Facts of the Case

The present batch of appeals was filed by the Revenue (Income Tax Department) against various General Electric (GE) group entities including General Electric Power Systems Inc., GE Engine Services McAllen LP, GE Caledonian Ltd., General Electric Canada Company, GE Jenbacher GmbH & Co., GE Wind Energy GmbH, and others.

These appeals arose from orders of the Income Tax Appellate Tribunal (ITAT), wherein the Tribunal had ruled in favour of the assessee companies (non-resident entities), particularly on the issue relating to levy of interest under Section 234B of the Income Tax Act, 1961.

The Revenue challenged the Tribunal’s decision, contending that interest under Section 234B was applicable.

Issues Involved

  1. Whether interest under Section 234B of the Income Tax Act, 1961 is leviable on non-resident assessees.
  2. Whether the ITAT erred in following earlier judgments of the Delhi High Court on the same issue.

Petitioner’s (Revenue) Arguments

  • The Revenue contended that the assessees were liable to pay interest under Section 234B for default in payment of advance tax.
  • It was argued that the Tribunal erred in deleting such interest and in relying upon previous decisions of the Delhi High Court.
  • The Revenue further indicated that similar issues were pending before the Supreme Court after grant of leave.

Respondent’s (Assessee) Arguments

  • The assessees (GE group entities) relied upon earlier binding judgments of the Delhi High Court.
  • It was contended that the issue of levy of interest under Section 234B on non-residents had already been settled in their favour.
  • The assessees emphasized that where tax is deductible at source, liability to pay advance tax (and consequently interest under Section 234B) does not arise.

Court’s Findings / Order

  • The Delhi High Court observed that the sole issue involved was the applicability of interest under Section 234B.
  • The Court held that the issue was already 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 affirmed that:
    • The ITAT committed no error in following the binding precedent.
    • The previous ruling of the High Court was applicable and binding.
  • Accordingly, all appeals filed by the Revenue were dismissed.

Important Clarification by the Court

  • The Court clarified that:
    • The issue is currently pending before the Supreme Court.
    • The final outcome will be subject to the Supreme Court’s decision in the pending batch of appeals and Special Leave Petitions.
    • Until then, the High Court’s earlier rulings continue to bind the parties.

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

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