Facts of the Case

The present batch of appeals was filed by the Revenue before the Delhi High Court challenging the orders of the Income Tax Appellate Tribunal (ITAT). The dispute centered on the levy of interest under Section 234B of the Income Tax Act on non-resident entities, including GE group companies.

The ITAT had ruled in favour of the assessees by following earlier binding precedents of the Delhi High Court, holding that such interest was not leviable in the given circumstances.

The Revenue, aggrieved by this finding, preferred appeals before the High Court.

Issues Involved

  1. Whether interest under Section 234B is leviable on non-resident assessees.
  2. Whether the ITAT was justified in following earlier jurisdictional High Court rulings in favour of the assessee.

Petitioner’s Arguments (Revenue)

  • The Revenue contended that interest under Section 234B is mandatory and should be levied for failure to pay advance tax.
  • It was argued that the ITAT erred in relying upon earlier judgments without independently analyzing the applicability of Section 234B.
  • The Revenue further indicated that similar issues were pending before the Supreme Court.

Respondent’s Arguments (Assessee)

  • The assessees relied on binding precedents of the Delhi High Court, particularly:
    • 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, non-resident assessees are not liable to pay advance tax, and hence Section 234B interest cannot be levied.
  • The ITAT correctly followed settled law and committed no error.

Court’s Findings / Order

  • The High Court observed that the issue was squarely covered in favour of the assessee by its earlier judgment in GE Packaged Power Inc..
  • It held that:
    • The ITAT rightly followed the binding precedent.
    • No substantial question of law arose for consideration.
  • Accordingly, all appeals filed by the Revenue were dismissed.

Important Clarification by the Court

  • The Court clarified that:
    • The Revenue has already appealed the issue before the Supreme Court.
    • The final outcome will be governed by the decision of the Supreme Court in the pending appeals.
  • Thus, the dismissal is subject to the final ruling of the Supreme Court on the same issue.

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

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