Relief To Lufthansa Airlines: Delhi HC Sets Aside Order Denying 'Nil' TDS Certificate [Read Order]
Where the petitioner has been granted certificate at nil withholding tax for prior assessment years and there is no issue to the chargeability of the petitioner’s income to tax under the Act, the impugned certificate requiring withholding tax at reduced rate instead of nil rate, cannot be sustained
![Relief To Lufthansa Airlines: Delhi HC Sets Aside Order Denying Nil TDS Certificate [Read Order]](https://www.taxscan.in/wp-content/uploads/2025/04/Lufthansa-Airlines-TDS-Certificate-Delhi-High-Court-taxscan.jpg "Relief To Lufthansa Airlines: Delhi HC Sets Aside Order Denying Nil TDS Certificate [Read Order]")
As a relief to German cargo airline Lufthansa Cargo AG, the Delhi High Court set aside the revenue's order denying nil TDS certificate to the company for the financial year 2024-25. Read More: SCN Cannot Be Challenged Prematurely before Final Adjudication unless it Pertains to Jurisdiction or Lack of Authority: Madras HC In order to get a certificate under Section 195(3) of the...
As a relief to German cargo airline Lufthansa Cargo AG, the Delhi High Court set aside the revenue's order denying nil TDS certificate to the company for the financial year 2024-25.
In order to get a certificate under Section 195(3) of the Act, Lufthansa, the petitioner, filed an application with the Revenue, but it was ultimately denied. Instead, a certificate for withholding tax at a reduced rate of 0.10% was provided by the Assessing Officer. Infuriated, the business filed a case in the High Court, arguing that, in accordance with Article 8 of the India-Germany Double Taxation Avoidance Agreement, it is a tax resident of Germany and that, therefore, its income is exempt from taxation in India.
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Furthermore, Lufthansa asserted that it has been granted certificates under Section 195(3) for over ten years to receive payment for services at zero TDS, and that neither the nature of its services nor the revenue it receives has changed to warrant the relief at this time. According to Revenue, the company's application was denied because it failed to provide any documentation proving its eligibility for a deduction.
Lufthansa however submitted that it has been furnishing its return of income regularly since the past 14 years. Further, it claimed that it had in unambiguous terms stated that its income is generated only from cargo handling and operating aircrafts. Additionally, it was submitted that it had received some interest on refund of income tax for which tax was deposited.
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At the outset, the High Court observed that the AO had not indicated any reasons which persuaded him to permit the payments at a lower rate of 0.10 percent withholding tax as against nil rate claimed by the petitioner. In the given circumstances, the impugned order passed by the AO rejecting the petitioner’s application for certificate under Section 195(3) of the Act cannot be sustained. There is no ambiguity in the petitioner’s explanation as to the nature of the services rendered by it and the AO has also not controverted the petitioner’s assertion that its income for the services, as described by the petitioner, is not be chargeable to tax in India by virtue of Article 8 of the DTAA.
The AO had also granted the petitioner an opportunity to file an application under Section 197 of the Act for seeking a certificate for nil/reduced withholding tax. In view of the liberty granted, the petitioner had filed an application dated 20.04.2024 for issuance of the certificate at nil rate of withholding tax under Section 197(1) of the Act.
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As noted above, this application was also rejected on 17.05.2024. The AO has not indicated any reasons which persuaded the AO to permit the payments from the specified agents at a lower rate of 0.10 percent withholding tax as against nil rate claimed by the petitioner. It is contended that the receipts at the reduced rate was allowed to the petitioner as against a certificate for nil withholding tax for the protection of the Revenue.
In the given circumstances, where the petitioner has been granted certificate at nil withholding tax for prior assessment years and there is no issue to the chargeability of the petitioner’s income to tax under the Act, the impugned certificate requiring withholding tax at reduced rate instead of nil rate, cannot be sustained.
Unlock the full scope of TDS & TCS with the 2024 amendments from The Finance (No.2) Act - Click Here
A division bench of Justice Vibhu Bakhru and Justice Tejas Karia allowed the petition and directed the issuance of the certificate for nil withholding tax under Section 197 of the Act. It was further held that issuance of the certificate shall not preclude the AO from examining whether the income/receipts of the petitioner are chargeable to tax in India in assessment proceedings, uninfluenced by the order.
To Read the full text of the Order CLICK HERE
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