Taxpayer obligated to withhold tax only if payment is chargeable to tax under the provisions of Income Tax Act

This Tax Alert summarises a recent ruling of the High Court (HC) of Delhi in the case of Van Oord ACZ India (P) Ltd. (Taxpayer) [2010-TIOL-187-HC-DEL-IT] on withholding tax obligation arising under the provisions of the Indian Tax Law (ITL) in respect of reimbursement of expenses to non-resident companies. The Delhi HC held that a payer is obligated to withhold tax only if the payment is chargeable to tax under the provisions of the ITL. Further, if the payer considers that the entire payment is not chargeable to tax under the ITL, he can seek a certificate for withholding at nil/ lower rate o...