Facts of the Case

The present batch of appeals was filed by the Revenue before the Delhi High Court against various assessees, including General Electric group entities and related foreign companies. The dispute centered around the levy of interest under Section 234B of the Income Tax Act, 1961 on non-resident assessees.

The Income Tax Appellate Tribunal (ITAT) had ruled in favor of the assessees by following an earlier judgment of the Delhi High Court. Aggrieved by this, the Revenue preferred appeals before the High Court raising a common question of law regarding applicability of interest under Section 234B.

Issues Involved

  1. Whether interest under Section 234B of the Income Tax Act, 1961 is leviable on non-resident assessees?
  2. Whether the ITAT was justified in following the binding precedent of the Delhi High Court in earlier GE-related cases?

Petitioner’s (Revenue’s) Arguments

  • The Revenue contended that interest under Section 234B is mandatory and should be levied where there is a failure to pay advance tax.
  • It was argued that non-resident assessees are also liable for advance tax obligations and consequently for interest under Section 234B.
  • The Revenue sought reconsideration of earlier rulings that were in favor of the assessees.

Respondent’s (Assessee’s) Arguments

  • The assessees relied on the binding precedent of the Delhi High Court in Director of Income Tax (International Taxation) vs GE Packaged Power Inc. (2015) 373 ITR 65 (Delhi).
  • It was argued that in cases of non-residents, where tax is deductible at source, liability to pay advance tax does not arise, and therefore Section 234B interest is not applicable.
  • The ITAT correctly followed the binding judgment and did not commit any error.

Court’s Findings / Order

  • The Delhi High Court observed that the issue raised by the Revenue was already settled in favor of the assessees by its earlier judgment in GE Packaged Power Inc. (2015).
  • The Court held that the previous ruling is binding and the ITAT was correct in following it.
  • Consequently, no substantial question of law arose for consideration.
  • All appeals filed by the Revenue were dismissed.

Important Clarification by the Court

  • The Court clarified that although the issue is presently covered by its earlier judgment, the matter is pending before the Supreme Court.
  • Therefore, the final outcome of the issue will be subject to the decision of the Supreme Court in the pending appeals and Special Leave Petitions.

Link to download the order -https://delhihighcourt.nic.in/app/case_number_pdf/2018:DHC:8726-DB/SRB01062018ITA6612018_145352.pdf

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