TaxTMI 
TaxTMI 
2024 (9) TMI 1128
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....owing salient facts as obtaining in W.P.(C) 9593/2022. The petitioner is a foreign company incorporated under the laws of the United States and is a U.S. tax resident. It had, for the Assessment Years AYs in question, entered into independent contracts with various customers for the supply of spare parts from outside India. It was its case that it had no Permanent Establishment PE and that the revenue earned from the aforenoted supplies would not be taxable in India. 3. For AYs 2001-02 to 2008-09, various assessment orders came to be framed holding that the petitioner had a PE in India. Applying the provisions of Section 44BB and 44BBB, deemed profitability of 10% of the gross receipts from the supply of spares and offshore repairs was assumed by the respondents and 35% of such profits was held as attributable to the PE in India. 4. On the basis of the aforenoted assessments, it is averred that the respondents, starting from Financial Year FY 2010-11 up to FY 2020- 21, had granted a lower with holding tax certificate at the rate of 1.5% of the gross receipts. However, while dealing with cases pertaining to AYs 2001-02 to 2008-09, the Income Tax Appellate Tribunal ITAT in term....
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....the petitioners continue to maintain that they have no PE in India. 2.2. Therefore, if the rate of attribution of profits to the PE in India is pegged at 26%, then the withholding rate of tax cannot exceed 1.04% 2.3. It is, therefore, Mr Jolly‟s contention that the conclusion reached, via the impugned order, by the AO that the withholding rate of tax should be 4%, is completely unsustainable. It is Mr Jolly's contention that this aspect of the matter has not been dealt with by the AO in the impugned order. 2.4. Furthermore, Mr Jolly says that the view taken by the AO that the petitioners have artificially split their contracts with various entities in India cannot improve the cause of the respondents/revenue, for the reason that those entities have already paid the requisite tax demanded of them. 3. On the other hand, Mr Puneet Rai, who appears on behalf of the respondents/revenue, has relied upon the impugned order(s) i.e., order(s) dated 23.09.2021, to support his contention that the conclusion reached by the AO is valid and legally tenable. 3.1. Mr Rai, however, cannot but accept the fact that in the earlier proceedings, to whic....
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....d under Section 197 of the Income Tax Act, 1961 [in short "Act"]. 2. As per the impugned order/certificate, the lower rate of with holding tax is pegged at 4%. 3. The petitioner has not only made a prayer that the impugned order/certificate be set a side, but has also sought a direction that the certificate ought to have been issued at "nil" rate. 4. Besides this, the petitioner sought an alternative prayer, which is, that it would be willing to withhold tax at the rate of 1.5% during the pendency of the writ petition. This, admittedly, was the rate of withholding tax for the period spanning between Financial Year (FY) 2018-19 and 2020-21. 5. We may also note that in FY 2021-22, the rate of withholding tax was fixed at 4%. 6. The petitioner had instituted a writ petition in this Court i.e., W.P.(C) 13188/2021, to assail the tax rate in the withholding certificate/order issued for 2021-2022, which was disposed of via order dated 25.03.2022, where in the following was recorded: Xxx xxx xxx ....
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....the order passed in its rectification application on the record, the matter is stood over. 15.1. Needless to add, the DRP will take an independent decision in the matter de hors the observations made above vis-à-vis the revenue's rectification application. 16. We may also note that despite an opportunity being given to the revenue to file counter-affidavit (s) in the above-captioned matters, it has failed to comply. 16.1 In W.P.(C) 9593/2022, the order to this effect was passed on 24.06.2022. Like wise, in W.P.(C) 10055/2022 via order dated 05.07.2022, time was granted to the revenue to file a counter- affidavit. 17. Since a request is made on behalf of the counsels for the revenue to grant further time to file counter-affidavits in the above- captioned matters, the same is acceded to. 17.1. The counter-affidavits will be filed by the revenue within the next four weeks. 17.2. Rejoinder there to, if any, be filed before the next date of hearing. 18. However, in the interregnum, we are inclined to direct as follows: the petitioner will receive income from the concerned remitters after imposition of withholding tax ....