Facts of the Case

The present batch of appeals was filed by the Revenue before the Delhi High Court against multiple General Electric (GE) group entities, including General Electric Power Systems Inc., GE Engine Services McAllen LP, GE Caledonian Ltd, GE Jenbacher GmbH & Co., and others.

The core issue arose from the levy of interest under Section 234B of the Income Tax Act, 1961 on non-resident assessees engaged in international transactions.

The Income Tax Appellate Tribunal (ITAT) had ruled in favour of the assessees by following earlier binding precedents of the Delhi High Court. Aggrieved, the Revenue preferred appeals before the High Court.

Issues Involved

  • Whether interest under Section 234B of the Income Tax Act, 1961 is leviable on non-resident assessees where tax is deductible at source.
  • Whether the ITAT was justified in following earlier judgments of the Delhi High Court on the same issue.

Petitioner’s Arguments (Revenue)

  • The Revenue contended that the assessees were liable to pay advance tax.
  • Consequently, failure to pay advance tax attracted interest under Section 234B.
  • The Revenue challenged the reliance placed by ITAT on earlier High Court rulings.

Respondent’s Arguments (Assessees)

  • The assessees argued that being non-residents, their income was subject to tax deduction at source (TDS).
  • Therefore, liability to pay advance tax did not arise.
  • They relied on the Delhi High Court judgment in Director of Income Tax (International Taxation) vs GE Packaged Power Inc. (2015) 373 ITR 65 (Delhi), which held that Section 234B interest is not applicable in such cases.

Court’s Findings / Judgment

  • The Delhi High Court observed that the issue is squarely covered in favour of the assessees by its earlier decision in GE Packaged Power Inc.
  • The Court held that:
    • The ITAT did not commit any error in following the binding precedent.
    • The principle laid down in earlier judgments continues to apply.
  • Accordingly, 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 on the same issue,
    • The final outcome will be subject to the decision of the Supreme Court in pending matters.

Sections Involved

  • Section 234B – Interest for default in payment of advance tax
  • Relevant provisions relating to Tax Deducted at Source (TDS) under the Income Tax Act, 196

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

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