Delhi High Court Grants Relief To Lufthansa Airlines, Sets Aside Revenue's Order Denying 'Nil' TDS Certificate
In a relief to German cargo airline Lufthansa, the Delhi High Court set aside the Revenue's order denying nil TDS certificate to the company for the financial year 2024-25.Section 195 of the Income Tax Act, 1961 deals with the deduction of TDS (Tax Deducted at Source) on payments made to non-resident Indians (NRIs). However, 'nil' withholding tax certificates can be issued under Section...
In a relief to German cargo airline Lufthansa, the Delhi High Court set aside the Revenue's order denying nil TDS certificate to the company for the financial year 2024-25.
Section 195 of the Income Tax Act, 1961 deals with the deduction of TDS (Tax Deducted at Source) on payments made to non-resident Indians (NRIs). However, 'nil' withholding tax certificates can be issued under Section 195(3), subject to prescribed conditions.
Accordingly, Lufthansa moved an application before the Revenue for issuance of a certificate under Section 195(3) of the Act, which came to be rejected. The Assessing Officer instead issued a certificate for withholding tax at a lower rate of 0.10%.
Aggrieved, the company moved the High Court claiming that it is a tax resident of Germany and its income is not chargeable to tax in India in terms of Article 8 of the India-Germany Double Taxation Avoidance Agreement.
Lufthansa further claimed that it has been granted certificates under Section 195(3) for receiving the payment for services at nil TDS for more than a decade and the nature of its services or the income received has undergone no change to deny the relief now.
Revenue submitted that the company's application was rejected on the ground that it had not brought any material on record to show that it qualified for a deduction.
Lufthansa however submitted that it has been furnishing its return of income regularly since the past 14 years. Further, it claimed that it had in unambiguous terms stated that its income is generated only from cargo handling and operating aircrafts. Additionally, it was submitted that it had received some interest on refund of income tax for which tax was deposited.
At the outset, the High Court observed that the AO had not indicated any reasons which persuaded him to permit the payments at a lower rate of 0.10 percent withholding tax as against nil rate claimed by the petitioner.
“In the given circumstances, where the petitioner has been granted certificate at nil withholding tax for prior assessment years and there is no issue to the chargeability of the petitioner's income to tax under the Act, the impugned certificate requiring withholding tax at reduced rate instead of nil rate, cannot be sustained,” Court said.
It therefore allowed the petition and directed the Revenue to issue a certificate for nil TDS to the German company.
However, liberty was reserved with the Revenue to examine whether the income/receipts of the company are chargeable to tax in India in assessment proceedings.
Appearance: Mr. Sujit Ghosh, Sr. Advocate with Ms. Mannat Waraich & Mr. Ajinkya Tiwari, Advocates for Petitioner; Mr Puneet Rai, SSC, Mr Ashvini Kumar and Mr Rishabh Nangia, SCs and Mr Nikhil Jain, Advocate for Respondent
Case title: Lufthansa Cargo AG v. Assistant Commissioner Of Income Tax & Ors.
Citation: 2025 LiveLaw (Del) 396
Case no.: W.P.(C) 11376/2024