LinkedIn profile as evidence for tax assessment, Delhi HC stays ITAT order

The Delhi High Court (High Court) has stayed the ruling of the Income Tax Appellate Tribunal (ITAT) that profiles posted on the social networking website LinkedIn can be used as additional evidence in determining whether a company’s liaison office constitutes a permanent establishment whose income is taxable..Senior Advocate S Ganesh appeared for the Petitioner GE Energy Parts Inc. (Assessee) before ITAT and High Court along with advocate Anuradha Dutt of Dutt Menon and Dunmorssette. Advocate NP Sahni appeared for the tax department in the High Court..The case pertains to a liaison office set up by General Electric International Operations Company Inc. in India. The office was to act as a communications channel between the head office and the Indian customers of General Electric. The tax department, after conducting an investigation of the premises, decided that the liaison office was carrying out commercial activities which made it a permanent establishment thereby making its income generated taxable in India..Before ITAT, the tax department sought admission of LinkedIn profiles of some of the expatriate employees to prove that they were playing a larger role than merely running a liaison office..In a judgment delivered on July 4, 2014 the ITAT held that:.“LinkedIn profiles is not in the nature of hearsay because it is the employee who himself has given all the relevant details and the same relate to him. These detalis are akin to admission made by a person. No third party is involved in creating of this LinkedIn profiles and, therefore, it cannot be said to be an hearsay evidence.”.Responding to the contention that the profiles were not used by the Commissioner of Income Tax (Appellate) while deciding this issue, the ITAT held that,.“The strict Rules of Evidence are not applicable to income-tax proceedings. The evidences sought to be filed by Revenue are only supporting in nature and would assist in appreciating the facts in a more judicial manner.”.It, therefore, proceeded to admit LinkedIn profiles as additional evidence..The matter was then taken to the High Court by way of appeal by the Assessee. A Division Bench of the High Court comprising Justices Badar Durrez Ahmed and Siddharth Mridul vide an interim order stayed the order of the ITAT on July 16..The matter will now be heard on November 13, 2014..Image taken from here.