Court dismisses stay application on equalization levy payment under Finance Act, 2016 amended in 2020. Tax liability upheld for petitioner.

The Court dismissed the petitioner's application seeking a stay on the payment of equalization levy under the Finance Act, 2016 as amended in 2020. The Court upheld respondent no.3's argument that the petitioner, with multiple permanent establishments in India, was liable to pay tax in India. The Court emphasized the binding effect of the Authority for Advance Rulings (AAR) order and held respondent no.3 accountable for their statements, ultimately disposing of the petitioner's application.

---

---

Issues:
1. Stay of payment of equalization levy under Section 165 A read with Section 166 A of the Finance Act, 2016 as amended by Finance Act, 2020.
2. Liability to pay tax in India due to multiple permanent establishments.
3. Applicability of Equalisation Levy on entities without a permanent establishment in India.
4. Fear of penalty for non-payment of Equalization Levy during the pendency of the writ petition.
5. Concerns regarding refund of income tax and payment of Equalization Levy if successful in the writ petition.
6. Respondent's objection to the petitioner's application and the binding effect of the Authority for Advance Rulings (AAR) order.
7. Consequential actions under the Income-tax Act, 1961 and Equalization Levy provisions.

Analysis:
1. The petitioner sought a stay on the payment of equalization levy under the Finance Act, 2016 as amended in 2020. The Authority of Advance Ruling had previously held that the petitioner, with multiple permanent establishments in India, was liable to tax in India. However, the petitioner contended that its core business conducted outside India did not create a permanent establishment or qualify as royalty income in India. The introduction of the Equalisation Levy, applicable to entities without a permanent establishment in India, raised concerns about potential double taxation.

2. Respondent no.3 argued that the petitioner was not liable to pay Equalization Levy as it had a permanent establishment in India, and the income in question was effectively connected to this establishment, subject to income tax under the IT Act. The respondent stated that entities with a permanent establishment in India were exempt from the Equalization Levy. The respondent also highlighted the binding effect of the AAR's order under the IT Act, emphasizing that the petitioner had not admitted any income in its tax return.

3. The petitioner expressed fear of future penalties for non-payment of Equalization Levy during the petition's pendency. They raised concerns about potential penalties if successful in proving the absence of a permanent establishment in India, as well as the implications for refunding income tax and paying the Equalization Levy with statutory interest. Respondent no.3 objected to the petitioner's application, stating that no cause of action existed at the current stage for grievances related to tax obligations.

4. The Court acknowledged respondent no.3's position and held them bound by their own averments in the reply affidavit. Consequently, the Court accepted the respondent's contentions and disposed of the petitioner's application. The Court emphasized that the respondent should be held accountable for their statements and directed the order to be uploaded on the website and sent to the counsel via email for reference.

---