Cvent Inc Vs DCIT (Delhi High Court)
The Delhi High Court considered a writ petition challenging an order and certificate issued by the income-tax authorities under Section 197 of the Income Tax Act, 1961, directing tax withholding at the rate of 15%. The petitioner, a non-resident company and tax resident of the United States with its principal place of business in Virginia, provides a platform for planning, marketing, and executing events in physical and hybrid formats. To provide its services, the company entered into third-party agreements for procuring standard off-the-shelf software products for use by itself and its associated enterprise in India for day-to-day operations.
The petitioner argued that the nature of its transactions with its Indian counterpart did not involve royalty, copyright, or fees for included services under the India-USA Double Taxation Avoidance Agreement. It contended that the competent authority issued the withholding certificate at 15% without providing any reasons and without properly considering the Supreme Court’s judgment in Engineering Analysis Centre of Excellence Ltd. v. CIT, which had been relied upon in its application. According to the petitioner, the withholding rate was unjustified and the nature of transactions could otherwise be examined during regular assessment proceedings.
The Revenue argued that the nature of the transactions had not been examined in detail and, therefore, it could not be concluded with certainty that the payments were not taxable under the Income Tax Act read with the India-USA treaty. The Department also stated that a withholding certificate is not final and that any excess tax deducted could be refunded after assessment if it is found that no tax liability arises.
