HC: MasterCard Asia Pacific exempted from Equalization Levy [Read Order]

In the case, MasterCard Asia Pacific Pte. ltd. Vs. Union of India, The Petitioner sought a stay on the payment of equalization levy under Section 165A r/w Section 166A of the Finance Act, 2016, as amended in Finance Act, 2020 until the pendency of the writ petition. The Delhi HC however exempted them from the same after a reply affidavit filed by IT Dept.

The Authority of Advance Ruling ruled on 6th June 2018 that the applicant had permanent establishment in India and that the sum received from its customer banks in India were liable to be taxed.

Applicant's Contention

The applicant contended that they were not liable to be taxed in India since their business was outside India and that no activity resulted in existence of Permanent Establishment (PE) or any payment can be termed as Royalty.

Equalization Levy

It was introduced in April 2020 by amending the Finance Act, 2016 and levied on entity that did not have PE in India. Therefore, the respondents contended that since the Applicants claimed that they did not have PE in India, they would be liable to pay tax under new levy. But to this, the applicant replied that any such action would lead to double taxation.ation.

IT Dept. reply to Court Notice

In the reply-affidavit filed by Income Tax Dept. they mentioned that the Petitioner was not liable to pay equalization levy since they had PE in India and the subject income effectively connected to this PE. The income was subject to income tax and provides for exception of equalization levy to those who have PE in India. The reply clearly showed that the IT Dept. had no intention of collecting EL due to Authority of Advance Ruling u/s 245S of IT Act.

The reply however also mentioned, "While the petitioner has paid taxes by way of TDS, it has not admitted any income in its return of income. Once the W.P filed before this court is decided, the consequential action under IT Act, 1961 or under Finance Act, 2016 shall be taken as mandated by law."

Court's Order

The court accepted the averments made by the respondent and held that the petitioner were not liable to pay Equalization Levy.

*The order will be uploaded on LatestLaws.com once the HC site is updated