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2023 (3) TMI 824 - DELHI HIGH COURTApplication u/s 197 - reduction of withholding tax - petitioner had sought a certificate, at “NIL” rate of tax - request to issue certificate at lower was rejected - whether or not the consideration received by the petitioner against the sale of software constituted royalty within the meaning of Section 9(1)(vi) and/or Article 13(3) of the Double Taxation Avoidance Agreement (DTAA) entered into between India and Denmark? - HELD THAT:- Least that the concerned officer ought to have done was to, at least, broadly, look at the terms of Distributor Agreement, to ascertain as to what is the nature of right which is conferred on the distributor partner and/or the reseller. Reduction of withholding tax u/s 195 is the rule, it is required to be borne in mind, that deduction of withholding tax morphs into an obligation, only if the sum received is chargeable to tax. The petitioner’s entire case is, that the sum that it receives under the Distributor Agreement is not chargeable to tax. It is in that context, that the petitioner has moved an application under Section 197 of the Act for being issued a certificate with “NIL” rate of withholding tax. We are of the view, that the best way forward would be to set aside the impugned certificate and the order, with a direction to the concerned officer, to revisit the application, in the light of what is indicated hereinabove. While doing so, the concerned officer will apply his mind, inter alia, to the terms of the Distributor Agreement, and the ratio of the judgment rendered by the Supreme Court in Engineering Analysis[2021 (3) TMI 138 - SUPREME COURT] - thus provisions of Rule 28AA shall also be kept in mind. The concerned officer will not be burdened by the fact that a review petition is pending, in respect of the judgment rendered by the Supreme Court in Engineering Analysis. The concerned officer will ensure, that the re-examination of the application is carried out, at the earliest.
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