HC Directs Issue of Nil-Rate TDS Certificate Under Section 197

Case Details: AECOM Intercontinental Holdings UK Ltd. vs. Assistant Commissioner of Income-tax [2026] 183 taxmann.com 692 (Delhi)

Judiciary and Counsel Details

• Dinesh Mehta & Vinod Kumar, JJ.
• Manuj Sabharwal, Devvrat Tiwari & Drona Negi, Advs. for the Petitioner.
• Anurag Ojha, SSC, Ms Hemlata Rawat & V.K. Saksana, JSC for the Respondent.

Facts of the Case

The assessee-company provided corporate and management support services to its AE under an agreement. For the immediately preceding year, in respect of the same AE and identical services, the High Court, by order dated 20-05-2025 in the assessee’s own case, had directed the issuance of a nil-rate tax withholding certificate. The assessee filed an application dated 12-03-2025 under section 197 seeking issuance of a certificate at nil rate, which, as observed by the Court, ought to have been decided by 12-04-2025.

However, by order and certificate dated 19-08-2025, the Competent Authority issued a withholding certificate at 13.76 per cent plus applicable surcharge and cess (aggregating to about 15 per cent), rejecting the nil-rate request. The authority neither disputed the nature of the transactions nor recorded any finding on their taxability and disregarded the earlier High Court direction on the ground that the Department had decided to file an SLP.

The matter was taken to the Delhi High Court.

High Court Held

The High Court held that the Competent Authority (CA) had neither disputed the nature of the transaction nor recorded any finding on its taxability, which the petitioner had undertaken with its AE. Even the petitioner’s assertion that his earlier writ petition was allowed by the Court and a direction was issued to grant the certificate at nil rate was side-tracked on the flimsy ground that the Department had decided to file an SLP.

The High Court’s judgment binds all the Authorities. When it comes to the dispute between the parties whose case has been adjudicated by the High Court, unless the Competent Authority can point to factual differences or new information affecting the transaction’s nature and taxability, it cannot take a view other than that of the High Court. Even the charade of the principle that each assessment year is separate and is to be treated separately cannot shield the illegal refusal to apply the law already settled.

Such an approach and denial of the certificate at a nil rate of tax result in irreversible adverse consequences to the assessee. The Competent Authority practically rendered the mandate and provisions of section 197 a waste piece of paper. Provisions of section 197 were enacted to ensure that, in case a particular transaction is not exigible to tax, no tax or tax with a lower rate is deducted.

Accordingly, the writ petition was allowed. The impugned order and certificate were set aside, and CA was directed to issue a certificate at a nil rate within a period of 15 days.

List of Cases Referred to

• AECOM Intercontinental Holdings UK Ltd. v. ITO [2025] 175 taxmann.com 351 (Delhi) (para 3)
• Branch Metrics Inc v. Dy. CIT, International Tax [2026] 183 taxmann.com 466 (Delhi) (para 16).