Facts of the Case

The present batch of appeals was filed by the Revenue 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., General Electric Canada Company, and others.

The core dispute arose in relation to the levy of interest under Section 234B of the Income Tax Act, 1961 on non-resident assessees. The Income Tax Appellate Tribunal (ITAT) had ruled in favour of the assessees by following an earlier decision of the Delhi High Court.

The Revenue challenged the ITAT’s order before the Delhi High Court.

Issues Involved

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

Petitioner’s (Revenue’s) Arguments

  • The Revenue contended that the ITAT erred in deleting the interest levied under Section 234B.
  • It was argued that the liability to pay advance tax exists, and consequently, interest under Section 234B should be applicable.

Respondent’s (Assessee’s) Arguments

  • The assessees relied on the binding judgment of the Delhi High Court in Director of Income Tax (International Taxation) vs GE Packaged Power Inc. (2015) 373 ITR 65 (Delhi).
  • It was argued that where tax is deductible at source, the non-resident assessee cannot be held liable for interest under Section 234B.

Court’s Findings / Order

  • The Delhi High Court observed that the sole issue raised by the Revenue relates to the levy of interest under Section 234B.
  • The Court held that the issue is already covered in favour of the assessee by its earlier judgment in GE Packaged Power Inc..
  • The Court reiterated that the earlier decision is binding and the ITAT committed no error in following it.
  • Accordingly, 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.
  • It was observed that the final outcome will be subject to the decision of the Supreme Court in the pending matters.

Sections Involved

  • Section 234B – Interest for defaults in payment of advance tax
  • Relevant provisions relating to TDS applicability on non-residents

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

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