Linkedin Profiles - Used as an Evidence by Tax Department!!

GE Energy Parts Inc. v. ADIT (ITA No. 671/Del/2011)

For a professional, a good LinkedIn profile is a passport to a better job. For the taxman, it’s just become a means to keep tabs on the goings-on in your company.
 

In a recent case, Income Tax officials succeeded in using LinkedIn profiles of people working for a GE group subsidiary as evidence that their company was conducting activities that were not permitted, and that it owed taxes.
 

In March 2007, the IT Dept conducted a survey of the offices of General Electric International Operations Company Inc (GEIOC).
 

The Department said it had noticed the GE group was engaged in various sales activities in India, for which the business heads were generally expats, who were on the payroll of GE International Inc. Support staff were provided by GE India Industrial Pvt. Ltd. and also by third parties.
 

Violation of terms

The Department noted that according to the application made to the RBI, the GEIOC liaison office was to act as a communication channel between the head office and the customers in India. However, as a result of survey, it says it found the company providing the services of its employees to GE group entities worldwide.
 

The activities indicated that GEIOC was carrying out business through a Permanent Establishment and that its income was taxable in India. But it had never filed returns indicating this.
 

To prove its case, the IT Department had sought details about the roles of certain employees working at the liaison office.
 

When it was unable to get the information, the Department submitted the LinkedIn profiles of the employees as evidence.
 

GE opposed this, saying the profiles were hearsay evidence.
 

In its July 4 order, the tax tribunal pointed out that LinkedIn profiles are not in the nature of hearsay (unconfirmed) evidence because it is the employee who has provided all the relevant details. These details are similar to an admission made by a person. No third party is involved in creating a LinkedIn profile and therefore, it cannot be said to be hearsay evidence, the order noted.
 

Matter of appeal

The order also said that in the present case, LinkedIn profiles submitted by the IT Department had a considerable bearing on the subject matter of appeal and could therefore be admitted as evidence.
 

Building digital profiles

A cyber security expert employed with a major financial institution said that all financial and security agencies have started building digital profiles of their “persons of interest”.
 

Information such as name, age, PAN number, credit card details are being collated using sophisticated algorithms. The IT department is also moving in that direction. 
 

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 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.
• 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. 

Tribunal’s ruling 

• Perusal of Section 255(6) 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.
• 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. 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.