Section 165(2)

Section 165(2) — the law in short

What the courts have decided on section 165(2), in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• Statutory position — s.165 of the Finance Act, 2016: the six per cent equalisation levy on online advertisement, the one lakh rupee threshold, the three exclusions, and the 1 April 2025 cut-off CBDT Circulars & InstructionsCuts both ways
  My client paid a foreign platform for online advertising. Was it required to withhold six per cent equalisation levy, what was the threshold below which it was not, and from when did that levy stop?
  The six per cent levy is charged by section 165 of the Finance Act, 2016 — it is not in the Income-tax Act, and a reader who looks for it there will not find it. It is charged on the amount of consideration for any specified service received or receivable by a NON-RESIDENT from (i) a person resident in India carrying on business or profession, or (ii) a non-resident having a permanent establishment in India. It is not charged in three cases: where the non-resident providing the service has a permanent establishment in India and the service is effectively connected with it; where the aggregate consideration for specified service received or receivable in a previous year by that non-resident from that payer does not exceed ONE LAKH RUPEES; and where the payment is not for the purposes of carrying on business or profession. Sub-section (3) ends the charge: it does not apply to any consideration for any specified service received or receivable by a person on or after 1 April 2025.
• Statutory position — s.40(a)(ib): the whole payment is disallowed where equalisation levy was deductible on it and was not deducted or not paid by the s.139(1) due date, and the proviso that gives it back CBDT Circulars & InstructionsCuts both ways
  The Assessing Officer has disallowed the entire online advertising spend because equalisation levy was not deducted. Is that right, and can the deduction be recovered in a later year?
  It is right in principle, and the disallowance is of the whole consideration, not of the six per cent. Section 40(a)(ib) of the Income-tax Act disallows 'any consideration paid or payable to a non-resident for a specified service on which equalisation levy is deductible under the provisions of Chapter VIII of the Finance Act, 2016, and such levy has not been deducted or after deduction, has not been paid on or before the due date specified in sub-section (1) of section 139'. Note where the levy itself lives: Chapter VIII of the Finance Act, 2016, not the Income-tax Act. The proviso restores the deduction — 'where in respect of any such consideration, the equalisation levy has been deducted in any subsequent year or has been deducted during the previous year but paid after the due date specified in sub-section (1) of section 139, such sum shall be allowed as a deduction in computing the income of the previous year in which such levy has been paid'.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.