Facts of the Case

The present batch of appeals was filed by the Revenue before the Delhi High Court involving multiple assessees belonging to the General Electric Group, including General Electric Power Systems Inc., GE Engine Services McAllen LP, GE Caledonian Ltd, General Electric Canada Company, GE Jenbacher GmbH & Co., Nuovo Pignone SPA, GE Wind Energy GmbH, and others.

The core issue across all appeals was identical and related to the levy of interest under Section 234B of the Income Tax Act, 1961 on non-resident entities.

The Income Tax Appellate Tribunal (ITAT) had ruled in favour of the assessees by following an earlier judgment of the Delhi High Court. Aggrieved by the same, 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.
  • Whether the ITAT was justified in following the earlier binding precedent of the Delhi High Court on the same issue.

Petitioner’s Arguments (Revenue)

  • The Revenue contended that interest under Section 234B is applicable and should be levied on the assessees.
  • It was argued that the ITAT erred in granting relief by relying upon earlier judgments.
  • The Revenue further pointed out that the issue is pending before the Supreme Court, implying that the matter is not final.

Respondent’s Arguments (Assessees)

  • The assessees relied upon the binding precedent of the Delhi High Court in
    Director of Income Tax (International Taxation) v. GE Packaged Power Inc. (2015) 373 ITR 65 (Delhi).
  • It was submitted that the issue of levy of interest under Section 234B on non-residents is already settled in their favour.
  • Therefore, the ITAT correctly followed the precedent and no interference was required.

Court’s Findings / Order

  • The Delhi High Court held that the issue is squarely covered in favour of the assessees by its earlier judgment in GE Packaged Power Inc. case.
  • The Court observed that:
    • The previous ruling is binding on it.
    • The ITAT committed no error in following the earlier judgment.
  • Accordingly, all the appeals filed by the Revenue were dismissed.

Important Clarification by the Court

  • The Court clarified that:
    • The Revenue has already approached the Supreme Court against the earlier judgment.
    • Since the matter is pending and leave has been granted, the final outcome will depend on the Supreme Court’s decision.
  • Thus, the dismissal of appeals is subject to the final ruling of the Supreme Court on the same issue.

Sections Involved

  • Section 234B – Interest for Default in Payment of Advance Tax
  • Income Tax Act, 1961

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

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