Benteler Automotive China Investment Limited v. Assistant Commissioner of Income tax (IT), Circle 1, Pune AND ORS
Validity of Section 197 NIL Withholding Tax Certificate Rejection when Identical Issues are Pending Appellate Review for Previous Assessment Years.
Court: Bombay High Court
Citation: 2026:BHC-AS:15021-DB
Decision Date: 27-03-2026
List of Laws
Income Tax Act, 1961; Income Tax Rules, 1962; India-China Double Taxation Avoidance Agreement (DTAA); Constitution of India, Article 226; Principles of Judicial Consistency and Sub-judice
- Facts: The Petitioner, a Chinese company and tax resident of China, entered into a Service Agreement to provide technical and management services to its Indian subsidiary, Benteler India. These services were rendered virtually from China via email and video conferencing. The Petitioner applied for a "NIL withholding tax" Certificate under Section 197 of the Income Tax Act, 1961, arguing that under Article 12(4) of the India-China Double Taxation Avoidance Agreement (DTAA), "fees for technical services" (FTS) are only taxable in India if the services are physically performed in India. The Revenue rejected the application, asserting that virtual rendition equates to physical presence and noting that similar claims for previous Assessment Years (2015-16 to 2023-24) had been rejected and were currently pending before the Income Tax Appellate Tribunal (ITAT).
- Procedural Posture: The Petitioner filed a Writ Petition under Article 226 of the Constitution of India before the Bombay High Court challenging the rejection order dated August 1, 2025, and seeking a declaration that the consideration is not taxable in India.
- Issue: Whether the Assessing Officer was justified in rejecting the application for a "NIL withholding tax" Certificate under Section 197, and whether the Court should grant a declaration on the interpretative taxability of services under the India-China DTAA while the same issue is sub-judice before the ITAT for previous years.
- Holding: The Court upheld the rejection of the Certificate and declined to grant the declaration, discharging the Writ Petition.
- Reasoning: The Court reasoned that Section 197 and Rule 28AA of the Income Tax Rules require the Assessing Officer to consider the tax liability of the previous four years. Since the Petitioner’s liability for identical services in previous years had been confirmed by the CIT(A) and DRP, and those findings remained undisturbed and pending before the ITAT, the Assessing Officer could not have issued a "NIL" certificate as it would contradict the existing standing of higher authorities. On the merit of the DTAA interpretation, the Court held that it would be imprudent to exercise its discretionary jurisdiction to grant a declaration when the exact issue is live and pending before the ITAT, the specialized fact-finding body. Any finding by the High Court at this stage would directly and improperly impact the pending appeals.
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