The competent authority erred by not adequately considering the petitioner's application and misapplying judicial precedence, necessitating the issuance of a tax certificate at a 2% rate.

JUDGMENT :

DINESH MEHTA, J.

1. By way of the instant writ petition, the petitioner has challenged order dated 02.05.2025 passed by the office of the Circle Income Tax 1(1)(2) (hereinafter referred to as ‘competent authority’) deciding petitioner’s application under Section 197 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act of 1961’) and consequential certificate dated 18.06.2025 whereby the respondent has required its counterpart in India to deduct tax at the rate of 15% on the payments made and credited to the petitioner.

2. The petitioner is engaged in the business of providing Software as a Service ('SaaS') based products/offerings which help its customers in generating links which can be used to share content over social media, provide links to apps on app-store, links to websites in e-mails, etc. The customers can also obtain a report (strictly for internal use purpose) in order to determine the effectiveness of the petitioner’s products. These products are directly provided to Indian customers under a contract/End User License Agreement (‘EULA’) and an order form between Indian customers and the petitioner. The petitioner provides off the shelf SaaS based products to the customers to install the same in their mobile application/ website.

3. Assailing the order dated 02.05.2025 and certificate dated 18.06.2025, Mr. Sachit Jolly, learned senior counsel for the petitioner argued that the competent authority has passed a mechanical order and has refused to accede to petitioner’s request for grant of certificate at NIL rate (though the application mentioned 0.01%).

4. He submitted that while passing the impugned order, the competent authority has not at all considered the application that was filed by the petitioner and the submissions put forward and was merely guided by revenue’s consideration. Though as per the petitioner, no tax is applicable/payable by it as the services rendered by the petitioner do not fall within the ambit for Fees for Included Services (FIS) or Fees for Technical Services (FTS) as defined in the Act of 1961.

5. Learned senior counsel submitted that if the treaty between India and the United States of America (in short ‘US’) is taken into account, more particularly the protocol thereof, marketing services are out of the ambit of FIS/FTS and therefore, the order impugned is wholly without application of mind.

6. While maintaining that the stance taken by the competent authority is per se erroneous and unsustainable, he argued that the premise on which the impugned order rests, is the judgment of Authority for Advance Ruling (AAR) in the case ofIn Re: Shell India Markets (P) Ltd.(2012) 18 taxmann.com 46 (AAR-New Delhi), completely ignoring the fact that the same has been overruled by the Bombay High Court in Shell India Markets Pvt. Ltd. v. Union of India and Others , (2024) 463 ITR 222 (Bom).

7. Explaining in detail the nature of transactions, which the petitioner has undertaken in India, learned Senior counsel submitted that by no stretch of imagination any tax can be imposed or recovered from the petitioner which is a company based in USA.

8. Mr. Debesh Panda, learned Senior Standing Counsel appearing on behalf of the respondent on the other hand submitted that the facts as portrayed by the petitioner cannot be considered by this Court at this juncture inasmuch as it is beyond the scope of this Court in its jurisdiction under Article 226 of the Constitution of India to record finding about the nature of transaction as the fact finding exercise is to be