INCOME TAX ACT, 1961

Section 195(2)

Tax deduction at source - Under section 195 - Issuance of a 'Certificate of No Deduction of Tax at Source' under section 195(2) -

Assessee was engaged in providing Information Technology Solutions and Support Services for e-commerce industry. In the course of its business, assessee stated to have made payments in the nature of 'pure reimbursements' to Walmart Inc., USA for the assessment year 2020-21 and in that regard had requested Department for issuance of a 'Certificate of No Deduction of Tax at Source'. The payment of salaries to the deputed expatriate employees were stated to have been made by 'Walmart Inc.' for administrative convenience and assessee made reimbursements to 'Walmart Inc.' With respect to such payments, assessee had sought for granting of Certificate under section 195. AO's case was that there was no employer-employee relationship between Flipkart Internet Private limited India and secondees seconded by assessee, The services rendered/provided by seconded employees were in the nature of technical services, both under Income Tax Act and under DTAA as well. Deduction under section 192 did not result in double deduction nor did it obviate the need to deduct under section 195. Once income was in the nature of FTS/FIS, it was to be taxed on gross basis; there was no need to examine whether or not income element was embedded in the said payment.Also, as per AO further information was required to record a detailed finding. Assessee called in question the validity of the Order, passed by AO whereby application for 'Nil TDS Certificate' was rejected and assessee sought for issuance of writ of mandamus to direct AO to issue 'Nil Tax Deduction at Source Certificate' to under section 195(2). Held: The stand taken on the material available was on the construction of legal position. The understanding of legal position being erroneous, the only conclusion that could be arrived at was to allow the application. Though revenue raised numerous contentions that further information was required to recod a detailed finding, however, a perusal of the file of department did not make out any instance where Department had sought for further information which was not furnished. On the contrary, assessee made out detailed representation on the legal position and record did not reflect any requisition for further information remaining unanswered. In light of setting aside of the impugned order in the context of legal position as noticed, the only order that could be passed was of one granting 'nil tax deduction at source'. Accordingly, AO was to issue a Certificate under section 195(2) of the effect of Nil Tax Deduction at source.

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