Facts of the Case

The present batch of appeals was filed by the Revenue before the Delhi High Court involving multiple assessees, including General Electric group entities such as 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 entities engaged in international transactions in India. The Income Tax Appellate Tribunal (ITAT) had ruled in favour of the assessees, following earlier binding precedents.

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 (TDS).
  • Whether the ITAT was justified in following earlier Delhi High Court rulings on the same issue.

Petitioner’s (Revenue) Arguments

  • The Revenue contended that the assessees were liable to pay advance tax, and consequently, interest under Section 234B should be imposed.
  • It was argued that failure to discharge advance tax liability attracted statutory interest irrespective of TDS obligations.

Respondent’s (Assessee) Arguments

  • The assessees argued that being non-residents, their income was subject to tax deduction at source (TDS) under the Act.
  • Since the obligation to deduct tax was on the payer, no liability to pay advance tax arose.
  • Therefore, interest under Section 234B could not be levied.

Court Findings / Judgment

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 ITAT did not commit any error in following the binding precedent.
  • Consequently, all appeals filed by the Revenue were dismissed.

Important Clarification by the Court

  • The Court clarified that the Revenue has already filed appeals before the Supreme Court against the earlier judgment.
  • Therefore, the final outcome on the question of law will be subject to the Supreme Court’s decision in the 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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