Foreign companies face tax uncertainty as court strikes down 4% withholding rate for income attribution.

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....Writ petitions challenged the 4% withholding tax rate u/s 195 on receipts asserted as business income u/s 9(1)(i), despite the petitioner having withheld tax at 1.5%. The Court noted the profit attribution rate of 26% was not disputed and that a 1.04% withholding rate would correspond to this rate. As the withholding rate exceeding 1.04% was not seriously questioned, the Court found itself unable to sustain the 4% rate. The withholding tax rate for other years would be decided independently. Since the orders were limited to adjudication u/s 197, all rights and contentions on merits are kept open for regular assessment proceedings.....