Facts of the Case

The present batch of appeals filed by the Revenue before the Delhi High Court involved multiple assessees, including GE group entities such as GE Engine Service Distribution LLC, GE Engine Services Inc., and others. The dispute centered around 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 earlier decisions of the High Court. Aggrieved by this, the Revenue preferred appeals before the High Court challenging the correctness of the ITAT’s decision.

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 High Court.
  • Whether the pending appeals before the Supreme Court affect the binding nature of the High Court’s earlier judgment.

Petitioner’s Arguments (Revenue)

The Revenue contended that:

  • Interest under Section 234B should be levied on the assessees for failure to pay advance tax.
  • The ITAT erred in relying upon earlier High Court decisions without considering that the issue was pending before the Supreme Court.
  • The matter required reconsideration in light of ongoing litigation before the Apex Court.

Respondent’s Arguments (Assessees)

The assessees argued that:

  • The issue of levy of interest under Section 234B on non-residents was already settled in their favour by the Delhi High Court in earlier judgments.
  • The ITAT correctly followed the binding precedent.
  • Mere pendency of appeal before the Supreme Court does not dilute the binding nature of the High Court judgment.

Court’s Findings / Order

The Delhi High Court held that:

  • The sole issue raised by the Revenue regarding levy of interest under Section 234B is already covered in favour of the assessee by the judgment in Director of Income Tax (International Taxation) v. GE Packaged Power Inc. (2015) 373 ITR 65 (Delhi).
  • The ITAT committed no error in following the binding precedent of the High Court.
  • Even though the Revenue has filed appeals before the Supreme Court and leave has been granted, the existing High Court judgment continues to bind subordinate authorities.

Accordingly, all appeals filed by the Revenue were dismissed.

Important Clarification by the Court

The Court clarified that:

  • The final outcome of the issue will be subject to the decision of the Supreme Court in the pending batch of appeals.
  • Parties shall ultimately be governed by the ruling of the Supreme Court on this question of law.

Section Involved

  • Section 234B of the Income Tax Act, 1961 – Interest for default in payment of advance tax

Link to download the order -https://delhihighcourt.nic.in/app/case_number_pdf/2018:DHC:8725-DB/SRB21052018ITA6052018_144505.pdf

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