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HC stays order permitting taxman to tap into LinkedIn

Written By Admin on Sunday, 20 July 2014 | Sunday, July 20, 2014

In a major relief to American multinational GE, the Delhi High Court on Wednesday stayed a July 4 order of the Delhi tax tribunal that permitted the taxman to tap into LinkedIn profiles of company employees as evidence, in respect of demand proceedings instituted against subsidiaries of the conglomerate.

As a result, the taxman will now be barred from producing LinkedIn profiles of past and present GE employees as evidence, in a number of cases lodged by GE against the department in the Delhi Income Tax Appellate Tribunal (ITAT). The department, however, can continue its probe into the matter and call for other evidence.

Meanwhile, the taxman has also been directed to file its reply on GE Energy Parts Inc’s plea, contending that LinkedIn profiles cannot be admitted in a court proceedings as they should be treated as hearsay. The court will hear the matter further on October 15.

The entire dispute stems from a survey carried out by the department in March 2007 at the office premises of General Electric International Operations Company (GEIOC). After the survey, the department concluded that the GE group was engaged in various sales activities in India, for which expatriates were appointed as business heads to monitor Indian operations. It added that these expatriate employees looked after the business of GE group as a whole, irrespective of any GE group company making sales in India.

The taxman, in its assessment order, had recorded that as per the company’s application made to RBI and permission obtained thereafter, the liaison office was to act as a communication channel between the head office and customers in India. However, the taxman observed, the company, instead of undertaking the permitted activities, was employing personnel and providing their services to GE group companies worldwide.

Following this, the department held that GEIOC was carrying out business in India through a Permanent Establishment (PE) and assessed that the income earned by such a PE was taxable in India.

Subsequently, the department asked the CEO of GEIOC to submit employment letters of employees working for overseas group companies and their roles and responsibilities. When the company failed to submit the letters of all employees of GE overseas group companies working in India, the taxman, during the course of proceedings in the tribunal, sought to submit LinkedIn profiles of employees as “additional evidence” as they would serve in “advancing the cause of justice”.

Dismissing GE’s contention that LinkedIn profiles are hearsay evidence, the tribunal on July 4 had said: “LinkedIn profiles are not in the nature of hearsay because it is the employee who himself has given all relevant details and the same relate to him. These details are akin to admission made by a person. No third party is involved in creating of this profile and, therefore, it cannot be said to be hearsay evidence.”

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