Delhi HC directs Income Tax Dept. to reconsider issue of issuance of Certificate with ‘NIL’ deduction of Income Tax after granting opportunity of hearing [Read Order]

The Delhi High Court directed the Income Tax Department to reconsider the issue of issuance of the certificate with ‘NIL’ deduction of income tax after granting the opportunity of hearing.

The Petitioner, Coursera Inc. stated that the impugned order dated 27.09.2021 rejecting Petitioner’s application for NIL deduction directing the customers of the Petitioner to withhold tax at the rate of 10% is arbitrary and no reason has been given in the order for arriving at such a conclusion. She states that the Petitioner acts merely as an aggregator of educational institutions making access to various courses easier and that upon successful completion of the course, a certificate to this effect which bears the seal of the institution concerned is awarded to the student.

The Petitioner being a tax resident of the USA has no PE in India and so business profits arising to the Petitioner in India are not liable to tax in India. She also states that the gross receipts of the petitioner can neither be characterised as Royalty nor Fees for included services (‘FIS’) in terms of Article 12 of India- USA Double Tax Avoidance Agreement (DTAA). The Petitioner has not transferred any copyright to its customers as there is no right to commercially exploit the content hosted on the e-platform and/or the services rendered are technical or consultancy in nature. She also submits that the Petitioner has already submitted itself to the Indian Tax jurisdiction by paying Equalisation levy at the rate of 2% in terms of the Finance Act, 2020 and the entire receipts of the Petitioner relates only to the e-commerce activity.

The division bench of Justice Navin Chawla and Justice Abhay Ahuja noted that the Petitioner in its application for a certificate under section 197 dated 23.09.2021 describes itself as an e-platform operator. In the later part of the same application, the petitioner claims itself to be a university for the purposes of Article 12(5)(c) of the DTAA between India and the United States of America. The AO, in the Impugned Order, holds that the Petitioner is not eligible for the benefit of article 12(5) (c) of the DTAA. However, the Impugned Order does not contain any reasoning or discussion on the applicability or otherwise of various sub-articles of the DTAA to the factual situation of the case.

The court while setting aside the impugned order directed the Respondent to pass a de novo reasoned order after taking into account the amendments made to the provisions of section 10(50) of the Act w.e.f. 01.04.2021 i.e. to exclude the receipts of the Petitioner which is subject to withholding tax at source to the extent such receipts are exigible to Equalisation Levy within a period of 4 weeks after granting an opportunity of being heard to the petitioner. It will be incumbent upon the petitioner to furnish to the Assessing Officer the information required by the Assessing Officer expeditiously.

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