My non-resident client pays equalisation levy on its Indian receipts, and the Assessing Officer has still refused a NIL section 197 certificate and directed ten per cent withholding. What is the answer?
The Delhi High Court set that order aside. The equalisation levy is charged by Chapter VIII of the Finance Act, 2016, not by the Income-tax Act; the join between the two statutes is section 10(50) of the Act, and the Finance Act 2021 amended that clause with effect from 1 April 2021 so that amounts taxable as royalty or fees for technical services under the Act read with the applicable treaty are excluded from the exemption. The Court held that the impugned order did not take that amendment into account, and gave no reasoning for the ten per cent rate at all — the officer's own file had recorded that the receipts were not royalty or fees for technical services under the India-US treaty and had recommended four per cent 'in the interest of Revenue'. The order was set aside with a direction to pass a de novo reasoned order within four weeks excluding, from the receipts subject to withholding, so much as is exigible to equalisation levy.
Decided by the High Court (Manmohan J and Navin Chawla J) on 2021-12-22, reported as W.P.(C) 14714/2021 and CM APPL. 46330-31/2021, High Court of Delhi at New Delhi; no law-report citation traced. It bears on section 197, section 197(1), section 195, section 10(50), section 90, section 90A of the Income Tax Act 1961, in TDS Defaults and How Tax Law Is Read matters.
This is the working authority for the apportionment point. After the 2021 amendment the two charges are meant to be mutually exclusive: what is royalty or fees for technical services under the Act read with the treaty is taxed as income and is outside section 10(50), and what is not is left to the equalisation levy and is outside total income. The Revenue's own submission, recorded in the judgment, was that 'the concept of apportionment of receipts has been introduced' and that the balance after taking out royalty and fees for technical services 'will be chargeable to Equalisation Levy'. So an officer cannot refuse the exemption wholesale on the footing that the assessee has paid the levy; he has to characterise the receipts first and apportion. The judgment is also a plain statement that a section 197 order must contain reasons: the Court twice records that there was no reasoning for the rate granted, and no discussion of the treaty articles relied on. Its limits should be stated with equal clarity. The Court expressly said it had not expressed any opinion on the merits and left all contentions open; it did not decide that Coursera's receipts were exempt, that it was a university within Article 12(5)(c), or that the rate should be nil. It is authority on how the exercise must be conducted, not on its outcome.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
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Coursera Inc, a tax resident of the United States, applied on 23 September 2021 for a certificate under section 197(1) of the Income-tax Act for financial year 2021-22, seeking nil deduction. It described itself in the application as an e-platform operator and, later in the same application, as a university for the purposes of Article 12(5)(c) of the India-US Double Taxation Avoidance Agreement. Its case was that it merely aggregates educational institutions, that the certificate awarded on completion of a course bears the seal of the institution concerned, that it has no permanent establishment in India so its business profits are not taxable here, that its gross receipts are neither royalty nor fees for included services under Article 12, and that it had already submitted to Indian tax jurisdiction by paying equalisation levy at two per cent, its entire receipts relating to e-commerce activity. A certificate was issued on 23 September 2021 and an order rejecting nil deduction was passed on 27 September 2021, directing its customers to withhold at ten per cent. The initial part of that order recorded that the receipts from Indian customers were not chargeable as royalty or fees for technical services under the Act read with the India-US treaty, that the assessee had been paying equalisation levy at two per cent and had filed the challans, and that such receipts 'may be subjected to TDS under section 195 of the Act @4% keeping in the interest of Revenue'. The petitioner challenged the order and the certificate. The Revenue relied on section 10(50) as amended with effect from 1 April 2021, submitting that apportionment had been introduced so that the part characterised as royalty or fees for technical services is taxable and the balance chargeable to equalisation levy.
The impugned order dated 27 September 2021 was set aside with a direction to the first respondent to pass a de novo reasoned order within four weeks, after taking into account the amendments made to section 10(50) with effect from 1 April 2021, that is to exclude the receipts of the petitioner which are subject to withholding tax at source to the extent such receipts are exigible to equalisation levy, and after granting an opportunity of being heard; the petitioner was obliged to furnish the information required by the Assessing Officer expeditiously (paragraph 10). The Court clarified that it had not expressed any opinion on the merits and that all contentions of either side were left open (paragraph 11), disposed of the petition in those terms (paragraph 12) and granted liberty to approach the Court again if the need arose (paragraph 13).
The Court found two defects on the face of the order. First, the order's own opening had recorded that the receipts were not chargeable as royalty or fees for technical services under the Act read with the India-US treaty and had recommended four per cent 'keeping in the interest of Revenue', yet the petitioner had been directed to deduct at ten per cent on the entire amount with no reasoning as to how that rate was arrived at (paragraphs 6 and 7). Second, the order did not take into account the impact of the amendment to section 10(50) made by the Finance Act 2021 with effect from 1 April 2021, the effect of which the Court described as being that amounts taxable as royalty or fees for technical services under the Act read with section 90 or 90A of the relevant treaty will not be exigible for being considered for the charge of equalisation levy (paragraph 8). The Court also noted that the order held the petitioner ineligible for Article 12(5)(c) but contained no reasoning or discussion on the applicability of the various sub-articles of the treaty to the facts (paragraph 9).
The said amendment states that the amounts taxable as royalty/fees for technical services under the Act read with section 90/90A of the relevant double taxation avoidance agreement [DTAA] will not be exigible for being considered for the charge of Equalisation Levy.
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Handle my notice → Ask a CA on WhatsAppThe Delhi High Court set that order aside. The equalisation levy is charged by Chapter VIII of the Finance Act, 2016, not by the Income-tax Act; the join between the two statutes is section 10(50) of the Act, and the Finance Act 2021 amended that clause with effect from 1 April 2021 so that amounts taxable as royalty or fees for technical services under the Act read with the applicable treaty are excluded from the exemption. The Court held that the impugned order did not take that amendment into account, and gave no reasoning for the ten per cent rate at all — the officer's own file had recorded that the receipts were not royalty or fees for technical services under the India-US treaty and had recommended four per cent 'in the interest of Revenue'. The order was set aside with a direction to pass a de novo reasoned order within four weeks excluding, from the receipts subject to withholding, so much as is exigible to equalisation levy. This was decided by the High Court (Manmohan J and Navin Chawla J) and bears on section 197, section 197(1), section 195, section 10(50), section 90, section 90A of the Income Tax Act 1961. It is reported as W.P.(C) 14714/2021 and CM APPL. 46330-31/2021, High Court of Delhi at New Delhi; no law-report citation traced. This is the working authority for the apportionment point. After the 2021 amendment the two charges are meant to be mutually exclusive: what is royalty or fees for technical services under the Act read with the treaty is taxed as income and is outside section 10(50), and what is not is left to the equalisation levy and is outside total income. The Revenue's own submission, recorded in the judgment, was that 'the concept of apportionment of receipts has been introduced' and that the balance after taking out royalty and fees for technical services 'will be chargeable to Equalisation Levy'. So an officer cannot refuse the exemption wholesale on the footing that the assessee has paid the levy; he has to characterise the receipts first and apportion. The judgment is also a plain statement that a section 197 order must contain reasons: the Court twice records that there was no reasoning for the rate granted, and no discussion of the treaty articles relied on. Its limits should be stated with equal clarity. The Court expressly said it had not expressed any opinion on the merits and left all contentions open; it did not decide that Coursera's receipts were exempt, that it was a university within Article 12(5)(c), or that the rate should be nil. It is authority on how the exercise must be conducted, not on its outcome. If it applies to you, the first step is this: In a section 197 application, put the equalisation levy challans and Form 1 on record with the application itself, and identify expressly which receipts are said to be exigible to the levy.
Coursera Inc, a tax resident of the United States, applied on 23 September 2021 for a certificate under section 197(1) of the Income-tax Act for financial year 2021-22, seeking nil deduction. It described itself in the application as an e-platform operator and, later in the same application, as a university for the purposes of Article 12(5)(c) of the India-US Double Taxation Avoidance Agreement. Its case was that it merely aggregates educational institutions, that the certificate awarded on completion of a course bears the seal of the institution concerned, that it has no permanent establishment in India so its business profits are not taxable here, that its gross receipts are neither royalty nor fees for included services under Article 12, and that it had already submitted to Indian tax jurisdiction by paying equalisation levy at two per cent, its entire receipts relating to e-commerce activity. A certificate was issued on 23 September 2021 and an order rejecting nil deduction was passed on 27 September 2021, directing its customers to withhold at ten per cent. The initial part of that order recorded that the receipts from Indian customers were not chargeable as royalty or fees for technical services under the Act read with the India-US treaty, that the assessee had been paying equalisation levy at two per cent and had filed the challans, and that such receipts 'may be subjected to TDS under section 195 of the Act @4% keeping in the interest of Revenue'. The petitioner challenged the order and the certificate. The Revenue relied on section 10(50) as amended with effect from 1 April 2021, submitting that apportionment had been introduced so that the part characterised as royalty or fees for technical services is taxable and the balance chargeable to equalisation levy. The matter was decided on 2021-12-22 by the High Court (Manmohan J and Navin Chawla J). On those facts the High Court held as follows. The impugned order dated 27 September 2021 was set aside with a direction to the first respondent to pass a de novo reasoned order within four weeks, after taking into account the amendments made to section 10(50) with effect from 1 April 2021, that is to exclude the receipts of the petitioner which are subject to withholding tax at source to the extent such receipts are exigible to equalisation levy, and after granting an opportunity of being heard; the petitioner was obliged to furnish the information required by the Assessing Officer expeditiously (paragraph 10). The Court clarified that it had not expressed any opinion on the merits and that all contentions of either side were left open (paragraph 11), disposed of the petition in those terms (paragraph 12) and granted liberty to approach the Court again if the need arose (paragraph 13).
The Court found two defects on the face of the order. First, the order's own opening had recorded that the receipts were not chargeable as royalty or fees for technical services under the Act read with the India-US treaty and had recommended four per cent 'keeping in the interest of Revenue', yet the petitioner had been directed to deduct at ten per cent on the entire amount with no reasoning as to how that rate was arrived at (paragraphs 6 and 7). Second, the order did not take into account the impact of the amendment to section 10(50) made by the Finance Act 2021 with effect from 1 April 2021, the effect of which the Court described as being that amounts taxable as royalty or fees for technical services under the Act read with section 90 or 90A of the relevant treaty will not be exigible for being considered for the charge of equalisation levy (paragraph 8). The Court also noted that the order held the petitioner ineligible for Article 12(5)(c) but contained no reasoning or discussion on the applicability of the various sub-articles of the treaty to the facts (paragraph 9). In the words reproduced by the source cited on this page: "The said amendment states that the amounts taxable as royalty/fees for technical services under the Act read with section 90/90A of the relevant double taxation avoidance agreement [DTAA] will not be exigible for being considered for the charge of Equalisation Levy."
It was decided by the High Court on 2021-12-22 and is reported as W.P.(C) 14714/2021 and CM APPL. 46330-31/2021, High Court of Delhi at New Delhi; no law-report citation traced. Binding within that High Court's jurisdiction. Persuasive elsewhere. A High Court decision binds the assessing officer, the Commissioner (Appeals) and the Income Tax Appellate Tribunal within that state, and is persuasive elsewhere. If your assessment is in a different jurisdiction, check whether your own High Court has taken the same view before relying on it. On section 197, section 197(1), section 195, section 10(50), section 90, section 90A, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The impugned order dated 27 September 2021 was set aside with a direction to the first respondent to pass a de novo reasoned order within four weeks, after taking into account the amendments made to section 10(50) with effect from 1 April 2021, that is to exclude the receipts of the petitioner which are subject to withholding tax at source to the extent such receipts are exigible to equalisation levy, and after granting an opportunity of being heard; the petitioner was obliged to furnish the information required by the Assessing Officer expeditiously (paragraph 10). The Court clarified that it had not expressed any opinion on the merits and that all contentions of either side were left open (paragraph 11), disposed of the petition in those terms (paragraph 12) and granted liberty to approach the Court again if the need arose (paragraph 13). It arises in TDS Defaults and How Tax Law Is Read matters, on section 197, section 197(1), section 195, section 10(50), section 90, section 90A of the Income Tax Act 1961, and was decided by Manmohan J and Navin Chawla J. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Ask the officer, in writing, to characterise the receipts before fixing a rate, and to state whether and to what extent he says they are royalty or fees for technical services under the Act read with the treaty. That is the question the amendment makes him answer. If the certificate directs a rate without reasons, take the reasons point on its own — it was enough here to set the order aside, without the Court deciding anything on characterisation. Where the officer's own file records a different rate or a different conclusion from the one in the operative order, put that inconsistency in the petition; it is what the Court fastened on. Do not read this judgment as authority that a levy-paying platform gets a NIL certificate. It gets a reasoned order that applies the amended section 10(50); the merits were expressly left open.
Searched for later treatment; none was found. That is not the same as a source affirming it. Two probes and nothing. The citedby search returns no results. A second probe pairing the name with section 10(50) and equalisation levy returned only three ITAT Delhi orders in Cloudera Inc (29 June 2026) - a different company caught by the similarity of name - and nothing citing this judgment. So the holding stands untested: where the equalisation levy applies to the receipts, section 10(50) as amended by the Finance Act 2021 exempts them from income-tax, and an officer fixing a withholding rate under section 197 must exclude those receipts before he computes the rate; an order that ignores the amendment is liable to be set aside. It has not been applied, doubted or overruled. Practically it remains a useful authority to press on a section 197 application, but a reader should expect to argue the statutory scheme rather than rely on weight of citation. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The judgment is an oral judgment of a Division Bench, delivered by Manmohan J, and runs to fourteen numbered paragraphs, of which paragraph 14 is empty on the copy read. The date line on the copy reads '22th December, 2021'. The version of section 10(50) reproduced by the Court at paragraph 4 is the version after the Finance Act 2021 and is truncated in the copy with an ellipsis at the end of Explanation 1; it does NOT contain the words 'but before the 1st day of August, 2024' or the proviso about assessment year 2026-27, both of which came later, and it should not be used as a statement of the clause as it now stands. The Court's statement that the Explanation was inserted 'by Finance Act 2021 w.e.f. 01-04-2021' is the Court's, and I have not verified it against the Finance Act 2021 itself; what I did verify is that section 171(a)(i) of the Finance Act 2021 inserted the mirror-image proviso into section 163(3) of the Finance Act 2016 with retrospective effect from 1 April 2020. The passage quoted at paragraph 6 is from the impugned order of the Assessing Officer, quoted inside the judgment, and is described as such and not as the Court's words. Note that Coursera's own application described it both as an e-platform operator and as a university for the purposes of Article 12(5)(c) of the India-US treaty; the Court recorded the inconsistency without resolving it. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The impugned order dated 27 September 2021 was set aside with a direction to the first respondent to pass a de novo reasoned order within four weeks, after taking into account the amendments made to section 10(50) with effect from 1 April 2021, that is to exclude the receipts of the petitioner which are subject to withholding tax at source to the extent such receipts are exigible to equalisation levy, and after granting an opportunity of being heard; the petitioner was obliged to furnish the information required by the Assessing Officer expeditiously (paragraph 10). The Court clarified that it had not expressed any opinion on the merits and that all contentions of either side were left open (paragraph 11), disposed of the petition in those terms (paragraph 12) and granted liberty to approach the Court again if the need arose (paragraph 13).
TaxSphere, “Coursera Inc v. Income Tax Officer TDS 1(2)(1) — a s.197 order that ignored the 2021 amendment to s.10(50) was set aside, and the receipts exigible to equalisation levy must be excluded before the withholding rate is fixed”, https://taxnotice.vittsphere.com/caselaw/case/coursera-inc-197-certificate-set-aside-for-ignoring-the-2021-amendment-to-section-10-50/ (validity last checked 2026-09-09)
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My money is stuck. Every invoice I raise has tax deducted at the full rate, my actual tax for the year is far less than the deductions, and I only get it back a year later when the refund comes. Somebody told me to apply for a lower-deduction certificate under section 197. What does section 197 actually say — which payments does it cover, what does the Assessing Officer have to be satisfied about, what form do I file, and can the certificate be backdated to cover the deductions already made?
The officer issued my 197 certificate at a higher rate without giving reasons. Can I challenge it?
My client paid equalisation levy on the same receipts the Assessing Officer is now taxing as income. Is there an exemption, and has the department any answer to it?
The AO says I short-deducted TDS on director remuneration. Can he disallow the payment under 40(a)(ia)?
