2023 (3) TMI 1468 - HC - Income Tax

Withholding tax certificate issued u/s 197 - deduction of lower withholding tax - petitioner has sought issuance of certificate u/s 197 at nil rate - concerned authority issued the impugned certificate stipulating withholding tax at the rate of 9.99% - Petitioner says that in this arrangement, there is no transfer of right in the copyright of the software programmes and therefore the payment made to the petitioner was not exigible to withholding tax - HELD THAT - In case instructions are received to resist the writ petition, a counter-affidavit will be filed at least five days before the next date of hearing. List the matter on 27.03.2023.

Summary

Issues involved:
The withholding tax certificate issued u/s 197 of the Income Tax Act, 1961 and the order dated 13.01.2023 are challenged in the writ petition.

1. Withholding Tax Certificate under Section 197:
The petitioner sought a certificate under Section 197 of the Income Tax Act for deduction of lower withholding tax. The certificate issued on 24.02.2023 imposed a tax rate of 9.99%, whereas the petitioner requested a "nil" rate. The petitioner, a recipient of the income, argued that it provides localisation services and has group entities globally. They claimed that payments made to the petitioner for software licenses did not involve transfer of copyright, hence not subject to withholding tax. Counsel for the petitioner cited a Supreme Court judgment in support of this argument.

2. Legal Arguments:
The petitioner's counsel relied on a Supreme Court judgment to support their claim that payments for software licenses were not subject to withholding tax due to the absence of copyright transfer. On the other hand, the respondents' counsel referred to a judgment of a coordinate bench of the court in a similar matter. The court issued notice to the respondents/revenue, who accepted the notice. The respondents' counsel mentioned that they would return with instructions and file a counter-affidavit if needed to resist the writ petition.

3. Next Steps:
The court allowed the petitioner to file legible copies of annexures before the next hearing date. The matter was listed for further hearing on 27.03.2023, indicating that the court would await the respondents' instructions before proceeding with the case.