Ignoring Earlier HC Rulings, Revenue Cannot Insist on 10% TDS u/s 197 Without Showing Change in Facts: Delhi HC in SFDC Ireland Case [Read Order]
The High Court held that tax authorities cannot insist on 10% TDS under Section 197 without showing change in facts when earlier rulings granted nil rate to the assessee.
In a recent ruling, the Delhi High Court held that the Income Tax Department cannot force 10% TDS (Tax Deducted at Source) under Section 197 when there is no change in facts and earlier High Court orders had already directed nil tax deduction for the same assessee.
SFDC Ireland Limited challenged an order and certificate issued in September 2025 which directed its Indian reseller, Salesforce India, to deduct tax at 10% on payments made to it. The company said it is a tax resident of Ireland and provides cloud based CRM software to Indian customers through a reseller. It stated that it has no office, employees or permanent establishment in India.
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The petitioner’s counsel pointed out that in earlier years, similar 10% or 2% TDS certificates were set aside by the High Court and nil rate certificates were issued. The counsel argued that there was no change in business or facts in the current year, yet the department again issued a 10% certificate without giving proper reasons.
The department’s counsel argued that each assessment year is separate and the officer can take a different view. The counsel also argued that earlier High Court orders did not consider the full tax law and that since the forms were filed by a person based in India, the company should be treated as resident in India.
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A Bench of Justice Dinesh Mehta and Justice Vinod Kumar observed that filing forms through a power of attorney holder in India does not make a foreign company resident in India. The court observed that the department did not show any change in facts or any permanent establishment in India.
The court pointed out that the order did not give any real reason for 10% TDS and only called it an interim arrangement. The court set aside the order and certificate and directed the department to issue a nil rate certificate under Section 197 for the year and future years, unless facts change.
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