Facts of the Case

  • The Respondents (GE group entities and others) are non-resident companies engaged in providing services and business operations involving India.
  • The Assessing Officer levied interest under Section 234B for default in payment of advance tax.
  • The ITAT ruled in favour of the assessees, deleting such interest liability.
  • The Revenue filed multiple appeals before the Delhi High Court.

Issues Involved

  1. Whether non-resident assessees are liable to pay interest under Section 234B of the Income Tax Act, 1961?
  2. Whether the ITAT erred in following earlier binding precedent of the High Court?

Petitioner’s Arguments (Revenue)

  • The Revenue argued that the assessees had defaulted in payment of advance tax, thereby attracting Section 234B.
  • It was contended that the ITAT wrongly deleted the interest liability.
  • The Revenue also relied on the pendency of similar issues before the Supreme Court.

Respondent’s Arguments (Assessees)

  • The assessees contended that being non-residents, the obligation to deduct tax lies on the payer under TDS provisions.
  • Therefore, no liability to pay advance tax arises, and consequently, Section 234B interest is not leviable.
  • They relied on binding precedent of the Delhi High Court in
    Director of Income Tax (International Taxation) v. GE Packaged Power Inc. (2015) 373 ITR 65 (Delhi).

Court’s Findings / Order

  • The Delhi High Court held that the issue is squarely covered in favour of the assessees by its earlier judgment.
  • The Court observed that:
    • The earlier ruling in GE Packaged Power Inc. is binding.
    • The ITAT committed no error in following the precedent.
  • Accordingly, all appeals filed by the Revenue were dismissed.

Important Clarification by the Court

  • The Court clarified that:
    • The issue is pending before the Supreme Court, where leave has been granted.
    • The final outcome will be governed by the Supreme Court’s decision in the pending appeals and SLPs.

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

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