Case Law Details
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.
After examining the matter, the Court observed that the petitioner’s case appeared to be covered by the Supreme Court’s ruling in Engineering Analysis Centre of Excellence Ltd. The Court held that the competent authority had not correctly dealt with that judgment and had failed to consider other relevant factors while issuing the certificate at 15%, making the certificate legally unsustainable.
Considering that about 85% of the relevant period had already elapsed and payments made to the petitioner had been subjected to withholding at 15%, the Court found it appropriate to balance the interests of both parties. It directed that a certificate for tax deduction at a lower rate of 2% be issued. The Court reasoned that this approach would address the Revenue’s concern regarding scrutiny assessment while also providing relief to the petitioner, as a substantial amount was otherwise being withheld.
Accordingly, the writ petition was partly allowed, and the tax authorities were directed to issue a certificate requiring tax deduction at 2% within ten days. The Court clarified that its order applies only to the certificate issued pursuant to the petitioner’s application for Assessment Year 2026–27 (Financial Year 2025–26). For subsequent years, the competent authority must independently consider the petitioner’s application and issue withholding certificates in accordance with law.
FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT
1. By way of present writ petition, the petitioner has challenged the order dated 17.11.2025 (mentioned as 05.09.2025), passed by the Office of Circle Int Tax 1(2)(1) (hereinafter referred to as the ‘Competent Authority’) so also the certificate dated 17.11.2025, whereby the competent authority has issued a tax withholding certificate at the rate of 15% under Section 197 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act of 1961’).
2. As per the petitioner, it is a non-resident company and a tax resident of the United States of America (for short ‘USA’), with its principal place of business at Virginia, USA. It provides a platform for planning, marketing and executing events in both physical and hybrid manner. In order to provide its services, the petitioner has entered into third party agreements for procurement of standard, off the shelf software products intended to be used for the Petitioner and its Associated Enterprise – Cvent India Private Limited for its day to day activities.
3. Mr. Shashwat Bajpai, learned counsel for the petitioner submitted that in spite of the fact that the nature of transactions carried out by the petitioner with its Indian counterpart is clear and though there is neither any involvement of royalty or copyright nor any reason to apprehend Fees for Included Services as per the India-USA Double Taxation Avoidance Agreement (hereinafter referred to as ‘India-USA Treaty’), yet for no rhyme or reason the Competent Authority has issued a tax withholding certificate at the rate of 15%, without recording any reason for the same.
4. Learned counsel relied upon the judgment of Hon’ble the Supreme Court rendered in the case of Engineering Analysis Centre of Excellence Ltd. v. CIT reported in (2021) 3 SCC 321 and submitted that the judgment of Hon’ble the Supreme Court is clear on the aforesaid issue and even the petitioner in its application had relied upon the said judgment, however, the Competent Authority has not correctly interpreted the same and has proceeded to issue a certificate at 15%.
5. Learned counsel argued that in any case, the petitioner can be subjected to assessment proceedings and it is required to satisfy the Assessing Officer about the nature of transaction during assessment proceedings, hence the certificate issued at the rate of 15% is not justified.
6. Indruj Singh Rai, learned Senior Standing Counsel for the respondent-Department on the other hand argued that none of the authorities has so far examined the nature of transactions carried out by the petitioner and unless the transactions carried out by the petitioner are examined in requisite detail, it cannot be said with certitude that the same are not taxable under the Act of 1961 read with the India-US treaty.
7. He further submitted that in any case, tax withholding certificate and certificate of deduction of tax at lower rate is not final and once the assessment of the petitioner is made, it shall be entitled for the refund of the tax amount, in case it is found that no tax is payable.
8. Heard learned counsel for the parties.
9. On going through the impugned order, we find that the case of the Petitioner is covered by the judgment of Engineering Analysis Centre of Excellence Ltd. (supra) and the Competent Authority has not correctly dealt with the said judgment and has not taken other relevant factors into consideration. Hence, the certificate issued at the rate of 15% is unsustainable in law.
10. Since almost 85% of the period is already over and the payments made to the petitioner have been subjected to 15% tax, though the transactions prima-facie look to be not exigible to tax, we are of the view that it would be just and proper if a certificate of deduction at 2% is issued to the petitioner so that the concern of the Revenue that the petitioner can be subjected to scrutiny assessment can be addressed and some respite can be given to the petitioner as a substantial amount is otherwise being withheld by the respondents.
11. The petition is, therefore, partly allowed.
12. The respondent is directed to issue a tax withholding certificate requiring deduction of tax at the rate of 2%. The same be issued within a period of 10 days from today.
13. We hereby make it clear that our order shall apply only for the certificate to be issued pursuant to the petitioner’s application for AY 2026-27 (i.e. FY 2025-26).
14. For subsequent year(s) the Competent Authority shall be required to consider the petitioner’s application and expeditiously issue tax withholding certificate in accordance with law.
15. With aforesaid directions, the petition along with pending application stands disposed of.
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