Coursera Inc v. Income Tax Officer Tds 1(2)(1) & Ors

$~55 *IN THE HIGH COURT OF DELHI AT NEW DELHIDate of Decision: 22[th]December, 2021+W.P.(C) 14714/2021 & CM APPL. 46330-31/2021 COURSERA INC ..... PetitionerThrough:Ms.KavitJha,Mr.HimanshuAggarwal & Mr.Udit Naresh,Advs. versus INCOME TAX OFFICER TDS 1(2)(1) & ORS. ..... RespondentsThrough:Mr.Sunil Agarwal, Sr. StandingCounsel with Mr.Tushar Gupta,Jr.StandingCounsel&Mr.Samarth Chaudhari, Adv. CORAM:HON'BLE MR. JUSTICE MANMOHANHON'BLE MR. JUSTICE NAVIN CHAWLA MANMOHAN, J. (Oral) 1.Present writ petition has been filed challenging the order dated27.09.2021 and certificate dated 23.09.2021 issued by RespondentNo.1, under section 197(1) of the Income Tax Act, 1961 (‘the Act’).Petitioner seeks directions to the Respondents to issue certificate with‘NIL’ deduction of income tax in favour of the Petitioner for financialyear 2021-22. 2.Learned counsel for the Petitioner states that the impugnedorder dated 27.09.2021 rejecting Petitioner’s application for NILdeduction directing the customers of the Petitioner to withhold tax @10% is arbitrary and no reason has been given in the order for arrivingat such a conclusion. She states that the Petitioner acts merely as anaggregator of educational institutions making access to variouscourses easier and that upon successful completion of the course, acertificate to this effect which bears the seal of the institutionconcerned is awarded to the student. 3.She further states that the Petitioner being a tax resident ofUSA, has no PE in India and so business profits arising to thePetitioner in India are not liable to tax in India. She also states that thegross receipts of the petitioner can neither be characterised as Royaltynor Fees for included services (‘FIS’) in terms of Article 12 of India-USA Double Tax Avoidance Agreement (‘DTAA’). The Petitionerhas not transferred any copyright to its customers as there is no rightto commercially exploit the content hosted on the e-platform and/orthe services rendered are technical or consultancy in nature. She alsosubmits that the Petitioner has already submitted itself to the IndianTax jurisdiction by paying Equalisation levy @ 2% in terms of theFinance Act, 2020 and the entire receipts of the Petitioner relates onlyto the e-commerce activity. 4.Per Contra learned Counsel for the Revenue has drawn ourattention to the provisions of section 10(50) of the Act, amended witheffect from 1[st]April, 2021, which reads as under: “Any income arising from any specified serviceprovided on or after the date on which the provisionsof Chapter VIII of the Finance Act, 2016 comes intoforce [or arising from any e-commerce supply orservices made or provided or facilitated on or after the1stdayofApril, [2020]]andchargeabletoequalisation levy under that Chapter. [Explanation 1.—For the removal of doubts it ishereby clarified that the income referred to inthis clause shall not include and shall be deemednever to have been included any income which ischargeable to tax as royalty or fees for technicalservices in India under this Act read with theagreement notified by the Central Governmentunder section 90 or section 90A…………….”hereby clarified that the income referred to inthis clause shall not include and shall be deemednever to have been included any income which ischargeable to tax as royalty or fees for technicalservices in India under this Act read with theagreement notified by the Central Governmentunder section 90 or section 90A…………….” 5.Mr.Agarwal submits that after amendment of section 10(50) ofthe Act by Finance Act 2021 w.e.f.01-04-2021, the concept ofapportionment of receipts has been introduced. Therefore, out of thetotal amount of receipts of the petitioner, the amount characterised asroyalty or fees for technical services will be chargeable to tax underthe Act read with provisions of applicable DTAA as royalty and/or feefor technical services for the purposes of TDS under section 195 of theAct. Balance amount, if any, will be chargeable to Equalisation Levy. 5.Mr.Agarwal submits that after amendment of section 10(50) ofthe Act by Finance Act 2021 w.e.f.01-04-2021, the concept ofapportionment of receipts has been introduced. Therefore, out of thetotal amount of receipts of the petitioner, the amount characterised asroyalty or fees for technical services will be chargeable to tax underthe Act read with provisions of applicable DTAA as royalty and/or feefor technical services for the purposes of TDS under section 195 of theAct. Balance amount, if any, will be chargeable to Equalisation Levy. 6.After hearing the counsels for parties, this court finds theImpugned Order in the initial part records as under:- “That the receipts from Indian customers are notchargeable to tax as royalty/FTS under the provisionsof the Act read with India US tax treaty. Since, theassessee has been suo moto paying equalization levy@2% on receipts from Indian customer and has filedchargeable to tax as royalty/FTS under the provisionsof the Act read with India US tax treaty. Since, theassessee has been suo moto paying equalization levy@2% on receipts from Indian customer and has filed copies of Equalisation Levy challans as evidence, suchreceipts may be subjected to TDS under section 195 ofthe Act @4% keeping in the interest of Revenue. Thisrecommendation is made owing to the limited framework of nature of proceedings under section 197” 7.However, the petitioner has been directed to deduct TDS @10% on the entire amount. There is no reasoning as to how the ratefinally granted has been arrived at. 8.The Impugned Order does not take into account the impact, ifany, of the amendment carried out to section 10(50) of the Act byFinance Act 2021 w.e.f. 01-04-2021. The said amendment states thatthe amounts taxable as royalty/fees for technical services under theAct read with section 90/90A of the relevant double taxationavoidance agreement will not be exigible for beingconsidered for the charge of Equalisation Levy. 9.The Petitioner in its application for certificate under section 197dated 23.09.2021 describes itself as an e-platform operator. In the laterpart of the same application the petitioner claims itself to be auniversity for the purposes of article 12(5)(c) of the DTAA betweenIndia and United States of America. The AO, in the Impugned Orderholds the Petitioner is not eligible for the benefit of article 12(5) (c) ofthe DTAA. However, the Impugned Order does not contain anyreasoning or discussion on the applicability or otherwise of varioussub-articles of the DTAA to the fact situation of the case. 10.Consequently, the impugned order dated 27.09.2021 is herebyset aside with a direction to the Respondent No. 1 to pass a de novoreasoned order after taking into account the amendments made to theprovisions of section 10(50) of the Act w.e.f. 01.04.2021 i.e. toexclude the receipts of the Petitioner which is subject to withholdingtax at source to the extent such receipts are exigible to EqualisationLevy within a period of 4 weeks after granting opportunity of beingheard to the petitioner. It will be incumbent upon the petitioner tofurnish to the Assessing Officer the information required by theAssessing Officer expeditiously. 11.It is clarified that this court has not expressed any opinion onthe merits of the case. Needless to say all contentions of either side areleft open. 12.Instant petition is disposed of in the above terms. 13.Liberty is granted to parties to approach this Court in case theneed arises. 14. MANMOHAN, J NAVIN CHAWLA, J DECEMBER 22, 2021/rv