Facts of the Case

The present batch of appeals was filed by the Revenue against multiple foreign entities of the GE Group concerning liability to pay interest under Section 234B of the Income Tax Act, 1961.

The issue arose in the context of non-resident assessees where tax was required to be deducted at source. The Income Tax Appellate Tribunal (ITAT) had ruled in favour of the assessees, holding that interest under Section 234B was not leviable.

Aggrieved, the Revenue preferred appeals before the Delhi High Court challenging the correctness of the ITAT’s findings.

Issues Involved

  1. Whether interest under Section 234B is leviable on non-resident assessees where tax is deductible at source?
  2. Whether the ITAT erred in following earlier binding precedents 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 incorrectly applied earlier judicial precedents without considering the facts of the present case.

Respondent’s Arguments (Assessees)

  • The assessees argued that being non-residents, their income was subject to tax deduction at source (TDS), and therefore, liability to pay advance tax did not arise.
  • They relied on binding precedent of the Delhi High Court in Director of Income Tax (International Taxation) vs GE Packaged Power Inc. (2015) 373 ITR 65, which held that Section 234B interest is not applicable in such cases.

Court’s Findings / Order

  • The Delhi High Court held that the issue is already covered in favour of the assessees by its earlier judgment in GE Packaged Power Inc. case.
  • The Court observed that:
    • The ITAT correctly followed the binding precedent.
    • There was no error in the ITAT’s decision.
  • Consequently, all appeals filed by the Revenue were dismissed.

Important Clarification by Court

  • The Court clarified that:
    • The Revenue has already appealed against the earlier judgment before the Supreme Court.
    • The final outcome will be subject to the Supreme Court’s decision in the pending appeals/Special Leave Petitions.

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

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