Facts of the Case

The Revenue filed multiple appeals before the Delhi High Court against various General Electric group entities and related foreign companies. The central issue across all connected matters was the levy of interest under Section 234B of the Income Tax Act, 1961.

The assessees were non-resident entities. The Revenue contended that interest under Section 234B was applicable due to alleged failure in payment of advance tax. However, the assessees relied on earlier judgments of the Delhi High Court where it was held that such interest is not leviable in similar circumstances.

The Income Tax Appellate Tribunal (ITAT) had ruled in favour of the assessees by following binding precedent.

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 binding precedents of the Delhi High Court.

Petitioner’s (Revenue’s) Arguments

  • The Revenue argued that the assessees were liable to pay advance tax and failure to do so attracted interest under Section 234B.
  • It was contended that the ITAT incorrectly relied upon earlier decisions and failed to properly interpret the statutory provisions.

Respondent’s (Assessee’s) Arguments

  • The assessees contended that the issue was already settled in their favour by the Delhi High Court in earlier judgments.
  • They argued that being non-residents, the obligation to deduct tax at source lay on the payer, and therefore, liability under Section 234B could not be imposed.
  • The ITAT correctly followed binding judicial precedent and committed no error.

Court’s Findings / Order

  • 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 Court observed:
    • The ITAT rightly followed the binding precedent.
    • There was no error in the ITAT’s decision.
  • Consequently, all appeals filed by the Revenue were dismissed.

Important Clarification by Court

  • The Court clarified that:
    • The issue is pending before the Supreme Court where leave has already been granted.
    • The parties shall ultimately be bound by the final decision of the Supreme Court in the pending appeals and Special Leave Petitions.

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

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