No PE Established: Delhi HC Quashes 3.5% TDS Certificate u/s 197 issued against GE Energy, Restores to 1.5% [Read Order]

The Delhi High Court quashed the TDS certificate under Section 197 ofIncome Tax Act, 1961 at the 3.5% issued against GE Energy stating no Permanent Establishment (PE) was established. It restored the rate back to 1.5% and also directed to continue further on conditions.

The petitions were filed by GE Energy Parts Inc (USA) and GE Global Parts and Products GmbH (Switzerland), who are engaged in supplying gas turbines, spare parts and undertaking offshore repair activities for equipment manufactured outside India.

The companies claimed that they do not have a Permanent Establishment (PE) in India and, therefore, no income was chargeable to tax in India.

The income tax department had been issuing certificates under Section 197 permitting tax deduction at source (TDS) at 1.5%.

However, for AY 2025-26, the Assessing Officer issued a certificate dated 16.05.2025 directing deduction of TDS at a higher rate of 3.5%. The officer said that in the proceedings of AY 2022-23, they found the PE establishment in India.

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The assessees approached the Delhi High Court, pointing out that the alleged PE finding for AY 2022-23 had already been set aside by the ITAT on 17.10.2025. The order is still intact and no appeal was filed.

Justices Dinesh Mehta and Vinod Kumar Gupta decided in favour of the assessees. The bench observed that the order of the ITAT set aside the finding of AO that assessee has PE in India. The same order has not been modified or no appeal filed.

The court directed the department to issue fresh certificates with a 1.5% rate within 15 days and even for future years.

However, the Court clarified that certificates at 1.5% should continue to be issued for future years unless the ITAT order is reversed or the Department brings fresh relevant material establishing a PE in India after granting due opportunity to the assessee.

The petition was allowed accordingly.

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