2022 (9) TMI 1557 - HC - Income Tax

TDS u/s 195 - withholding tax deducted at source (TDS) - Present writ petition filed challenging the certificate issued u/s 195(2) directing the Google Cloud India Pvt. Ltd. (GCI) to deduct tax at source at the rate of 10% at the time of making payment to the Petitioner - Petitioner further seeks a direction to permit GCI to make payments to the Petitioner without deduction of tax at source during financial year 2022-23 relevant to assessment year 2023-24 under the Google Cloud Services Reseller Agreement - HELD THAT - Issue notice. Learned senior standing counsel accepts notice on behalf of Respondent Nos.1 and 2. He prays for and is permitted to file a counter affidavit within six weeks. Rejoinder affidavit, if any, be filed before the next date of hearing. Registry is directed to tag the present writ petition along with WP(C) No.8720/2021 and list for final hearing on 13th January, 2023. Appropriate directions in regard towards the interim arrangement - although the impugned order directs 10% withholding, the deposit of 8% by GCI plus 2% Equalisation Levy admittedly being paid by GCI on remittances to the Petitioner should not be construed as any non-compliance of the impugned order so as to attract the provisions of Section 201 of the Act on GCI - HELD THAT - As Respondent No. 2 has made the payments under consideration liable for a withholding at the rate of 10% in accordance with section 115A of the Act read with the DTAA. We direct that purely as an interim measure, the Petitioner would be entitled to receive its payment from GCI subject to a deduction of 8% to be paid progressively for financial year 2022-23 relevant to assessment year 2023-24 as well. This interim arrangement is being made under the orders of this Court. The deposit of 8% should not be treated as any non-compliance of the impugned order.

Summary

Issues:
1. Challenge to certificate directing tax deduction at source
2. Similar issue in another case pending
3. Interim arrangement for payment deduction

Analysis:
The writ petition challenges a certificate issued under Section 195(2) of the Income Tax Act, 1961, directing Google Cloud India Pvt. Ltd. to deduct tax at a 10% rate when making payments to the Petitioner. The Petitioner seeks permission for GCI to make payments without tax deduction during the financial year 2022-23. The Petitioner's counsel highlights a similar issue in another case, Sumo Logic vs. Commissioner of Income Tax International Taxation & Anr, scheduled for a hearing. In a previous case, the court directed counter affidavits to be filed, with the Petitioner set to file rejoinder affidavits. The court accepts notice, permits Respondent Nos.1 and 2 to file a counter affidavit within six weeks, and directs the petition to be listed for final hearing on 13th January, 2023, along with another related case.

Regarding an interim application, the Petitioner relies on a previous arrangement allowing payments subject to an 8% deduction to be paid progressively to Respondent No.2. The Petitioner requests appropriate directions for a similar interim arrangement for the financial year 2022-23. Despite the impugned order directing a 10% withholding, the court directs that the Petitioner can receive payments subject to an 8% deduction for the financial year 2022-23. This interim arrangement is made under the court's orders, and the deposit of 8% should not be considered non-compliance with the impugned order. The court disposes of the present application with this direction.