Delhi High Court Quashes Higher 3.5% TDS On GE Group Payments, Restores 1.5% Rate

The Delhi High Court has quashed the certificates issued by the Income Tax Department directing deduction of tax at source (TDS) at a higher rate of 3.5% on payments made to two GE group entities, and directed the authorities to issue fresh certificates prescribing deduction at the rate of 1.5%.A Division Bench of Justices Dinesh Mehta and Vinod Kumar allowed the writ petitions filed by GE Energy Parts Inc. and GE Global Parts and Products GmbH, challenging certificates issued under Section 197 of the Income Tax Act, 1961 for the assessment year 2025–26.Petitioners, foreign entities engaged in supply of gas turbines, spare parts and offshore repair services, contended that they did not have any permanent establishment (PE) in India and that the Department had consistently issued certificates allowing TDS at 1.5% in earlier years. They argued that the enhancement to 3.5% was arbitrary and contrary to settled practice as well as earlier High Court orders.The Revenue defended the higher rate on the ground that during proceedings for AY 2022–23, the Assessing Officer had recorded a finding that the Petitioners had a PE in India, justifying the enhanced deduction.However, the Court noted that the said PE finding had already been set aside by the Income Tax Appellate Tribunal (ITAT) by an order dated October 17, 2025. In view of this, the Bench held that the very foundation for issuing the higher-rate TDS certificate no longer survived.“By order dated 17.10.2025, such finding has been set aside by the ITAT and therefore, the very ground available with the respondents to justify or substantiate the higher deduction of tax given in order dated 16.05.2025 has lost its foundation,” the Court observed.Accordingly, the impugned certificates were quashed and the Department was directed to issue fresh certificates prescribing deduction at the rate of 1.5% within 15 days.The Bench further clarified that if the Department proposes to issue a certificate at a higher rate, it may do so if the ITAT order is set aside or if it is in receipt of any information or evidence showing existence of Petitioner's PE.Both writ petitions were accordingly allowed.Case Title: GE Energy Parts Inc v. Assistant Commissioner Of Income Tax & Anr. (and connected matter)Citation: 2026 LLBiz HC (DEL) 22Case Number: W.P.(C) 10259/2025 (and connected matter)For Petitioner: Mr. Tushar Jarwal, Mr. Rahul Sateeja & Mr. Vikrant A Maheshwari, AdvocatesFor Respondent: Mr. Sunil Aggarwal, SSC, Ms. Priya Sarkar, JSC with Mr. Anugrah Dwivedi & Mr. Utkarsh Shukla, AdvocatesClick here to read order

Delhi High Court Quashes Higher 3.5% TDS On GE Group Payments, Restores 1.5% Rate

Kapil Dhyani

Tags