TaxTMI 
TaxTMI 
Casual rather callous manner, in which the application under Section 197 of the Act of 1961 was rejected, that too disregarding binding precedence non application of mind caused displeasure of Courts.
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....asual rather callous manner, in which the application under Section 197 of the Act of 1961 was rejected, that too disregarding binding precedence non application of mind caused displeasure of Courts.<br>By: - DEV KUMAR KOTHARI<br>Income Tax<br>Dated:- 8-9-2026<br>Income-tax Act, 1961 Main provision Section 197 - Certificate for deduction at lower rate Related and incidental provisions: Section 9 - Income deemed to accrue or arise in India Section 143 - Assessment Section 144C - Reference to Dispute Resolution Panel Section 234C - Interest for deferment of advance tax Related judgments: Assistant/Deputy Commissioner of Income Tax Versus Godaddy. Com. - 2026 (9) TMI 271 - SC Order Godaddy. Com LLC Versus Assistant/Deputy Commissioner of Income Tax Circle 1 (3) (1), International Taxation Delhi. - 2026 (2) TMI 769 - DELHI HIGH COURT Godaddy. Com LLC Versus Assistant Commissioner Of Income Tax, DCIT, Circle 1 (3) (1) - 2023 (12) TMI 718 - DELHI HIGH COURT Aecom Intercontinental Holdings Uk Ltd. Versus Assistant Commissioner of Income Tax, Circle Int Tax 1 (1) (1), Delhi & Ors. - 2026 (2) TMI 711 - DELHI HIGH COURT Section 197 read....
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....s as follows, with highlights added Certificate for deduction at lower rate. 197. (1) 1[Subject to rules made under sub-section (2A), 2[where, in the case of any income of any person 3[or sum payable to any person], income-tax is required to be deducted at the time of credit or, as the case may be, at the time of payment at the rates in force under the provisions of sections 192, 193, 4[194,] 194A, 5[194C,] 194D, 6[194G] 7[, 194H] 8[, 194-I] 9[, 194J] 10[, 194K] 11[****] 12[, 194LA] 24[194LBA,] 21[194LBB, 22[194LBC, 23[194M, 25[194-O, 194Q]]]] and 195, the Assessing Officer is satisfied] that the total income 13[****] of the recipient justifies the deduction of income-tax 14[****] at any lower rates or no deduction of income-tax 15[****], as the case may be, the 16[Assessing] Officer shall, on an application made by the assessee in this behalf, give to him such certificate as may be appropriate. (2) Where any such certificate is given, the person responsible for paying the income shall, until such certificate is cancelled by the 17[Assessing] Officer, deduct income-tax 18[****] at the rates specified in such certificate or deduct no tax, as the case may be. 19[(2A) The ....
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....Board may, having regard to the convenience of assessees and the interests of revenue, by notification in the Official Gazette, make rules specifying the cases in which, and the circumstances under which, an application may be made for the grant of a certificate under sub-section (1) and the conditions subject to which such certificate may be granted and providing for all other matters connected therewith.] (3) 20[****] Un quote: The provisions which were applicable during relevant period of consideration by Courts discussed in this write-up have not under gone change. Therefore, rulings rendered by honourable Supreme Court read with related and relied on judgments of High Courts are still relevant. Relevant other provisions of IT Act, IT Rules and forms have also not been materially changed affecting situations contemplated in these judgments related to lower or nil TDS. There was nothing on record to show that facts and circumstances have changed which could cause taxability of services of applicant in India hence a reason for not following binding judgment of Tribunal and High Court in an appeal u.s. 260A. Binding judgment should have been followed: One of s....
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....ubstantial issue was that tax officers did not follow judgments of High Court of judicature on the very same issue and also in case of same assessee involved in above referred cases. Relevant portion from judgment reported as 2026 (2) TMI 769 (supra.) against which the SLP of department has been dismissed with highlights added by learned author: "3. Mr. Sachit Jolly, learned Senior Counsel submitted that the petitioner had not only succeeded in its appeal before the Income Tax Appellate Tribunal Delhi Benches 'D', New Delhi (hereinafter referred to as 'Tribunal'), but said order has been affirmed by this Court in the case of GoDaddy.com LLC vs. Asst. Commissioner of Income Tax, 2023:DHC:8834:DB vide its order dated 11.12.2023. He submitted that it has been clearly held that domain name registration charges are essentially for granting the right to use the petitioner's services and are not exigible to income tax as per the provisions of the Act of 1961 read with the terms of the India-USA Double Taxation Avoidance Agreement (hereinafter referred to as 'India-USA DTAA'), still the Competent Authority has outrightly rejected petitioner's applicati....
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....on under Section 197 of the Act of 1961. 4. Learned senior counsel expressed his concern that in spite of the above order dated 11.12.2023 passed by this Court, the Competent Authority has gone to the extent of recording that the Department has proposed to file an SLP against the said order. 5. While informing that even till today, the petitioner has not received any notice, learned senior counsel argued that even on the date of passing of the impugned order, despite knowing that no SLP has been filed in Hon'ble the Supreme Court, let alone any interim order or issuance of notice the Competent Authority has refused to follow the order of this Court, wherein the taxability of the transaction has been decided after considering the nature of the service provided by the petitioner so also the provision of Act of 1961 and India-USA DTAA. He argued that refusal to follow the binding dictum of this Court needs to be taken seriously in order to uphold the rule of law. 6. Mr. Siddhartha Sinha, learned Senior Standing counsel for the Department could not defend the impugned order passed by the Competent Authority by any manner, though he tried his best. 7. Heard learned couns....
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....el for the parties and perused the record. 8. On perusal of the order dated 06.03.2025, we find that no reason other than the bald assertion that the Department is proposing to file an SLP against the order dated 11.12.2023 has been assigned by the Competent Authority in the impugned order. Such reason, according to us cannot be said to be a reason in the eyes of law, much less a plausible or sustainable one. While noticing that limitation of filing SLP has since passed, we are constrained to record that impugned order unravels the mindset of the authority, for whom Revenue collection appears to be the sole objective. 9. The Authority deciding application under Section 197 of the Act of 1961 has an obligation of deciding the application as per the provisions of the Act of 1961, while having due regard to the treaties between the two countries. He should not be driven or swayed by the Revenue targets/considerations. 10. For what we have stated hereinabove and following the reasoning which we have given in our order of even date in Writ Petition No. 14299/2025 (AECOM International Holdings UK Ltd. vs. Assistant Commissioner of Income Tax, Circle Int Tax 1(1)(1), Delhi & Ors.....
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....), we hereby allow the present writ petition; quash and set aside the impugned order dated 06.03.2025 so also the consequential certificate dated 21.08.2025. We hereby direct the Competent Authority to issue a certificate at 'nil' rate within a period of fifteen days from today with the additional directions, as below: (i) The competent officer or any other authority who is supposed to consider the petitioner's application under Section 197 of the Act of 1961, shall issue a certificate of nil rate of tax not only for the Financial Year 2025-26 (AY 2026-27), but also for the subsequent years in case an application is filed. The certificate(s) shall be issued within 30 days of the day when application is filed. (ii) The competent authority dealing with petitioner's subsequent application(s) under Section 197 of the Act of 1961 shall not be bound by direction given in clause (i) above, if he comes to a conclusion and records a finding that the petitioner is having a PE in India and the transactions which the company has carried out in India are liable to be taxed in India. However, before recording such finding, a notice in this regard shall be issued to the peti....
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....tioner. (iii) It will also be required from the petitioner-company to disclose truly and fully all facts in its applications to be filed each year. It shall be required of the petitioner to extend full cooperation when any such notice (as provided in clause (ii) above) is issued for the subsequent year(s). 11. While parting with the order, we record our displeasure about the casual rather callous manner, in which the petitioner's application under Section 197 of the Act of 1961 has been rejected, completely disregarding the binding judgment of this Court, that too, in an appeal under Section 260A of the Income Tax Act, 1961. 12. The Writ Petition along with pending application stands disposed of in the aforesaid terms." Un quote: The Tax Officer refused nil rate TDS certificate merely because he expected that department will challenge the order and judgment of High Court in which order of tribunal in Favor of assessee was approved. This is wrong practice of tax authorities and goes against rules of judicial hierarchy and judicial discipline propounded long time before Apex Court of our country and also in other parts of the world. We find that not only in a....
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....bove case but also in other cases Tax officer refused to grant certificate of lower or nil rate of TDS. High Court has showed displeasure in similar manner but different words. From - Aecom Intercontinental Holdings Uk Ltd. Versus Assistant Commissioner of Income Tax, Circle Int Tax 1 (1) (1), Delhi & Ors. - 2026 (2) TMI 711 - DELHI HIGH COURT " 12. The approach of the Competent Authority has practically rendered the mandate and provisions of Section 197 of the Act of 1961, a waste piece of paper. Provisions of Section 197 of the Act of 1961 were enacted with an objective to ensure that in case particular transaction(s) is/are not exigible to tax, in light of the treaties between two countries and the provisions of the Act of 1961, (whichever is more beneficial to the assessee) then no tax or tax with lower rate is deducted, so as to ensure that cash flow of an entity is not unnecessarily retarded or blocked. And that the Department or the Revenue is not burdened with the interest (@ 6% per annum) which the revenue is bound to pay on the applicable refund. 3. We allow the writ petition and set aside the impugned order dated 19.08.2025 and consequential certificate of ....
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....even date issued @ 15%, we simultaneously direct the Competent Authority to issue a certificate at 'nil' rate within a period of 15 days from today. 14. It has been informed by learned members of the Bar that the software/mechanism of Section 197 of the Act of 1961 is so programmed that even if the competent authority proposes to issue a certificate consequent to the order passed by this Court, an assessee has to apply afresh and he cannot directly give effect to the order passed by this Court, which not only puts an unnecessary burden on the assessee but also consumes a lot of time in empty formality of submitting application all over again. 15. In our view, the concern expressed at bar deserves appropriate attention of the CBDT. The programme should be so modified or the software should be so developed that once an order has been passed by the High Court or any other superior Court, a fresh certificate (may be in the name of revised or amended rate) can be issued by the competent authority within the time allowed by the High Court, without requiring a fresh application to be filed. 16. A copy of this order be forthwith sent to the Chairman CBDT in order to issue ....
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....proper guidelines and circular so as to ward off the difficulties and hurdles which are being faced by the bona fide entities/assessees. 17. Instant direction shall also be considered by the CBDT or the Principal Chief Commissioner while considering the direction given by us on 29.01.2026 in Writ Petition No. 70857/2025. For the sake of ready reference, paragraph No. 24 of the said order is reproduced hereinbelow:- "24. As a parting remark, we would like to highlight that we have often noticed that the date of the order considering application under Section 197 and the date of issuance of certificate is not same. We are informed that the order often bears the date on which the application under Section 197 of the Act of 1961 has been filed. Due to this, an impression is often taken as if the issuance of the certificate has taken a long time after the application was processed or decided. The date on the order at multiple occasions bears the date of application that was filed by the applicant. The responsible authorities/CBDT are requested to address this issue." 18. With these observations, the writ petition stands allowed with all pending applications." Unquote In t....
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....his judgment besides wrong practice of tax officers in not acting as per law and precedence, other difficulties related to software have also been addressed and directions have been issued to CBDT and Pr.CIT and concerned authorities. The Court has also noted fact that order passed by competent authority ofen bears that date of application. However, issuance of certificate take longer time. This seems to be a sort of unfair practice to show that order was passed timely but there was delay in issue of certificate. ( may be some reasons can be shown by department in this regard). But off course this could be a malpractice or unfair practice of departmental officers and staff to insist that someone should come form the office of applicant to persuade to issue the certificate and collect the certificate. Though it is duty of the departmental officer to post physical or portal based order as soon as possible. From - Assistant/Deputy Commissioner of Income Tax Versus Godaddy. Com. - 2026 (9) TMI 271 - SC Order Assistant/Deputy Commissioner of Income Tax Versus Godaddy. Com. No.- Special Leave Petition (Civil) 30960/2026 [@Diary No(s). 45711/2026]. Dated:- August 31, 2....
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....026 HON'BLE MR. JUSTICE K.V. VISWANATHAN AND HON'BLE MR. JUSTICE ARUN PALLI {For the Petitioner(s) • Mr. S. Dwarakanath, A.S.G., • Mr. Sudarshan Lamba, AOR, • Ms. Shambhavi Sharma, Adv., • Ms. Prerna Dhal, Adv., • Ms. Seema Bengani, Adv., • Mr. Gaurav Arya, Adv., • Mr. Mudit Bansal, Adv., • Mr. Abhyudey Kabra, Adv., • Mr./Ms. S. Vijay Adithya, Adv., • Ms./Mr. Rama Ratan Sharma, Adv. For the Respondent(s) • Mr. Sachit Jolly, Sr. Adv., • Ms. Disha Jham, AOR, • Mr. Sohum Dua, Adv. } ORDER 1. Delay condoned. 2. Heard Mr. S. Dwarakanath, learned Additional Solicitor General appearing for the petitioner-Revenue and Mr. Sachit Jolly, learned Senior Counsel appearing on caveat for the respondent no. 1. 3. We find no good ground to interfere with the impugned judgment/order(s). The Special Leave Petition is, accordingly, dismissed. 4. Pending application(s), if any, shall stand disposed of." Un quote: We find that ten counsels have appeared for Revenue and three for tax payer. As per ord....
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....er their lordships heard only one counsel Mr. S. Dwarakanath, learned Additional Solicitor General on behalf of Revenue and one Mr. Sachit Jolly, learned Senior Counsel for one of respondents. (Note- serial number of counsels inserted by ld. Author to point out how human resources are deployed by Revenue, hence tax payer is also forced to engage some counsels to contest) The question which any citizen is free to ask is why so many counsels are engaged by revenue and hefty fees is paid to them. This is not only un-necessary spending but is also prompting wastage of highly competent human resources of country spent in Courts without much assistance to the Counsel arguing. Rather it can be said that deploying so many people amount to over staffing and that reduces productivity, efficiency and responsibility of other advocates supposed to assist senior counsel. This sort of practice can definitely be checked by government and its department, to engage limited number of counsels. This sort of practice can possibly be restricted by their lordships and regulatory authorities regulating profession of law. The private litigant have not much say, because it is dictate of senio....
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....r counsel engaged by litigant that his team is organised as per his choice. However, author has found that any litigant can put a restriction on maximum number of advocates to be engaged in a case. The limit should be reasonable in view of complexity of case. =============<br> Scholarly articles for knowledge sharing by authors, experts, professionals ....