Court Examines Petition on 9.99% Withholding Tax Rate for Software Licenses; Hearing Set for March 2023.

The HC addressed a writ petition challenging the withholding tax certificate under Sec. 197 of the Income Tax Act, 1961, which imposed a 9.99% tax rate instead of the requested "nil" rate. The petitioner argued that payments for software licenses were not subject to withholding tax, citing a SC judgment. The court issued notice to the respondents and allowed the petitioner to submit legible annexures. The matter was scheduled for further hearing on 27.03.2023, pending respondents' instructions and potential counter-affidavit submission.

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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.

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