The Delhi Bench of the Income Tax Appellate Tribunal, in GE Energy Parts Inc v. Assistant Commissioner of Income Tax, Circle Int Tax 1(3)(1), ITA No. 1947/Del/2025, concerning Assessment Year 2022-23, has held that the US-based assessee did not have either a fixed place Permanent Establishment (PE) or a Dependent Agent Permanent Establishment (DAPE) in India. Consequently, receipts arising from offshore supply of equipment, spare parts, repairs and refurbishment carried out outside India could not be taxed in India. The order was pronounced on 3 August 2026.
Background of the Case
GE Energy Parts Inc, a tax resident of the United States, entered into international transactions involving supply of spare parts, including replacement, refurbishment and supply of rotable parts, to customers in India on an offshore basis. Consideration of approximately ₹108.57 crore was received for offshore supply of spare parts and repairs carried out outside India.
The Assessing Officer treated the receipts as business income on the basis that the assessee had a PE in India and attributed 10% of the gross receipts, resulting in an addition of approximately ₹10.86 crore. The assessee challenged both the existence of the alleged PE and the consequent attribution of profits.
Whether GEII’s Project Office Constituted the Assessee’s PE
The Revenue contended that the project office of GE International Inc. (GEII) constituted a fixed place PE of the assessee under Article 5 of the India-US DTAA. Reliance was also placed on agreements and documents involving a project director of GEII to suggest that the Indian office was being used for the activities of the wider GE group.
The Tribunal rejected this approach. It observed that the relevant comprehensive service agreement relied upon by the Revenue was between Ratnagiri Gas & Power Pvt. Ltd. and GEII, and not GE Energy Parts Inc. The project director had signed the agreement in his capacity as representative of GEII, and there was no material showing that the assessee had authorised him to represent it.
The Tribunal further found that the Assessing Officer had failed to bring documentary evidence establishing that the conditions prescribed under Article 5 for creation of either a fixed place PE or DAPE were satisfied. In particular, there was no evidence that GEII’s project office was at the disposal of or used by the assessee for conducting its offshore business, nor was it established that the office habitually exercised authority to conclude contracts on behalf of the assessee.
Revenue Bears the Onus to Establish Permanent Establishment
An important principle reiterated by the Tribunal was that the onus lies on the Revenue to establish the existence of a PE within the meaning of Article 5 of the India-US DTAA.
The Tribunal also took note of the assessee’s preceding assessment years, where coordinate benches had held that no fixed place PE or DAPE existed in India. It observed that the DRP itself had acknowledged that the PE issue had arisen in earlier years on similar grounds.
Accordingly, the Tribunal held that the assessee had neither a fixed place PE nor a DAPE in India during AY 2022-23.
Offshore Supply, Repairs and Refurbishment Not Taxable in India
The Tribunal separately examined the offshore supply agreements. The agreements demonstrated that the supply of parts and repair services was to be carried out outside India. In the agreement considered in detail by the Tribunal, title to parts shipped from the United States passed to the Indian customer immediately after the goods departed the territorial land, seas and overlying airspace of the United States.
On this basis, the Tribunal found that the supply of equipment as well as repairs and refurbishment were concluded outside India. Referring to the principle recognised in Ishikawajma-Harima Heavy Industries Ltd. v. DIT, 288 ITR 408 (SC), the Tribunal held that receipts from such offshore supplies and services were not taxable in India.
Allegation of Artificial Splitting of Contracts Rejected
The Revenue had also argued that the underlying arrangements constituted a composite contract that had been artificially divided into offshore and onshore components to reduce Indian tax liability.
The Tribunal rejected this allegation after examining the contractual framework. It recorded that separate agreements for onshore services and contract management and offshore supply of parts and repairs existed from the bid stage itself. The division was therefore not an artificial splitting subsequently introduced by the assessee for tax purposes.
No Profit Attribution in Absence of PE
Once the Tribunal concluded that GE Energy Parts Inc had no PE in India and that the offshore supply, repair and refurbishment receipts were themselves not taxable in India, the question of attributing profits to an alleged Indian PE did not survive.
The Tribunal accordingly set aside the impugned assessment order and allowed the assessee’s appeal, thereby directing deletion of the addition arising from the alleged PE attribution.
Key Takeaway
The ruling reinforces that the existence of a group entity’s project office in India does not, by itself, create a PE for another foreign group company. The Revenue must establish, through specific evidence, that the requirements of Article 5 of the applicable tax treaty are actually satisfied. It also confirms the importance of examining where title passes, where services are performed and whether offshore and onshore contractual obligations are genuinely separate when determining the Indian taxability of cross-border supplies and services.
