TMI Blog2023 (3) TMI 824X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 applicati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The petitioner had sought a certificate, at NIL rate of tax. 3. The impugned certificate, however, pegs the rate of tax at 9.99%. Quite obviously, the petitioner s prayer has been rejected. The reasons for rejecting the prayer made in the petitioner s application are contained in the order dated 19.05.2021. Broad facts: 4. The petitioner is a non-resident company, incorporated under the laws of Denmark. The petitioner, admittedly, has been issued a tax residency certificate by the concerned authorities in Denmark. 4.1 It is the petitioner s case, that it is in the business of providing IP Video Management Software [hereafter referred to as Software ] and other video surveillance related products to entities and persons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act, the concerned officer is not carrying out an assessment, and therefore, the parameters which apply for assessing taxable income would not get triggered, while rendering a decision qua an application filed under the aforementioned provision. 6.2 It is also Mr Kumar s contention, that under the provisions of Section 195, deduction of withholding tax is the rule, and issuance of a lower withholding tax certificate under Section 197 of the Act is an exception. 7. It is, therefore, Mr Kumar s contention, that the rate of withholding tax indicated in the impugned certificate ought to be sustained. Reasons: 8. We have heard the learned counsel for the parties, and examined the record. In our view, the impugned order do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring Analysis. 10.1 That apart, in our view, the 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. 11. We find, that there is no reference whatsoever to any of the clauses of the Distributor Agreement. The concerned officer has, instead, picked up one of the remitters i.e., the distributor partners, and made observations, which to say the least, do not meet the parameters set forth in Rule 28AA of the Income Tax Rules, 1962 [in short, the Rules ] for estimating the income, that the petitioner may have earned in the given FY. The erroneous approach ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amine the application, in the background of the parameters set forth in Rule 28AA of the Rules. Concededly, that exercise has not been carried out. 13. Insofar as Mr Kumar s argument is concerned, that reduction of withholding tax under Section 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. 14. Given the foregoing, we are of the view, that the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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