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* IN THE HIGH COURT OF DELHI AT NEW DELHI % Judgment Reserved on: 23.12.2025 Judgment delivered on: 14.01.2026 Judgment uploaded on: As per Digital Signature~

+ W.P.(C) 16158/2025 & CM APPL. 66147/2025 ERNST AND YOUNG LLP .....Petitioner versus ASSISTANT COMMISSIONER OF INCOME TAX, INTERNATIONAL CIRCLE-1-2-2, NEW DELHI .....Respondent Advocates who appeared in this case For the Petitioner : Mr. Kamal Sawhney, Mr. Arun Bhadauria and Mr. Nishank Vashishta, Advocates For the Respondents : Mr. Indruj Singh Rai, SSC, Mr. Sanjeev Menon, JSC and Mr. Gaurav Kumar, Advocate. CORAM:

HON'BLE MR. JUSTICE V. KAMESWAR RAO HON'BLE MR. JUSTICE VINOD KUMAR

JUDGMENT

V. KAMESWAR RAO, J.

1. This petition has been filed with the following prayers:-

“(i) Issue a writ of certiorari and/or any other writ, order or direction in the nature of certiorari setting aside the Impugned Certificate dated 17.09.2025 r/w Impugned Order dated 17.09.2025;

(ii) issue a writ of mandamus and/or any other writ, order or direction in the nature of mandamus directing the respondent to issue a “nil withholding” certificate for prospective payments amounting to 17,50,00,00,000/- to be paid by the petitioner to its payee Ernst & Young (EMEIA) Services Limited from the date of section

195(2) application till 31.03.2026. And/ Or (iii) Issue any other appropriate writ, order or direction which this Hon‟ble Court may deem fit and proper in the facts and circumstances of the case.”

2. In substance the challenge in this petition is to the certificate and order dated 17.09.2025 passed under Section 195 of the Income Tax Act, 1961 (the Act), whereby the respondent has concluded and authorised the petitioner herein to pay or credit any payment covered under the nature of payment being business income by withholding tax at the rate of 5.25%.

3. We may reproduce paragraph no.4 of the impugned order, which reads as under:-

“4. It has further claimed that the amount expected to be paid to recipient does not satisfy the „make available‟ test and thus does not fall within the ambit of Fees for Technical Services („FTS‟) as defined under Article 13 of India-UK DTAA as already held by Authority of Advance Ruling in AAR No.820/2009. Further, the applicant contended that the recipient does not have any Permanent Establishment („PE‟) in India and in this respect, it has submitted No PE Declaration and TRC issued to the recipient of the recipient for AY 2022- 23, it has been noticed that the contention of the applicant that the recipient does not have any PE in India is not tenable. This fact has already been discussed in detail in the assessment order of the recipient for AY 2022-23. In the said order, it was held that there exists Virtual Service PE of the recipient in India. Thus, income from India is liable to be taxed as business income arising due to Virtual Service PE as per Article 5(k) of India -UK DTAA.”

4. The case of the petitioner as submitted by Mr Kamal Sawhney, learned counsel for the petitioner is that the sole basis for the respondent to reject the petitioner’s application for grant of Nil Withholding Certificate for the payment proposed to be made to Ernst & Young (EMEIA) Services Limited (EMEIA, hereinafter), a UK based entity, holding that it constitutes business income of EMEIA and is chargeable to tax, is in view of the existence of a virtual service permanent establishment of EMEIA as per Article 5(k) of the India-UK Double Taxation Avoidance Agreement (DTAA, hereinafter).

5. He has submitted that the conclusion arrived at by the assessing officer is unsustainable in view of the fact that the issue virtual service permanent establishment has been decided against the Revenue by the jurisdictional Income Tax Appellate Tribunal (ITAT) in the case of Clifford Chance Pte. Ltd. v. ACIT, [2024] 160 taxmann.com 424 (Delhi - Trib.). The appeal preferred by the Revenue against the said order has been dismissed by this Court in Commissioner of Income Tax, International Taxation-1, New Delh