Nil TDS Certificate for Same Parties, Same Transactions: Delhi HC

The Delhi High Court has set aside an order of the Income Tax Department that denied a nil-rate tax withholding certificate to AECOM Intercontinental Holdings UK Ltd and instead imposed a 15% withholding rate on payments received from its Indian affiliate. The Division Bench of Justice Dinesh Mehta and Justice Vinod Kumar allowed the writ petition filed by the UK-based company and directed the Assistant Commissioner of Income Tax, Circle International Tax 1(1)(1), Delhi, to issue a certificate under Section 197 of the Income Tax Act, 1961 at a nil rate within 15 days. The appellant/assessee, AECOM Intercontinental Holdings UK Ltd is engaged in providing corporate and management support services—covering areas such as legal, tax, treasury, finance, IT, human resources, and enterprise risk management—to its associated enterprise in India, AECOM India Private Limited. For the preceding assessment year, the Delhi High Court had already ruled in favour of the company in a similar petition and had directed the tax department to issue a nil-rate withholding certificate for the same nature of services. Despite this, the competent authority, by an order dated 19 August 2025, issued a certificate prescribing withholding tax at 13.76% plus surcharge and cess, effectively amounting to around 15%. The petitioner contended that the impugned order ignored the earlier High Court ruling involving the same parties and identical transactions, and was therefore arbitrary and contrary to law. The Bench noted that the competent authority had neither disputed the nature of the transactions nor recorded any independent finding on their taxability. Instead, the authority sought to justify the deviation from the earlier High Court order by stating that the department had decided to file a Special Leave Petition (SLP) against that judgment. The Court held that all departmental authorities are bound by judgments of the High Court. In disputes between the same parties, unless a factual distinction or new material affecting taxability is shown, the authority cannot take a view contrary to that already settled by the Court. The oft-cited principle that each assessment year is separate cannot be used as a shield to disregard binding precedent. The Bench also expressed strong displeasure at the inordinate delay in deciding the Section 197 application. Although the application was filed on 12 March 2025 and ought to have been decided within a month, the order was passed only on 19 August 2025. During this period, tax continued to be deducted at 15%, adversely impacting the company’s cash flow. The Court observed that the provision exists to ensure that where a transaction is not taxable—or taxable at a lower rate—no excessive tax is withheld, thereby preventing unnecessary blockage of funds and avoiding subsequent refund obligations (along with statutory interest) on the Revenue. The Court remarked that the conduct of the competent authority had effectively rendered the mandate of Section 197 “a waste piece of paper.” Taking note of systemic issues, the Bench recorded submissions that the current software mechanism under Section 197 requires an assessee to file a fresh application even when a High Court has directed issuance of a revised or nil-rate certificate. The Court directed that a copy of the judgment be sent to the Chairman of the Central Board of Direct Taxes (CBDT) to consider issuing appropriate guidelines or modifying the system so that certificates can be issued directly in compliance with court orders, without requiring fresh applications. The Court also reiterated concerns raised in an earlier case about discrepancies between the date of passing of orders under Section 197 and the actual date of issuance of certificates, urging the CBDT to address this issue. The Delhi High Court has quashed the order dated 19 August 2025 and the consequential certificate prescribing 15% withholding. The court directed issuance of a nil-rate withholding certificate within 15 days. Case Details Case Title: Aecom Intercontinental Holdings Versus ACIT Case No.: W.P.(C) 14299/2025, CM APPL. 58549/2025 & CM APPL. 7329/2026 Date: 4/02/2026 Counsel For Petitioner: Manuj Sabharwal Counsel For Respondent: Anurag Ojha, SSC Click Here To Read Order Read More: GoDaddy’s Domain Registration Income Is Not Taxable in India: HC Slams Tax Dept. for Ignoring Binding Precedent

Nil TDS Certificate for Same Parties, Same Transactions: Delhi HC

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