2021 (8) TMI 1274 - HC - Income Tax

Applicability of Equalization Levy on payments to be received by the Petitioner - Whether the Respondents erred in law and on facts in re-characterizing the nature of payments to be received by the Petitioner from Indian Customers as Fee for Technical/Included Services under the Income-tax Act, 1961 / India-USA Double Taxation Avoidance Agreement (DTAA) rather than business income ? - HELD THAT - Issue notice. Mr.Ruchir Bhatia, Advocate accepts notice. He prays for and is granted six weeks time to file the counter affidavit. Rejoinder affidavit, if any, be filed before the next date of hearing. Since the petitioner has prayed for refund of taxes and this Court is of the view that the said prayer would adequately protect the interest of the petitioner, the prayer for interim stay is declined. List the matter before the Joint Registrar (Judicial) for completion of pleadings on 10th December, 2021.

Summary

Issues: Challenge to rejection of application for revision of certificate under section 264 of the Income Tax Act, 1961 and issuance of certificate directing tax deduction at 10% rate; Request for direction to issue certificate for NIL tax deduction and refund of withheld taxes.

Analysis:
The writ petition challenges the rejection of the petitioner's application for revision of a certificate issued under section 197 of the Income Tax Act, 1961, directing Indian Customers to deduct tax at a rate of 10%. The petitioner seeks a direction for a certificate permitting tax deduction at a NIL rate for the relevant financial year and refund of withheld taxes. The primary legal questions raised include whether the Equalization Levy applies to payments received by the petitioner as an E-commerce Operator without a permanent establishment in India and whether the nature of payments should be considered as "Fee for Technical/Included Services" rather than "business income" under the Income-tax Act, 1961 or the India-USA Double Taxation Avoidance Agreement (DTAA).

The court issued notice to the respondent's advocate, who accepted it, and granted six weeks to file a counter affidavit. The petitioner's request for an interim stay was declined, considering the prayer for refund of taxes sufficient to protect the petitioner's interest. The matter was listed before the Joint Registrar (Judicial) for completion of pleadings on 10th December 2021. The order was directed to be uploaded on the website immediately, with a copy sent to the counsel via email. The judgment reflects a procedural progression in response to the legal challenges raised by the petitioner regarding tax deductions and the nature of payments received, ensuring due process and timelines for further proceedings.