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Details of foreign employees on Linkedin is considered as additional evidence to determine the existence of PE in India
Details of foreign employees on Linkedin is considered as additional evidence to determine the existence of PE in India
Details of foreign employees on Linkedin is considered as additional evidence to determine the existence of PE in India
Details of foreign employees on Linkedin is considered as additional evidence to determine the existence of PE in India
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Details of foreign employees on Linkedin is considered as additional evidence to determine the existence of PE in India

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Recently, the Delhi Bench of the Income-tax Appellate Tribunal (the Tribunal) in the case of GE Energy Parts Inc. (the taxpayer) held that the Linkedin profiles of the employees of the GE group, …

Recently, the Delhi Bench of the Income-tax Appellate Tribunal (the Tribunal) in the case of GE Energy Parts Inc. (the taxpayer) held that the Linkedin profiles of the employees of the GE group, submitted by the tax department as an additional evidence, is not hearsay and has considerable bearing on the subject matter of appeal. The taxpayer is free to rebut the information contained in the Linkedin profiles by bringing on record contrary facts to dislodge the claims made in therein. These details are akin to admissions made by a person, considering a third party was not involved in creating the Linkedin profiles. Accordingly, the Tribunal admitted the Linkedin profiles submitted by the tax department as an additional evidence to determine the existence of a Permanent Establishment in India.

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  • 1. © 2014 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. KPMG FLASH NEWS KPMG IN INDIA Details of foreign employees on Linkedin is considered as additional evidence to determine the existence of PE in India 9 July 2014 B Background Recently, the Delhi Bench of the Income-tax Appellate Tribunal (the Tribunal) in the case of GE Energy Parts Inc. 1 (the taxpayer) held that the Linkedin profiles of the employees of the GE group, submitted by the tax department as an additional evidence, is not hearsay and has considerable bearing on the subject matter of appeal. The taxpayer is free to rebut the information contained in the Linkedin profiles by bringing on record contrary facts to dislodge the claims made in therein. These details are akin to admissions made by a person, considering a third party was not involved in creating the Linkedin profiles. Accordingly, the Tribunal admitted the Linkedin profiles submitted by the tax department as an additional evidence to determine the existence of a Permanent Establishment (PE) in India. ________________ 1 GE Energy Parts Inc. v. ADIT (ITA No. 671/Del/2011) – Taxsutra.com Facts of the case  The GE group was engaged in various sales activities in India, for which the business heads were generally expats, who were appointed to head Indian operations. These expats were on the payroll of GE International Inc. (GEII), but working for various businesses of the GE Group. In accordance with the permission obtained from the RBI, a Liaison Office (LO) was set-up to act as a communication channel between the HO and the customers in India.  During the year under consideration, a survey 2 was conducted at the LO of GE International Operations Company Inc. (GEIOC). During the course of survey, inquiries were made relating to the sales made through various GE overseas entities, employees working from the LO of GEIOC, the roles and responsibilities of various employees, etc. __________________ 2 Section 133A of the Act
  • 2. © 2014 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.  The survey indicated that the LO, 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.  The Assessing Officer (AO) held that for Assessment Year (AY) 2002-03 to 2006-07 these expats had a fixed place of business in the form of LO in India. The activities of the non-resident GE group entities being conducted through LO were not of the preparatory or auxiliary character, but constituted a PE. Tax department’s contentions  The business carried on by the overseas company through the foreign employees was never disclosed to the tax authorities. Therefore, summons were issued to the CEO of GEIOC and asked to submit copies of employment letters of employees working for the overseas group companies.  With reference to the summons/notices issued, the taxpayer had not provided full information of the employees which formed part of the specific sales team that provided services to the specific business group.  In the back drop of these, in the absence of any information, the tax department had filed additional evidence in the form of Linkedin profile of employees. The tax department claimed that since the documents are available in the public domain and downloaded from the website, it should be admitted as additional evidence to the proceedings.  A Linkedin profile contains information on a person’s education, details of employment, a summary of the person’s job profile, etc. A Linkedin profile establishes 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. Further, they were responsible for the sale of GE products in India.  This information was necessary to disprove the taxpayer’s claim that such employees are worth nothing, and act as a communication channel only and perform very limited functions.  The taxpayer never refuted the evidence/details obtained by it through the profiles of employees by filing employment contracts and other evidence, so as to disprove the contents as obtained from the Linkedin profile of employees. Taxpayer’s contentions  The Linkedin profile of various employees filed by the tax department has no probative value and the said profiles have no relevance to or any bearing on the issue in the present case.  Employees’ description of himself/herself, without further and detailed inquiry and investigation cannot possibly form the basis for reaching any clear, cogent and/or reliable conclusion with regard to the precise nature of the activities of the Indian entities.  Each Linkedin profile is merely a particular employee’s appraisal/vision of himself/herself and the same does not, in any way, have the imprimatur or endorsement or approval directly or indirectly of his employer company.  Linkedin is a social networking website operational since May 2003. The information available is only in the nature of hearsay and cannot be adduced as evidence. It was further contended that there is inordinate delay in production of the additional evidence and therefore, the same cannot be adduced at this stage. Tribunal’s ruling  Perusal of Section 255(6) 3 of the Act indicates that the Tribunal has all the powers vested in it which are vested in the income-tax authorities regarding discovery, production of evidence, etc. The Tribunal has wide powers including the powers of compelling the production of books of accounts and other documents.  As per Section 5 of the Evidence Act, evidence may be given in any suit or proceeding of the acceptance or non-acceptance of every fact in issue, and of such other facts as are herein declared to be relevant and of no others.  Merely because the Linkedin profiles were available in the public domain and were not referred by the AO, the tax department cannot be prevented from bringing that information on record, so as to arrive at the correct factual finding on the issue regarding a PE. ________________ 3 The Tribunal shall, for the purpose of discharging its functions, have all the powers which are vested in the income-tax authorities and any proceeding before the Appellate Tribunal shall be deemed to be a judicial proceeding within the meaning of sections 193 and 228 and for the purpose of Section 196 of the Indian Penal Code (45 of 1860), and the Appellate Tribunal shall be deemed to be a civil court for all the purposes of section 195 and Chapter XXXV of the Code of Criminal Procedure, 1898
  • 3. © 2014 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.  It cannot be said to be a case of inordinate delay because the AO had drawn an adverse inference on account of non-furnishing of information by the taxpayer.  The taxpayer cannot be permitted to first open the investigations/inquiries by not furnishing the necessary information and then claim benefit out of the same. It is the determination of correct taxability of the taxpayer, which should guide the proper course of action.  It is true that either party cannot make out a new case by implanting additional evidence. However, where the additional evidence only supplements the information on the basis of which a factual finding is to be arrived at, and not supercede the information, then the Tribunal can and should look into those details.  In the present case, it has been observed that Linkedin profiles, sought to be filed by the tax department, has considerable bearing on the subject matter of appeal and therefore, it should be admitted.  The taxpayer is free to rebut the information contained in the Linkedin profiles by bringing on record contrary facts to dislodge the claims made in therein.  The Linkedin profiles were not in the nature of hearsay because it is the employee who himself had given all the relevant details and the same relate to him. These details are akin to admission made by a person. No third party was involved in creating the Linkedin profiles and, therefore, it cannot be said to be hearsay evidence.  It is well settled law that admission, though not conclusive, is binding and decisive on point unless it is successfully withdrawn or proved to be erroneous 4 . The Linkedin profiles are in the nature of admissions of persons on their job profile since the data is in public domain.  The strict Rules of Evidence are not applicable to income-tax proceedings. The evidences sought to be filed by the tax department were only supporting in nature and would assist in appreciating the facts in a more judicial manner.  In view of above discussion, the Tribunal admitted the Linkedin profiles filed by the tax department. However, in its interim order, the Tribunal has not concluded on the existence of the PE. __________________ 4 Narayan v. Gopal AIR 1960 SC 100 Our comments Use of social networking websites by corporate employees for publishing their personal and professional details is a common trend in recent times. This data is available in the public domain and can be accessed by anyone. In this decision, the Delhi Tribunal dealt with the issue of admission of additional evidence in the form of details of foreign employees on Linkedin site. The Tribunal held that Linkedin profiles submitted by the tax department had a considerable bearing on the subject matter of appeal. Linkedin profiles were not in the nature of hearsay because it is the employee who himself had given all the relevant details on the website. Accordingly, the Tribunal admitted the Linkedin profiles submitted by the tax department as additional evidence. The present decision suggests that the tax department may use social media platform to collect factual evidence for use in assessment/appellate proceedings. The tax department may use such evidence not only for pending assessments, but may also use such evidence to reopen completed assessments. The tax department may also use such details as ‘additional evidence’ before the Tribunal or Court. Therefore, it may be worthwhile for companies to review details posted by their executives/employees on the social networking websites i.e., Facebook, Linkedin, twitter, etc. to ensure that they are accurate.
  • 4. © 2014 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. © 2014 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name, logo and “cutting through complexity“ are registered trademarks of KPMG International Cooperative (“KPMG International”), a Swiss entity. www.kpmg.com/in Ahmedabad Commerce House V, 9th Floor, 902 & 903,Near Vodafone House,Corporate Road, Prahlad Nagar, Ahmedabad – 380 051 Tel: +91 79 4040 2200 Fax: +91 79 4040 2244 Bangalore Maruthi Info-Tech Centre 11-12/1, Inner Ring Road Koramangala, Bangalore 560 071 Tel: +91 80 3980 6000 Fax: +91 80 3980 6999 Chandigarh SCO 22-23 (Ist Floor) Sector 8C, Madhya Marg Chandigarh 160 009 Tel: +91 172 393 5777/781 Fax: +91 172 393 5780 Chennai No.10, Mahatma Gandhi Road Nungambakkam Chennai 600 034 Tel: +91 44 3914 5000 Fax: +91 44 3914 5999 Delhi Building No.10, 8th Floor DLF Cyber City, Phase II Gurgaon, Haryana 122 002 Tel: +91 124 307 4000 Fax: +91 124 254 9101 Hyderabad 8-2-618/2 Reliance Humsafar, 4th Floor Road No.11, Banjara Hills Hyderabad 500 034 Tel: +91 40 3046 5000 Fax: +91 40 3046 5299 Kochi 4/F, Palal Towers M. G. Road, Ravipuram, Kochi 682 016 Tel: +91 484 302 7000 Fax: +91 484 302 7001 Kolkata Unit No. 603 – 604, 6th Floor, Tower – 1, Godrej Waterside, Sector – V, Salt Lake, Kolkata 700 091 Tel: +91 33 44034000 Fax: +91 33 44034199 Mumbai Lodha Excelus, Apollo Mills N. M. Joshi Marg Mahalaxmi, Mumbai 400 011 Tel: +91 22 3989 6000 Fax: +91 22 3983 6000 Pune 703, Godrej Castlemaine Bund Garden Pune 411 001 Tel: +91 20 3050 4000 Fax: +91 20 3050 4010

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