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| DATE: | September 2, 2011 (Date of publication) |
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| Click here to download the judgement (general_electric_genpact_representative_assessee.pdf) |
Even if “Representative Assessee”, no liability for unconnected income
The whole of the share capital of Genpact India, an Indian company, was held by a Mauritius company. The whole of the share capital of the Mauritius company was in turn held by General Electric Co, USA. The Mauritius company “gifted” the shares of Genpact India to another Mauritius company, whose shares were then ultimately sold to a Luxembourg company. The AO claimed that the transaction of transfer of shares of Genpact India had resulted in capital gains to General Electric, USA, and so he issued a notice u/s 163 proposing to treat Genpact India as an “agent” of General Electric and to assess it as a “representative assessee”. This was challenged by a Writ Petition. HELD upholding the challenge:
The mere fact that a person is an agent or is to be treated as an agent u/s 163 and is assessable as “representative assessee” does not automatically mean that he is liable to pay taxes on behalf of the non-resident. U/s 161, a representative assessee is liable only “as regards the income in respect of which he is a representative assessee“. This means that there must be some connection or concern between the representative assessee and the income. On facts, even assuming that Genpact India was the “agent” and so “representative assessee” of General Electric, there was no connection between Genpact India and the capital gains alleged to have arisen to General Electric (from the sale of shares of Genpact India). Consequently, the s. 163 proceedings seeking to assess Genpact India for the capital gains of General Electric were without jurisdiction.
Note: In Aditya Birla Nuvo, the department treated the buyer of the shares from the Mauritius company as “agent” u/s 163. Also, here, it is surprising the department did not initiate proceedings directly against General Electric, USA, though it was assessed in India. See also Hindalco Industries vs. DCIT (ITAT Mumbai)
THIS CASE IS SEEN TO REMIND ONE OF SOME OF THE ARGUMENTS ADVANCED BY THE REVENUE MORE OR LESS IN THE SAME VEIN AS IN THE VODAFONE CASE. IN THE VODAFONE CASE THE DISPUTE IS CENTERED ON THE TDS PROVISIONS. HOWEVER, THE ISSUE HEREIN ARE UNDER THE DIFFERENT SCHEME OF PROVISIONS NAMELY, THOSE GOVERNING THE SUBJECT OF ‘REPRESENTATIVE ASSESSEE’; AND, AS SUCH, HAVE COME TO BE DECIDED AGAINST THE REVENUE, FOLLOWING FOR THIS PURPOSE THE LINE OF DECISIONS CONFINED TO THE SAID SUBJECT.