Facts of the Case

The Revenue filed multiple appeals against various GE group entities (non-resident companies) challenging the orders of the Income Tax Appellate Tribunal (ITAT).

The central issue pertained to the levy of interest under Section 234B for alleged default in payment of advance tax by non-resident assessees.

The Tribunal had ruled in favour of the assessees by relying on an earlier judgment of the Delhi High Court in Director of Income Tax (International Taxation) v. GE Packaged Power Inc. (2015) 373 ITR 65 (Delhi).

Issues Involved

  1. Whether interest under Section 234B is leviable on non-resident assessees where tax is deductible at source (TDS) by the payer.
  2. Whether the ITAT was correct in following earlier binding precedent of the High Court.

Petitioner’s Arguments (Revenue)

  • The Revenue contended that the assessees were liable to pay advance tax, and failure to do so attracts interest under Section 234B.
  • It was argued that the Tribunal erred in deleting the interest liability.
  • The Revenue also pointed out that the earlier judgment relied upon is under challenge before the Supreme Court.

Respondent’s Arguments (Assessees – GE Entities)

  • The assessees argued that being non-residents, their income was subject to tax deduction at source (TDS).
  • Therefore, the primary obligation to deduct tax lies on the payer, not the recipient.
  • Consequently, no liability under Section 234B arises.
  • They relied on binding precedent of the Delhi High Court in GE Packaged Power Inc. case.

Court’s Findings / Order

  • The Delhi High Court held that the issue is already covered in favour of the assessees by its earlier judgment.
  • The Court observed that:
    • The ITAT correctly followed binding precedent.
    • No error was committed by the Tribunal.
  • Accordingly, all appeals filed by the Revenue were dismissed.

Important Clarification by the Court

  • The Court clarified that:
    • Since the earlier judgment is pending before the Supreme Court,
    • Final determination of law will depend on the Supreme Court’s decision in the pending appeals. 

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

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