FACTS OF THE CASE

The Revenue preferred multiple appeals against various General Electric group entities and related foreign companies. The central issue arose from orders of the Income Tax Appellate Tribunal (ITAT), wherein relief was granted to the assessees concerning levy of interest under Section 234B of the Income Tax Act, 1961.

The assessees were non-resident entities engaged in business activities involving India. The Revenue contended that interest under Section 234B should be levied for failure to pay advance tax.

However, the Tribunal relied on earlier Delhi High Court judgments which held that where tax is deductible at source, non-resident assessees are not liable for advance tax, and consequently, no interest under Section 234B is leviable.

ISSUES INVOLVED

  1. Whether interest under Section 234B of the Income Tax Act, 1961 is leviable on non-resident assessees.
  2. Whether the ITAT was correct in following the binding precedent of the Delhi High Court.
  3. Whether the pendency of appeals before the Supreme Court affects the binding nature of High Court judgments.

PETITIONER’S (REVENUE) ARGUMENTS

  • The Revenue argued that non-resident assessees were liable to pay advance tax under the provisions of the Income Tax Act.
  • Consequently, failure to pay advance tax should attract interest under Section 234B.
  • The Revenue contended that the issue was pending before the Supreme Court, and therefore, relief should not have been granted based solely on earlier High Court rulings.

RESPONDENT’S (ASSESSEE) ARGUMENTS

  • The assessees contended that as non-residents, their income was subject to tax deduction at source (TDS).
  • Since the obligation to deduct tax lies with the payer, the assessees had no liability to pay advance tax.
  • Therefore, interest under Section 234B was not applicable.
  • They relied on the binding precedent of the Delhi High Court in earlier judgments.

COURT FINDINGS / ORDER

  • The Delhi High Court observed that the sole issue involved was regarding levy of interest under Section 234B.
  • The Court held that the issue was already covered in favour of the assessees by its earlier judgment in:
    Director of Income Tax (International Taxation) vs GE Packaged Power Inc. (2015) 373 ITR 65 (Delhi).
  • The Court reiterated that binding precedent must be followed, and the ITAT committed no error in doing so.
  • Accordingly, all appeals filed by the Revenue were dismissed.

IMPORTANT CLARIFICATION BY COURT

  • The Court clarified that since the matter is pending before the Supreme Court, the final outcome will be governed by the Supreme Court’s decision.
  • Thus, while the High Court decision binds for now, it remains subject to final adjudication by the Supreme Court.

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

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