Delhi High Court
British Airways Plc vs Income Tax Officer & Ors. on 3 December, 2020
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Date of Decision: 03.12.2020
+ W.P.(C) 13496/2019
BRITISH AIRWAYS PLC ... Petitioner
Through: Mr.Vishal Kalra, Advocate.
Versus
INCOME TAX OFFICER & ORS. ... Respondents
Through: Mr. Ruchir Bhatia, Senior Standing
Counsel with Ms. Mansie Jain and
Ms. Madhura MN, Advocates.
CORAM:
HON'BLE MR.JUSTICE MANMOHAN
HON'BLE MR.JUSTICE SANJEEV NARULA
SANJEEV NARULA, J. (oral)
1. The Petitioner is a foreign company, incorporated under the laws of
the United Kingdom and resident of U.K. under the India-U.K.
DTAA. By way of the present writ petition, it seeks a direction for
issuance of a lower withholding certificate under Section 197(1) of the
Income Tax Act, 1961 [hereinafter referred to as the 'Act'], effective
from 1st April, 2019 for Financial Year [hereinafter referred to as
'FY'] 2019-20.
2. Mr. Vishal Kalra, learned counsel for the Petitioner submits that the
Petitioner is engaged in the business of operating aircraft in
international traffic and its revenue/income in relation to its
international air traffic to and from India is derived from ticket sales
and cargo traffic. As its income/profits are not chargeable to tax under
Article 8 of India-UK DTAA r/w Section 90(2) of the Act, the
Petitioner requested for nil rate of withholding tax. Mr. Kalra further
submits that starting from the calendar year in question, the TDS
Reconciliation, Analysis and Correction Enabling System [hereinafter
referred to as the 'TRACES'] was unable to accept manual
applications till March, 2019. On 25th February, 2019, Petitioner had
tried to file a manual application, but it was not accepted by the
Income Tax Department. Therefore, Petitioner could file its first
application only on 18th March, 2019. Even on the said date, the
TRACES system permitted concurrent insertion of only three parties
in the defined fields provided therein, and allowed attachment of
documents as annexures. The system allowed only one application to
be filed at a time. Due to the aforesaid constraints, vide application
dated 18th March, 2019, Petitioner inserted the names of 3 parties in
the space provided in the online form, and documents - containing
names of approximately 300 other parties for which it needed the
certificate - were uploaded as annexure thereto.
3. Mr. Kalra further submits that the application made by the Petitioner
remained pending till 3rd June, 2019, on which date the AO issued
certificates for 3 parties whose names were provided in the designated
fields in the Form. Realizing that no certificate was issued for the
remainder parties mentioned in the uploaded documents, Petitioner
made an application dated 5th June, 2019 to the AO, through the
TRACES system, which by then allowed insertion of 50 parties
concurrently. However, since the limitation of the system to make one
application at a time still remained, Petitioner was precluded from
making an application for the balance parties. The certificate for the
said application was issued by the AO on 13th June, 2019. Thereafter
Petitioner made applications in a similar manner on 14th June, 2019,
2nd July, 2019 and 10th July, 2019 for which the certificates were
issued on 2nd July, 2019 and 7th August, 2019 respectively. During this
period the Petitioner continuously followed up with the officer of the
Centralized Processing Cell, TRACES Customer care, explaining the
challenges faced. Ultimately, the CPC, taking note of similar
representations made by several assessees, resolved the issue in the
system. Taking benefit of the upgradation, the Petitioner filed four
applications dated 10th July, 2019 for 180 parties. The certificate for
the balance 230 parties was issued on 7th August, 2019. The certificate
dated 7th August, 2019 mentions all the parties for which the
Petitioner sought certificate for, including the date on which such
certificates were issued. Mr. Kalra submits that the system generated
certificates are valid from the date of issue. Because of the delay in
issuance of the certificates, Petitioner was suffering grave hardship
and accordingly pursued the Respondents to issue a clarification that
no TDS is required to be deducted from payments received for the
period of 1st April, 2019 to 12th June, 2019. Respondents have,
however, declined to do so. In the absence of any clarification from
the Respondents, the period starting from 1st April, 2019 to the date of
issuance of the certificates is not covered by the certificates issued by
the Respondents. Mr. Kalra further emphasizes that the lower
withholding certificates have been issued at nil rate by the Respondent
No.1 for years FY 2018-19, 17-18 and 16-17 effective from 1st April
of the respective year. In these circumstances, the Petitioner prays that
the withholding tax certificates should be effective from 1st April,
2019 for FY 2019-20 and seeks appropriate direction in this regard.
4. We have given due consideration to the contentions of the learned
counsel for the parties and have perused the record. When the petition
first came up for hearing on 20th December, 2019, this Court passed
the following order:-
"The limited grievance of the petitioner raised in this petition is that
the withholding tax certificate issued to the petitioner has been made
effective from the date of issue and not from the beginning of the
financial year i.e. 01.04.2019. For example, it is pointed out that one
of the certificates placed at page 61 of the record has been made
effective from 13.06.2019 whereas the same had been applied for
financial year 2019-20. Counsel for the petitioner states that for
other jurisdictions, necessary clarifications have been issued by the
respondents themselves.
XX XX XX XX "
5. On 7th January, 2020, after taking note of the contentions of the
parties, the Court passed the following order:
"1. On the last date, Mr. Bhatia, learned senior standing counsel for
the Revenue had sought time to take instructions on the limited
grievance raised by the petitioner that the withholding tax certificate
issued to the petitioner has been made effective from the date of
issue, and not from the beginning of the financial year i.e.
01.04.2019.
2. The case of the petitioner is that on and from 01.04.2019, the
respondent introduced the system of making the application for
reduced withholding tax under Section 197 of the Income Tax Act,
1961 electronically. However, initially the system of the respondent
did not permit the applicant to include the particulars of more than
three parties. Consequently, the petitioner made the application in
respect of three parties and submitted an annexure containing the
particulars of 337 parties alongwith the application. The said list
has been placed on record.
3. Learned counsel for the petitioner submits that even in the
previous years, the respondent had issued lower withholding tax
certificates in respect of the same parties. It appears that the
respondents kept upgrading their systems and, as and when the same
was done, the petitioner kept making applications for lower
withholding tax in respect of the said 337 parties. However,
certificates were granted from the date of making of separate
applications despite the initial application being made on
18.03.2019.
4. Mr. Bhatia, submits that he has no written instructions and is not
in a position to state as to whether, the electronic system initially did
not permit making an application in respect of more than three
parties. He seeks further time to take instructions in this regard. He
states that in view of the impending union budget, four weeks' time
be granted to file reply.
5. The petitioner has placed on record the lower withholding tax
certificate issued in respect of the financial year 2018-19. We find
that the parties to whom the lower withholding tax certificates were
issued for the financial year 2018-19 are the same. In a matter like
the present one, time is of the essence since the petitioner is being
subjected to higher deduction of tax at source by the parties which
are transacting in business, while its claim is for lower withholding
tax. The petitioner is a well-established business enterprise. Though,
the lower withholding tax certificates have been issued in respect of
all the parties, the dispute remains with regard to the date from
which the certificates should take effect since the petitioner claims
that it had made the application on 18.03.2019 for the financial year
2019-20. In respect of all the parties, we are inclined to direct as an
interim measure that the said certificates issued to the petitioner
would be effective for the entire financial year of 2019-2020, subject
to further orders.
XX XX XX XX "
6. On the succeeding date i.e. 14th February, 2020, the interim order was
made absolute till the disposal of this writ petition.
7. Till date, the Respondents have not filed any counter affidavit.
However, a copy of a communication dated 12th February, 2020 from
the ITO (TRACES), CPC (TDS) to the ITO, TDS Ward-1(1)(2),
International Taxation, New Delhi in the context of the present writ
petition, has been placed on record. The said communication is relied
upon by the Revenue as a response to the grounds urged by the
petitioner in the present writ petition. The said communication reads
as under:
"Centralized Processing Cell (TDS)
Aayakar Bhawan, Sector-3, Vaishali,
Ghaziabad-201010
F.No.CPC-TDS/Writ Petition/Form 13/2019-20/
Date: 12.02.2020
To,
The Income Tax Officer
TDS, Ward-1(1)(2), International Taxation
New Delhi
Sir,
Subject: Writ Petition No. W.P.(C) 13496/2019 in the case of
British Airways PLC Vs. Income Tax Officer & Ors. - reg
Ref:-1) F.No. ITO/Ward(1)(2)/2019-20/180 dated 06.02.2020.
Kindly refer to the subject cited above.
2. I am directed to refer to the above mentioned letter on
the subject matter and forward comment as under
Applicant's Grounds Comments
1. Till late March, The online Form-13 functionality
2019 the online (for Lower/Nil Deduction
system known as Certificate) was deployed on
TRACES was website (TRACES) on 12.11.2018
practically not and has been working properly
working. The without any major downtime.
taxpayers at large Besides, it is to highlight that total
were not able to 8366 Form-13 were received on
apply online for website (TRACES) from 12.11.2018
issuance of lower till March, 2019 and all
withholding functionalities on website
certificate. (TRACES) were working to process
these requests.
The assessee had filed online
application on the website on
18.03.2019 vide request no. 5517
with three TANs which are,
DELM25694E, DELT04391C,
DELA51631G. The Nil Deduction
Certificates for the same were
issued on 03.06.2019.
2. When the The taxpayer/deductee can submit
petitioner made an the Form No. 13 along with
online application on supporting documents
18.03.2019, only electronically in two modes:
three parties could be a) Online mode (For upto 50
inserted as per online TANs)
format. b) Offline Utility mode (For
more than 50 TANs)
While applying Form-13 a pop-up
is flashed on the screen to inform
about the mode that can be used by
the applicant (screenshot is placed
as Annexure-I) for the submission
of Form-13.
Detailed FAQs
(https://contents.tdscpc.gov.in/en/fa
q-taxpayer-Form-13.html) (placed
as Annexure-II) and E-Tutorials
(https://contents.tdscpc.gov.in/docs/
E-Tutorial) on Form-13 are also
available on TRACES
(www.tdscpc.gov.in)
Revision functionality is also
available to add/modify TAN/TANs.
The assessee had filed online
application using online mode on
the website on 18.03.2019 vide
request no. 5517 with only three
TANs which are, DELM25694E,
DELT04391C, DELA51631G.
3. The department As per the available functionality
however did not issue applicant needs to furnish the
certificates for the details of transaction and TAN in
parties uploaded as the online Form-13. The applicant
annexure due to filed the details in Annexure-I of
inherent default in Form 13 and attached the list of
the online system. TANs alongwith other documents in
Form 13. The applicant did not opt
for the offline utility mode which
was applicable as per the
procedure for more than 50 TANs.
This issues with the approval of CIT(CPC-TDS).
Encl: As above"
8. During the course of the arguments, Mr. Bhatia, learned senior
standing counsel, relying on the aforesaid communication, submitted
that the Petitioner had the option of both online mode and offline
mode to submit Form No-13 along with the supporting documents.
The Petitioner ought to have availed the offline utility mode which
was applicable, as per procedure, for more than 50 TANs. Be that as it
may, indisputably, Petitioner made the applications well within time
i.e. on 18th March, 2019. Mr. Bhatia also admits that in light of the
interim order passed by the court, denial of the final relief, as sought
by the Petitioner, would cause grave hardship and result in a situation
that would have undesirable ramifications and consequences that
would adversely affect the Petitioner as well as the TANs named in
the certificates. Having perused the record and considering the fact
that the parties to whom the withholding tax certificates were issued
for the FY 2018-19 are the same, we have no reason to doubt that the
Petitioner was incapacitated from making applications as per the
online format for all the parties for whom it wanted to have the
withholding tax certificates issued. Petitioner has also asserted that it
could not make an application for more than 3 TANs initially, and
thereafter, when the system allowed for applying for 50 TANs,
multiple applications could not be made. With the initial application,
Petitioner also enclosed the particulars of 337 parties for whom
similar certificates were requested. The only plausible reason the
names could not be added in the designated fields, was the technical
inadequacy of the system. That said, concededly, for the TANs in the
said list, the Revenue subsequently has indeed issued certificates. In
these facts and circumstances, we have no reason to deny the relief
sought for in the present petition. Accordingly, it is declared that the
withholding tax certificates issued by the respondents which are the
subject matter of the present writ petition shall be effective from 1st
April, 2019 for FY 2019-20. The interim orders are made absolute.
9. With the above directions, the present writ petition is allowed.
SANJEEV NARULA, J
MANMOHAN, J
DECEMBER 03, 2020
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