(1.) INTERIM order on application dated 19 -2 -2014 filed by the department under Rule 29 of the ITAT Rules, 1963 for admission of additional evidence: BEFORE we proceed to consider the admissibility of this additional evidence filed by the department, we may point out the proceedings which took place in this lead appeal of GE group of cases on various dates. Hearing of the appeal commenced on 28 -1 -2014 and continued on 29 -1 -2014 and 18 -2 -2014. Thereafter on 19 -2 -2014 the revenue sought permission to file the following documents as additional evidence:
(2.) ON 20 -2 -2014 the assessee filed its reply. After detailed hearing and after considering the arguments and written submissions of ld. CIT(DR), ld. Counsel for the assessee sought further time to file a detailed reply. Accordingly, the following order -sheet noting was recorded on 20 -2 -2014: 20 -2 -14: Ld. DR had filed an application for admission of additional documents on 19 -2 -14. Ld. Counsel sought time to file a reply by 20 -2 -14 viz. today. Ld. Counsel files a reply objecting to admission of additional documents. After detailed hearing and after considering the department's stand, ld. Counsel requested for filing a detailed reply against admission of additional documents. Accordingly, the appeals are adjourned to 25 -3 -14.
2.1. Thereafter from 25 -3 -2014 the appeal got adjourned from time to time as per the order -sheet notings and finally from 27 -5 -2014 again the hearing of the appeal commenced but the arguments on the admission of additional evidence were deferred to 2 -6 -2014 as ld. Sr. counsel was not available. 2.2. From 2 -6 -2014 to 4 -6 -2014, arguments on admission of additional evidence were advanced by both the parties and written submissions were exchanged and, thereafter, it was agreed by both the parties that the issue regarding admissibility of additional evidence be first decided before hearing the appeal any further. Accordingly, we accede to the request of both the parties to firstly decide the issue of admissibility of additional evidence. 2.3. At the out set ld. Sr. Counsel, Shri S. Ganesh, for the assessee submitted that the department has not moved any formal application for admission of additional evidence. In this regard ld. CIT(DR) has relied upon the decision of Third Member in the case of Mascon Global Ltd. Vs. ACIT : 37 SOT 202 (Chennai) (TM), wherein in para 10, ld. Third Member has observed as under: 10. So far as the additional evidence is concerned, I find that it consists of the replies made by the Internal revenue Service of the USA to the assessee through E -mail. The E -mail itself is titled "IRS E -mail Tax Law Assistance". The assessee has also filed publication No. 538 Titled "Business Expenses" and this publication has also been issued by the Department of Treasury, Internal revenue Service, Washington DC. This gives details of what interest an assessee can and cannot deduct under the US Tax Laws. Another document filed before the Tribunal was an E -mail from the IRS, US Department of Treasury which explains what are employment taxes, what is federal tax and so on. All these seem to have been gathered by the assessee from the Website of the IRS of USA. I do agree that whatever stated therein may not be binding on the Indian Income -tax authorities. However, they are relevant an can throw light on the nature of the interest and the allowability thereof. They do not in any way bind our authorities but they can afford guidance. The Indian Tax authorities may take their own decision after referring to the papers submitted by the assessee. The other objection of the ld. Judicial Member is that these papers are not authenticated. I see that they have been downloaded from the Website of the IRS of USA. The ld. Accountant Member has stated that it would be open to the CIT to examine even the veracity of these papers. This provides for an adequate safe guard to protect the interest of the revenue. The contents of the website can be cross checked for accuracy and veracity., The other objection of the ld. Judicial Member is that her is no formal application under Rule 29 of the ITAT Rules for admission of the additional evidence. On going through the Rule, I do not find any requirement therein that there should be a formal written application before the Tribunal for admission of the additional evidence. These are rules of procedure and, in a fit case, and depending on the circumstances, it would be open to the Tribunal to admit additional evidence when it is produced in Court and an oral application is made. I do not think that there is any hard and fast rule in this behalf and it should be left to the discretion of the Bench. I am unable to say that the ld. Accountant Member exercised such discretion improperly. Rule 29 permits the Tribunal to admit the additional evidence for any substantial cause. Apparently, the ld. Accountant Member has admitted the additional evidence on this ground with which I am unable to disagree. The intention behind the Rule is that substantial justice should be done and the interest of justice should be the overriding consideration. Having this in mind I hold that there is no error in the ld. Accountant Member admitting the additional evidence and sending it to the CIT for examination and decision. (emphasis supplied by us) 2.4. In view of above discussion, we do not find any merit in the preliminary objection raised by the ld. Sr. counsel for the assessee. Accordingly the same is rejected. In the petition for admission of additional evidence it is submitted on behalf of department that the documents are available in public domain and down loaded from the web site of internet and the source is indicated against the same. It is further stated that these documents, refer to certain material facts and will help in advancing the cause of justice. Therefore, it is prayed that the same be admitted as additional evidence to the proceedings under consideration.
(3.) LD . CIT(DR) pointed out that in this case a survey u/s. 133A of the Act was conducted at the office premises of General Electric International Operations Company Inc. ("GEIOC") on 2 -3 -2007. During the course of survey, copies of various documents were obtained and statements of various persons were also recorded. Inquiries were made as to sales made through various GE Overseas entities, employees working from the liaison office of GEIOC, roles and responsibilities of various employees etc.
Ld. CIT(DR) pointed out that it was noticed that GE group was engaged in various sales activities in India, for which the business head were generally expats, who were appointed to head Indian operations, with the support staff provided by GE India Industrial Pvt. Ltd. ("GEIIPL") and also by various third parties. These expats were on the payroll of GE International Inc. (GEII), but working for various businesses of GE Group. 4.2. Ld. CIT(DR) pointed out, as noted in the assessment order, that as per the application made to RBI and permission obtained, the liaison office was to act as a communication channel between the head office and the customers in India. However, as a result of survey, it was found that the company instead of undertaking the permitted activities, was employing various persons and providing the services of such persons to the GE group entities worldwide. The activities indicated that the GEIOC was carrying out business in India through a PE and the income attributable to such PE was taxable in India. But the company had not furnished such income in the return of income filed for any year. 4.3. Ld. CIT(DR) pointed out that in the assessment order AO observed that the expatriate employees of GE group were responsible and looked after the business of GE group as a whole, irrespective of any GE group company making sales in India. The bifurcation of sales by various entities was decided by the GE management, as was evident from the documents seized during the course of survey. After detailed analysis of documents found during the course of survey, it was observed that for A.Y. 2002 -03 to 2006 -07 these expats and their team had at their disposal a fixed place of business in the form of office premises at AIFACS, 1, Rafi Marg, New Delhi. From these survey documents it was revealed that the activities of the non -resident GE group entities being conducted from the fixed place of business referred to above were not of the preparatory or auxiliary character but constituted the PE as provided in paragraph 2 of Article 5 of respective tax treaties. 4.4. Ld. CIT(DR) further pointed out that this conclusion was arrived at on the basis of analysis of various documents found during the course of survey in the form of agreements/purchase orders/copies of contracts which proved the active involvement of the employees of Indian company and expats in the conclusion of contract on behalf of such non -resident GE Group entities. Therefore, it was concluded that GEIPL also constituted the agent, other than an agent of independent status, of the non -resident GE Group entities. This resulted into the creation of the dependent agent PE as per the provision of tax treaties and business connection as per the provisions of Explanation 2 to section 9(1)(i) of the Act. 4.5. Ld. CIT(DR) submitted that in the back drop of these facts, since assessee had not filed any return of income, notice u/s. 148 was issued after recording the reasons. He pointed out that in the reasons recorded, in para 7, page 21 of the assessment order, the assessing officer, inter alia, has observed as under: The information regarding the employees of GE in India prior to the present expats is not given by the GE group, however, there have been the persons working for such sales throughout the period 01 -04 -2000 to till date.
4.6. Ld. CIT(DR) pointed out that the business carried on by the overseas company through the foreign employees was never disclosed to the tax authorities. 4.7. Ld. CIT(DR) submitted that vide summons issued u/s. 131 dated 2 -3 -07 to the Chief Executive Officer of GEIOC, the assessee was asked to submit copy of employment letters of employees working for overseas group companies of services relating to sourcing and sales. Further, on 7 -3 -2007 a letter was issued to GEIOC which reads as under: F. No. DDIT/Cir. 1(2)/Intl. Taxation/2006 -07 Dated: 07.03.2007
M/s. GEIOC Inc.
AIFACS, 1 Rafi Marg, New Delhi -110001.
Sub: Survey u/s. 133A in the case of GEIOC Inc. -Information -reg.
During the course of survey, it was found that the following employees of GE International Inc. were occupying the cabins/office space in the business premises of M/s. GEIOC:
(i) Dan Nalawade
(ii) Riccardo Pracacci
(iii) William Blair
(iv) Ash Nair
(v) Kenneth Pierson
(vi) Sameer Aggarwal
(vii) Prat Kumar
2. Some information with regard to the person namely Riccardo Pracacci Was collected during the survey. The following information in respect of the remaining six employees is requested: (i) Copy of employment letter.
(ii) Full copy of last income tax return field in India.
(iii) A self attested declaration from the employees with regard to responsibilities and work attended by them in India. (iv) Copy of any self appraisal submitted by them with regard to work done by them in India.
3. The information is requested by 11.00 AM of 16.03.2007 Yours faithfully,Sd/ -(D. Vijay Kumar Chadha)Dy. Director of Income Tax,Circle -1(2), Intl. Taxation, New Delhi.
4.8. The assessee partly responded to these summons/notices dated 2 -3 -2007 and 7 -3 -2007 vide its letter dated 16 -3 -2007 and 9 -4 -2007. In the letter dated 16 -3 -2007 the assessee, inter alia, stated in para 1.2 as under: Kindly note that our client does not have access to employment letters of all employees of GE overseas group companies working in India. However, as requested in your letter dated March 7,2007, our client has procured and enclosed copies of assignment letters (at Annexure 3) for the following employees of GE International Inc. US (GEII"):
Dan NalawadeRiccardo PracacciWilliam BlairAshfaq NainarKenneth PiersonSameer AggarwalPrat Kumar
4.9. With reference to these summons/notices and reply thereto, ld. CIT(DR) submitted that assessing officer was not provided full information of employees which formed part of specific sales team that provided services to specific business group (energy/oil and gas/aviation/infrastructure etc.) or specific entity during all the years under appeal. 4.10. Ld. CIT(DR) further submitted that assessee had filed objections to the reasons recorded but did not object to the AO's observations regarding non -furnishing of information as reproduced earlier. 4.1Ld. CIT(DR) submitted that in course of hearing, ld. Counsel has tried to set up new pleas regarding the modus operandi which can be appreciated only when the entire information regarding employees is available before the Tribunal. He submitted that assessee had provided common reply/submissions/modus operandi in respect of the assessee and clubbed all the assessment proceedings. In this regard he referred to letter dated 16 -12 -2008 filed by Price Water House Coopers, the subject of which reads as "General Electric Non -resident Entities (Collectively referred to as 'GE Overseas' or 'GE Overseas entities) assessment year 2001 -02 to 2006 -07". He submitted that this modus operandi was not objected before the AO nor disputed before the ld. CIT(A) and the assessee has now for the first time made legal allegations/claims particularly that specific entity wise information on persons providing services during various assessment years was not available with the AO. He pointed out that ld. Counsel further claimed that the employees were only acting as communication channel. Ld. CIT(DR) further pointed out that assessee has filed TPO's orders for A.Yrs. 2004 -05 to 2008 -09 which, though available with assessee, were not provided to assessing officer. 4.12. Ld. CIT(DR) submitted that in the back drop of these new claims advanced by the ld. Counsel it is now necessary that the additional evidence now sought to be placed before the Tribunal, may be admitted. 4.13. Ld. CIT(DR) pointed out that as the very specific information was not provided by the assessee and accordingly not objected/disputed before the AO/ld. CIT(A), and now if the Tribunal take cognizance of the allegations made for the first time then it should have information to adjudicate the issue properly. 4.14. Ld. CIT(DR) submitted that for examining the new claims advanced by the assessee it is necessary that assessee should provide all information relating to all Indian as well as expats, their duration of employment, designation, emoluments, basis of incentives/bonus, nature of job, duties and responsibilities, terms and conditions of employment etc. and specifically for which overseas entity they were part of sales team. Copy of EMS for all the employees for all the years under appeal that were providing sales services to overseas entities must also be provided. He submitted that if the assessee provides these informations then revenue will not press for admission of additional evidence. However, in absence of any information on these counts, the revenue has filed additional evidence I the form of Linkedin profile to rebut the fresh unsubstantiated claims made by the assessee. 4.15. Ld. CIT(DR) in his written submissions dated 5 -6 -2014, placed on record, has further submitted in paras 2.3 and 2.4 as under: As the information on expats was not filed, the AO vide letter dated 14.11.2008 (Paragraph 11 of the assessment order (page 44)) again asked the assessee to submit, "The details of expatriates looking after the business of the assessee in India, who were present in India during various years? Please provide name, designation, name of employer, duration of stay, copy of secondment/employment/assignment letter. The details of the office, which was being used for providing the services. In the reply dated 16.12.2008, the assessee stated that, " It is humbly submitted that we are in the process of collection of the data in relation to the expatriates who were associated with the sales activities of the GE overseas entities and would be furnishing them shortly"(item (v) on page 47 of the assessment order). As the specific information was not provided, the AO discussed the modus operandi of doing business in India by all overseas entities subject to assessment proceedings and for all years under appeal. This modus operandi has not been objected/disputed before the lower authorities or even before the Hon'ble Tribunal. And, if the assessee makes any fresh allegations/claims then it must also submit all these information to substantiate its claim. It cannot make wild allegations that the AO did not provide information in the assessment order.
2.4. Vide letter dated 14.11.2008 (page 490 and 491 of Assessee's PB -volume 2), the AO asked the assessee provide information, "please state, whether any support services were provided by any entity in India, if yes, copy of agreement, details of year wise payment, names of employees of the entity working for the assessee and the nature of services provided by such persons? Please also state, whether such persons were in any way connected with the negotiation of prices or in the finalization of contracts/purchase orders? (Query No. (vi) on page 44 of the assessment order)". The reply of the assessee is quoted by the AO on pages 44 to 48 of the assessment order. In regard to this query, the assessee vide letter dated 23.12.2008 submitted that, "in this regard, reliance is placed on our submission dated 16.12.2008 and December 23, 2008 (filed in response to questionnaire dated December 16, 2008) wherein nature of support services provided by GEIIPL have been explained in detail. Furthermore, as required by your Honour we are providing details of employees of GEIIPL who were providing such services. Details relating to financial years 2003 -04 to 2005 -06 are enclosed as Annexure -4" (see page 511 of assessee's PB -Volume 2). The AO has commented on this part submission information in point (v) on page 50 of the assessment order and point (vi) on page 5Further, the assessee did not provide information for assessment years 2001 -02 to 2003 -04. Additionally, it did not provide information that which employee is working for which entity. It did not provide information on year wise payments made by all overseas entities to GEIIPL. As discussed elsewhere, GEIIPL has also not identified any of the overseas entity in its transfer pricing documentation other than GEIOC. 4.16. With reference to above specific information, called for by the assessing officer, ld. CIT(DR) submitted that for proper adjudication of the issue it is necessary that the entire information regarding employees be available before the ITAT. 4.17. Ld. CIT(DR) further submitted that Linkedin profile contains information on person's education, details of employment, a summary of person's job profile/experience etc. 4.18. Ld. CIT(DR) pointed out that these informations are necessary to dislodge the assessee's claim that such employees are worth nothing and they act as a communication channel only and perform very limited functions as mentioned in the agreement between GEIIPL and GEIOC. He pointed out that these Linkedin profile establish that these individuals are very highly qualified, they have international experience, they have worked at high positions in the GE in India and outside India and they were responsible for sale of GE products in India. He submitted that the Linkedin profile also shows with which they were working. This is factual information and the assessee was provided with the same on 19 -2 -2014. He pointed out that assessee availed about two and half months and was to file factual rebuttal but it has not submitted anything on facts to disprove the contents of Linkedin profile. 4.19. As regards the whistleblower's writ petition filed before the Hon'ble Delhi High court, ld. CIT(DR) submitted that the same is to be admitted because it highlights various activities undertaken by the assessee and its modus operandi. 4. LD . Sr. Counsel Shri S. Ganesh for the assessee submitted that Linkedin profile of various employees filed by ld. DR has no probative value, what -so -ever, and the said Linkedin profiles have no relevance to or any bearing, what -so -ever, on the issues which arise for consideration in the present case. He submitted that each linkedin profile is merely a particular employee's appraisal/vision of himself and the same does not in any way have the imprimatur or endorsement or approval directly or indirectly of his employer company. Further, an employee's description of himself, without further and detailed inquiry and investigation cannot possibly form the basis for reaching any clear, cogent and/or reliable conclusion with regard to precise nature of the activities of the Indian entities. He further submitted that department has not explained why this matter is now sought to be placed on record on the 4th day of the final hearing of the appeal i.e., 3 days after assessee's counsel had concluded his arguments. He further pointed out that no attempt has been made to contend that the said linkedin profile (which are all dated 4 -2 -2014), were not available at any earlier point of time or that there was any other ground or reason as to why the aid material could not be placed on the record of the proceedings, if not during the course of assessment, at least before the CIT(A) or at an earlier stage shortly after the filing of the present appeal on 4 -2 -2011.;