Facts of the Case

The present batch of appeals was filed by the Revenue against multiple foreign entities of the General Electric group and other non-resident assessees. The central dispute revolved around the levy of interest under Section 234B of the Income Tax Act, 1961 on such non-resident entities.

The Income Tax Appellate Tribunal (ITAT) had ruled in favour of the assessees by following earlier binding precedents of the Delhi High Court, particularly in similar matters involving international taxation.

Aggrieved by the Tribunal’s decision, the Revenue preferred appeals before the Delhi High Court.

Issues Involved

  1. Whether interest under Section 234B of the Income Tax Act is leviable on non-resident assessees.
  2. Whether the ITAT was justified in following earlier binding judgments of the High Court on the same issue.

Petitioner’s (Revenue’s) Arguments

  • The Revenue contended that interest under Section 234B is mandatory and should be levied irrespective of the residential status of the assessee.
  • It argued that the Tribunal erred in following earlier judgments without independently examining the applicability of Section 234B.

Respondent’s (Assessee’s) Arguments

  • The assessees submitted that the issue is already settled in their favour by earlier judgments of the Delhi High Court.
  • It was argued that when tax is deductible at source, non-resident assessees cannot be held liable for advance tax, and consequently, Section 234B interest is not applicable.
  • Reliance was placed on binding precedent in identical circumstances.

Court’s Findings / Order

  • The Delhi High Court held that the issue is squarely covered in favour of the assessee by its earlier judgment in Director of Income Tax (International Taxation) vs GE Packaged Power Inc. (2015) 373 ITR 65 (Delhi).
  • The Court observed that the Tribunal had correctly followed the binding precedent and committed no error.
  • It reiterated that judicial discipline requires adherence to earlier binding decisions.

Final Order

  • All appeals filed by the Revenue were dismissed.

Important Clarification by the Court

  • The Court clarified that since the Revenue has already filed appeals before the Supreme Court against the earlier judgment, and those appeals are pending:
    • The final outcome on the question of law will depend on the Supreme Court’s decision.
  • Thus, the dismissal is subject to the final ruling of the Supreme Court in pending matters.

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

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