Facts of the Case

The present batch of appeals was filed by the Revenue (Commissioner/Principal Commissioner of Income Tax – International Taxation) against multiple non-resident entities including GE Engine Service Distribution LLC, GE Engine Services Inc., and other connected entities.

The core dispute revolved around the levy of interest under Section 234B of the Income Tax Act, 1961 on non-resident assessees.

The Income Tax Appellate Tribunal (ITAT) had ruled in favour of the assessees by holding that such interest was not leviable where tax was deductible at source on payments made to non-residents. The Revenue challenged this finding before the Delhi High Court.

Issues Involved

  1. Whether interest under Section 234B can be levied on non-resident assessees when tax is deductible at source (TDS) by the payer.
  2. Whether the ITAT was correct in relying on earlier Delhi High Court judgments on this issue.

Petitioner’s Arguments (Revenue)

  • The Revenue contended that non-resident assessees are liable to pay advance tax and failure to do so attracts interest under Section 234B.
  • It was argued that the liability to pay advance tax cannot be completely negated merely because tax is deductible at source.
  • The Revenue sought reconsideration of earlier precedents.

Respondent’s Arguments (Assessee)

  • The assessees argued that where income is subject to TDS, the primary obligation to deduct tax lies on the payer.
  • Since the tax was required to be deducted at source, the non-resident assessee had no liability to pay advance tax.
  • Therefore, interest under Section 234B cannot be imposed.
  • Reliance was placed on the binding precedent of the Delhi High Court in
    Director of Income Tax (International Taxation) vs GE Packaged Power Inc. (2015) 373 ITR 65 (Delhi).

Court’s Findings / Order

  • The Delhi High Court observed that the issue was already settled in favour of the assessee by its earlier judgment in GE Packaged Power Inc.
  • The Court held that the previous ruling is binding and applicable to the present batch of appeals.
  • It was further noted that the ITAT had not committed any error in following the earlier decision.
  • Accordingly, the appeals filed by the Revenue were dismissed.

Important Clarification by the Court

  • The Court clarified that the matter is pending before the Supreme Court, where leave has already been granted in related appeals.
  • Therefore, the final outcome will be subject to the decision of the Supreme Court.

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

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