The Income Tax Appellate Tribunal (ITAT) delivered its decision in the case of GE Energy Parts Inc. v. ADIT (ITA No. 671/Del/2011) dated 4 July 2014 that, from now LinkedIn profiles of employees of overseas entities working in India can be used to determine the existence of a permanent establishment (PE) in India. Further, the ITAT acknowledged LinkedIn profiles submitted by the tax authority as additional evidence.

Summary of the case:

The Taxpayer (i.e. General Electric Energy Parts Inc.) is a company incorporated in the United States (US) and was engaged in sales activities in India. Another group company of the Taxpayer, i.e. General Electric International Operations Company Inc. (GEIOC) US, established a liaison office (LO) in India to act as a communication channel between the head office and the customers of General Electric (GE) group. During the concerned tax year, a tax investigation (survey) was carried out at the LO of GEIOC. During the course of the survey, inquiries were made as to sales made through various GE group entities, employees working from the LO, roles and responsibilities of various employees, etc.

The tax authorities noted that the Taxpayer/other group entities appointed expatriate staff to head the India operations. These expatriates were on the payroll of GE International Inc. (GEII) US, but worked for various businesses of the GE group entities in India. The tax authorities argued that the LO was carrying out commercial activities, beyond its permitted activities under the foreign exchange regulation and that the expatriate staff were responsible for the business of the GE overseas group as a whole, irrespective of any GE group company making sales in India. The tax authorities asserted that GEIOC was carrying out business in India through a PE and that the income attributable to such PE was taxable in India.

Pursuant to this, the tax authorities issued a summons under the Income Tax Act 1961 (ITA) to key personnel/Chief Executive Officer (CEO) of GEIOC asking for employment letters of all employees of GEII working in India at their LO. The Taxpayer/GEIOC failed to submit information. The tax authorities held that the Taxpayer constituted a fixed place PE in India. The Taxpayer appealed to the ITAT. However, in the interim appeal, the tax authorities produced employees’ LinkedIn profile as additional evidence before the ITAT.

Here the Issue was whether the tax authorities were permitted to provide employees’ LinkedIn profile before the ITAT in an interim appeal to determine fixed place PE?

Decision of the court:

The ITAT held that the tax authorities are prima facie allowed to file employees’ LinkedIn profile as additional evidence before the ITAT for PE determination and that the Taxpayer will have the opportunity to rebut the evidence so produced. It further made the following remarks:

The Taxpayer contended that the LinkedIn profiles had no probable value or relevance in the PE determination. Each LinkedIn profile is merely a particular employee’s appraisal/vision of himself and the same does not in any way have the endorsement or approval directly or indirectly of his employer company. However, the ITAT did not agree with the Taxpayer’s contention, especially when the Taxpayer had withheld information from the tax authorities by not submitting the documents called for.

However, The ITAT did not agree with the Taxpayer that LinkedIn profiles were hearsay evidence. It is the employee who himself has given all the relevant details and the same relate to him. These details are akin to admission made by a person. It is true that either party cannot make out a new case by implanting additional evidence but where the additional evidence only supplements the information on the basis of which a factual finding is to be arrived at, and then the ITAT can and should look into those details. Finally, in the present case, the LinkedIn profiles sought to be filed by the tax authorities had considerable bearing on the subject matter of the appeal and therefore were admitted. The Taxpayer or GEIOC will be free to rebut the information contained in the LinkedIn profiles by bringing on record contrary facts to dislodge the claims made in the LinkedIn profiles.