Delhi HC: LUFTHANSA CARGO AG VERSUS ASSISTANT COMMISSIONER OF INCOME TAX & ORS. 2025 (4) TMI 89
Background: The case involves Lufthansa Cargo AG, a tax resident of Germany engaged in international cargo transportation, disputing the rejection of its application for nil withholding tax certificate under Section 195(3) of the Income Tax Act, 1961. The petitioner had been receiving such certificates for over a decade, as its income from international aircraft operations was exempt under Article 8 of the India-Germany Double Taxation Avoidance Agreement (DTAA). However, for the financial year 2024-25, the tax authorities rejected the application and instead issued a certificate mandating a 0.10% withholding tax rate. The petitioner challenged this decision, arguing that there had been no change in its operations or tax status.
Decision: The Delhi High Court found that the rejection lacked proper justification and directed the issuance of a nil withholding tax certificate while allowing the authorities to reassess the petitioner’s taxability independently. The Delhi High Court ruled in favor of Lufthansa, directing the issuance of a nil withholding tax certificate under Section 197. The court noted that Lufthansa, a German tax resident, had consistently received such certificates for over a decade and that its income from international air cargo operations was exempt under Article 8 of the India-Germany DTAA. The Assessing Officer’s decision to impose a 0.10% withholding tax lacked justification. The court held the rejection unsustainable but allowed future taxability assessments independently.
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