment is valid. Fixed place as well Agency Permanent establishment of all the GE overseas is established in India. Attribution of income to the PE should be 2.6% of the sales made by GE overseaes entities in India. Interest u/s 234B is not chargeable. See GE ENERGY PARTS INC. VERSUS ADIT CIRCLE-1 (2) INTERNATIONAL TAXATION NEW DELHI. 2017 (2) TMI 780 - ITAT DELHI

Summary

Issues Involved:
1. Challenge to reassessment
2. Permanent establishment
3. Attribution of income
4. Interest u/s 234B

Analysis:

i. Challenge to reassessment:
The judgment involves a challenge to the reassessment conducted for the assessment years 2001-02 to 2008-09. The Tribunal found the initiation of reassessment to be valid based on the facts and circumstances of the case.

ii. Permanent establishment:
The issue of permanent establishment was a key point in the appeals. The Tribunal determined that both fixed place and agency permanent establishments of all the overseas entities of the GE group were established in India. This finding was crucial in determining the tax liabilities of the entities in India.

iii. Attribution of income:
Regarding the attribution of income, the Tribunal decided that 2.6% of the sales made by the GE overseas entities in India should be attributed as income to the permanent establishment. This determination was significant in calculating the taxable income of the entities in India.

iv. Interest u/s 234B:
The judgment also addressed the issue of interest under section 234B of the Income Tax Act. The Tribunal ruled that interest under this section was not chargeable in the present case. This decision impacted the final tax liabilities of the entities involved.

The judgment highlighted that while some appeals did not involve the reassessment issue, the other three issues of permanent establishment, attribution of income, and interest u/s 234B were common to all appeals. The Tribunal's decision in a lead case concerning GE Energy Parts Inc. set a precedent for the remaining appeals, as the issues were found to be similar. The Tribunal's decision in the lead case was applied to the 138 appeals under consideration, resulting in a partial allowance of all the appeals.