Facts of the Case

The present batch of appeals was filed by the Revenue against multiple foreign entities belonging to the General Electric (GE) group and other non-resident companies.

The core dispute in all the appeals related to the levy of interest under Section 234B of the Income Tax Act on non-resident assessees.

The Income Tax Appellate Tribunal (ITAT) had ruled in favour of the assessees by following an earlier judgment of the Delhi High Court in a similar matter involving GE entities. Aggrieved by this, the Revenue preferred appeals before the High Court.

Issues Involved

  1. Whether interest under Section 234B is leviable on non-resident assessees.
  2. Whether the ITAT was justified in following the earlier Delhi High Court judgment in favour of the assessee.
  3. Whether pending appeals before the Supreme Court affect the binding nature of High Court precedents.

Petitioner’s (Revenue’s) Arguments

  • The Revenue contended that interest under Section 234B should be levied on the non-resident assessees.
  • It was argued that the ITAT erred in relying upon earlier judgments without independently examining the facts.
  • The Revenue further pointed out that the issue is pending before the Supreme Court, implying that the matter is not conclusively settled.

Respondent’s (Assessee’s) Arguments

  • The assessees argued that the issue is squarely covered in their favour by the Delhi High Court judgment in:
    Director of Income Tax (International Taxation) vs GE Packaged Power Inc. (2015) 373 ITR 65 (Delhi).
  • They contended that non-residents are not liable for advance tax where tax is deductible at source, and hence Section 234B interest cannot be imposed.
  • The ITAT correctly followed binding precedent, leaving no scope for interference.

Court’s Findings / Order

  • The High Court held that the issue is already covered in favour of the assessees by its earlier judgment in GE Packaged Power Inc..
  • It observed that the ITAT committed no error in following the binding precedent.
  • The Court emphasized that existing High Court rulings are binding unless overturned.
  • Consequently, all appeals filed by the Revenue were dismissed.

Important Clarification by Court

  • The Court clarified that since the matter is pending before the Supreme Court:
    • The final outcome will be governed by the Supreme Court’s decision in the pending appeals and Special Leave Petitions.
  • Thus, while the High Court ruling applies presently, it is subject to final adjudication by the Supreme Court.

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

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