Facts of the Case

The respondent, British Airways PLC, is a foreign entity incorporated under the laws of the United Kingdom and is engaged in providing air transport services. The assessee disputed its tax liability regarding a portion of its income attributed to ground handling services provided to other entities based on bilateral agreements. This specific income portion became the subject of assessment and subsequent appellate proceedings. Furthermore, the assessee asserted the applicability of the Indo-UK Double

Taxation Avoidance Agreement (DTAA). While the primary tax dispute was eventually resolved through a Mutual Agreement Procedure (MAP) on December 18, 2011, the issue of interest remained.


Issues Involved

The core legal question was whether the assessee, as a foreign company, was liable to pay interest under Section 234B of the Income Tax Act, 1961, following the determination of its tax liabilities.


Petitioner’s (Revenue) Arguments

The Revenue contended that the assessee was liable to pay interest under Section 234B in addition to the determined tax. They sought to challenge the findings of the CIT(Appeals) and the ITAT, which had previously ruled in favor of the assessee.


Respondent’s Arguments

The assessee maintained that the liability for interest under Section 234B did not apply in their specific circumstances, especially considering their status as a foreign company where tax is generally deductible at source by the payer.


Court Order / Findings


The High Court of Delhi dismissed the Revenue's appeals. The Court noted that the specific issue regarding interest under Section 234B for foreign companies had already been settled by previous rulings.

  • The Court relied on its earlier decisions in DIT v. Jacabs Civil Inc. and DIT v. GE Packaged Power Inc..
  • The Court clarified that a previous "discordant" ruling in DIT v. Alcatel Lucent USA Inc. was decided based on its own peculiar circumstances and did not override the established rationale in Jacabs.
  • Consequently, the question of law was answered against the Revenue.

Important Clarification 


The Court reaffirmed that the rationale established in the Jacabs Civil Inc. case applies to foreign companies regarding interest under Section 234B, effectively shielding such assessees from interest liability where the duty to deduct tax at source lies with the payer.


Section Involved


  • Section 234B of the Income Tax Act, 1961.
  • Indo-UK Double Taxation Avoidance Agreement (DTAA).

Link to download the order: https://delhihighcourt.nic.in/app/case_number_pdf/2015:DHC:11034-DB/SRB05032015ITA2722014_112448.pdf

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