By K. B. Bhujle | Advocate
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[General Electric Co. v. DDIT (Del.), WP No. 9100 of 2007, dated 12-8-2011]
Genpact India is an Indian company. The whole of the share capital of Genpact India 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 Assessing Officer found that the shares of Genpact India were transferred outside India. He held that the transaction of transfer of shares of Genpact India has resulted in capital gains to General Electric, USA. Therefore, he issued a notice u/s.163 of the Income-tax Act, 1961 proposing to treat Genpact India as an agent of General Electric and to assess the capital gain in its hands as a representative assessee. General Electric Co. filed writ petition challenging the notice.
The Delhi High Court allowed the writ petition and held as under:
“(i) 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.
(ii) 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.
(iii) 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. Genpact India is sought to be taxed as representative assessee when it had no role in the transfer of shares. Merely because these shares relate to Genpact India that would not make Genpact India as agent qua deemed capital gain purportedly earned by General Electric Co.
(iv) Consequently, the section 163 proceedings seeking to assess Genpact India for the capital gains of General Electric were without jurisdiction.”
