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Del HC delineates guiding principles for deciding application for lower/ Nil tax withholding; outlines principles governing DAPE under India-Ireland DTAA February 20, 2025
Published in: TaxBuzz
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Del HC delineates guiding principles for deciding application for lower/ Nil tax withholding; outlines principles governing DAPE under India-Ireland DTAA
In the recent judgment of SFDC Ireland Ltd.[1], the Delhi HC has shed light on an issue of vital importance, viz., the nature of the duty cast upon the Assessing Officer (‘AO’) while deciding an application for issuance of lower/ Nil withholding certificate, u/s 195/ 197(1) of the Income Tax Act, 1961 (‘the Act’). While doing so, the Hon’ble Court ventured into a deep dive of various facets such as: (i) relevance of the procedure u/r 28AA of the Income Tax Rules, 1962 (‘the Rules’); (ii) chargeability to tax as an essential prerequisite for attracting Section 195; (iii) concept of Dependent Agent Permanent Establishment (‘DAPE’), etc.
Brief Factual Matrix
Judgment by Delhi HC
Accordingly, the HC directed the AO to grant NIL withholding tax certificate to the assessee.
The case was represented by Mr. Ajay Vohra, Sr. Advocate, instructed and assisted by the team of Vaish Associates Advocates, comprising of Mr. Aniket D. Agrawal, Associate Partner and Mr. Samarth Chaudhari, Sr. Associate.
VA Comments
The judgment goes a long way in outlining the duty cast upon the AOs at the stage of deciding applications u/s 197(1) [as also Section 195], and directs that AOs guide their enquiries as per the scheme prescribed in the statute, and do not indiscriminately fling allegations [of some suspected dependency without alleging existence of DAPE (as in the instant case)] sans establishing (even prima facie) that receipts in question are chargeable to tax under the Act.
The judgment also explains intricate aspects of a DAPE by referring not only to the provisions of the India-Ireland DTAA, but also that of OECD and UN Model conventions. It also refers to text of Klaus Vogel on Double Taxation Conventions for identifying the rationale for inclusion of DAPE as a category of PE.
Similarly placed assessees can cite this judgment to apply principles propounded by the HC to their own cases.
For any further information/clarification, please feel free to write to:
Mr. Aniket D. Agrawal, Associate Partner ([email protected])
Mr. Samarth Chaudhari, Senior Associate ([email protected])
…
[1] 2025:DHC:977-DB
[2] (2010) 327 ITR 456 (SC); [2021] 432 ITR 471 (SC); (2012) 6 SCC 613
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