DCIT (INTERNATIONAL TAXATION), NEW DELHI vs. M/S. GE NUOVO PIGNONE SPA, GURGAON

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ITA 561/DEL/2016Status: DisposedITAT Delhi01 June 2018AY 2012-134 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the issue of leviability of interest under Section 234B is covered in favour of the assessee by the Delhi High Court's decision in GE Packaged Power Inc. The pendency of a review petition before the Supreme Court does not warrant a contrary decision.

What were the facts?

The Revenue appealed against the deletion of interest under Section 234B by the DRP. The assessee argued that since payments were subject to withholding tax under Section 195, Section 234B interest was not leviable.

What were the issues?

Whether interest under Section 234B is leviable when payments to non-residents are subject to withholding tax under Section 195. Whether a pending review petition before the Supreme Court should prevent the Tribunal from following a jurisdictional High Court judgment.

Which sections of the Income-tax Act were involved?

Section 234B,Section 195,Section 201,Section 144C(13),Section 143(3)

AI-generated summary — verify with the full judgment below

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Income Tax Appellate Tribunal, DELHI BENCH: ‘D’ NEW DELHI

Before: SHRI BHAVNESH SAINI & SHRI L.P. SAHUvs

Hearing: 31.05.2018Pronounced: 01.06.2018

ORDER PER SHRI BHAVNESH SAINI, J.M.

This appeal by the Revenue has been directed against the order of DCIT, Circle 1(3)(1) (International Taxation), New Delhi dated 30.12.2015 for A.Y. 2012-13 passed u/s 144C(13)/143(3) of the Income Tax Act, 1961 (hereinafter for short called as the “Act”) on the ground that the Department has filed review petition before the Hon’ble Supreme Court on the chargeability of interest u/s 234B of the Act in the same group of companies. The DRP in their order dated 27.11.2015 noted that regarding interest u/s 234B of the Act, the assessee has argued that since all the payments made to non-resident assessees are subject to withholding tax u/s 195 of the Act, hence, interest u/s 234B of the Act is not leviable. The proviso below section 209(1) was only inserted w.e.f. AY 2013-14 and is a prospective amendment. Reliance has been placed on the decision of Delhi High Court in the case of GE Capital. The DRP following the above decision on the issue directed the AO to delete interest u/s 234B of the Act. The AO in view of the directions of the DRP did not charge interest.

2.

The Revenue only contended that review petition is pending in the Supreme Court on the chargeability of interest u/s 234B of the Act, on the other hand, Ld. Counsel for the assessee submitted that issue is covered in favour of the assessee by judgment of jurisdictional Delhi High Court in the case of Director of Income Tax (International Taxation) vs. GE Packaged Power Inc. reported in 373 ITR 65 (Delhi) in which group appeals have been decided including the assessee and in para 23 it was held as under:

“For the above reasons, this court finds that no interest is leviable on the respondent-assessees under section 234B even though they filed returns declaring nil income at the stage of reassessment. The payers were obliged to determine whether the assesses were liable to tax under section 195(1), and to what extent, by taking recourse to the mechanism provided in section 195(2) of the Act. The failure of the payers to do so does not leave the Revenue without remedy; the payer may be regarded an assessee-in-default under section 201, and the consequences delineated in that provision will visit the payer. The appeal of the Revenue is accordingly dismissed without any order as to costs.” 2.1 He has, therefore, submitted that issue is covered in favour of the assessee.

3.

Considering the above, we are of the view that the issue is covered in favour of the assessee by judgment of Delhi High Court in the case of GE Packaged Power Inc. (supra). Merely because the review petition is pending before the Supreme Court is no ground to take a contrary decision.

4.

In the result, the departmental appeal fails and is dismissed.

Order pronounced in the open court on 01.06.2018

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