Facts of the Case

The Revenue filed multiple appeals against various General Electric (GE) group entities and related foreign companies concerning liability to pay interest under Section 234B of the Income Tax Act, 1961.

The dispute arose from the contention of the Revenue that non-resident assessees were liable to pay interest for failure to pay advance tax. The Income Tax Appellate Tribunal (ITAT) had ruled in favour of the assessees by following earlier binding precedents of the Delhi High Court.

Issues Involved

  • Whether non-resident assessees are liable to pay interest under Section 234B of the Income Tax Act, 1961.
  • Whether the ITAT was correct in following earlier binding judgments of the Delhi High Court.

Petitioner’s Arguments (Revenue)

  • The Revenue argued that the assessees were liable for payment of advance tax.
  • Consequently, failure to pay advance tax should attract interest under Section 234B.
  • The Revenue challenged the ITAT’s reliance on earlier High Court rulings.

Respondent’s Arguments (Assessees)

  • The assessees contended that the issue was already settled in their favour by binding precedent of the Delhi High Court.
  • They relied on the judgment in Director of Income Tax (International Taxation) vs GE Packaged Power Inc. (2015) 373 ITR 65 (Delhi).
  • They argued that no interest under Section 234B is leviable where tax is deductible at source.

Court Findings / Judgment

  • The Delhi High Court held that the issue is already covered in favour of the assessees by its earlier judgment in Director of Income Tax (International Taxation) vs GE Packaged Power Inc..
  • The Court observed that the ITAT committed no error in following the binding precedent.
  • The Court reaffirmed that the earlier ruling is binding on it.

Court Order

  • All appeals filed by the Revenue were dismissed.
  • The dismissal was subject to the outcome of pending appeals before the Supreme Court on the same issue.

Important Clarification

  • The Court clarified that the final determination on the legal issue will depend on the outcome of pending proceedings before the Supreme Court.
  • Until then, the existing Delhi High Court precedent remains binding.

Link to download the order -https://delhihighcourt.nic.in/app/case_number_pdf/2018:DHC:8726-DB/SRB01062018ITA6612018_145352.pdf

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