The Income Tax Department was ordered to Issue tax certificate by the Delhi High Court (HC) bench of Justices Rajiv Shakdher and Tara Vitasta Ganju after ruling that the Indo-UAE treaty does not mention Fees for Technical Services (FTS).
The Writ Petition (WP) was filed to seek direction for issuance of a certificate under Section 197 of the Income Tax Act, 1961.
Although the petitioner requested the issuance of certificates under Section 197 of the Act at a “Nil” rate for the aforementioned F.Y. 2019–2022, Sachit Jolly, who appeared on behalf of the petitioner, informed the beach that the certificates were granted pegging the withholding tax at 4%.
The bench called the respondents/revenue to file the counter-affidavit as they were not filed one.
The bench did acknowledge, however, that according to Suni Agarwal’s instructions, who the court had asked to file the counter affidavit, the best course of action would be for a certificate under Section 197 to be issued, setting the withholding tax rate at 4%, which was also the situation in F.Y. 2019–2022.
The bench also observed that the Double Tax Avoidance Agreement obtained between India and UAE does not contain any article concerning FTS. Further, the petitioner, who is a non-resident and does not have a Permanent Establishment (PE) in India, claims that the subject income is “business income”.
The HC directed the respondent to issue a certificate under section 197 of the Income Tax Act not later than 2 weeks from the date of the judgment.
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