Facts of the Case

The Revenue filed multiple appeals before the Delhi High Court against various GE group entities (non-resident assessees), challenging the orders of the Income Tax Appellate Tribunal (ITAT).

The core issue pertained to the levy of interest under Section 234B of the Income Tax Act, 1961 on non-resident entities.

The ITAT had ruled in favour of the assessees by following earlier binding precedents of the Delhi High Court. Aggrieved by this, the Revenue preferred appeals before the High Court.

Issues Involved

  1. Whether interest under Section 234B is leviable on non-resident assessees.
  2. Whether the liability to pay advance tax arises when tax is deductible at source.
  3. Whether the ITAT erred in following earlier binding precedent of the Delhi High Court.

Petitioner’s Arguments (Revenue)

  • The Revenue contended that the assessees were liable to pay interest under Section 234B for failure to pay advance tax.
  • It was argued that the ITAT wrongly relied on previous judgments without independently analyzing the facts.
  • The Revenue further submitted that the matter was pending before the Supreme Court and therefore required reconsideration.

Respondent’s Arguments (Assessee)

  • The assessees (GE group entities) argued that they were non-residents and their income was subject to Tax Deducted at Source (TDS).
  • Since the obligation to deduct tax lies on the payer, no liability to pay advance tax arises for the assessee.
  • 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 held that the issue was already covered in favour of the assessees by its earlier judgment.
  • It was observed that the ITAT correctly followed the binding precedent and committed no error.
  • The Court reiterated that interest under Section 234B is not leviable where tax is deductible at source on payments to non-residents.
  • Accordingly, all appeals filed by the Revenue were dismissed.

Important Clarification by the Court

  • The Court clarified that since the matter is pending before the Supreme Court, the final outcome will be subject to the decision of the Supreme Court.
  • The parties shall be bound by the final ruling in the pending batch of appeals before the Apex 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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