Delhi High Court directs NIL TDS certificate under Section 197 where Tribunal held receipts not taxable as royalty

Background of the dispute

The writ petition in Financial And Risk Organisation Limited Vs ITO (Delhi High Court) arose from a challenge to:

  • An order dated 23.06.2025 (actually passed on 21.08.2025) passed by Circle INT TAX 1(3)(1) (referred to as the competent authority), and
  • A consequential certificate dated 21.08.2025 issued under Section 197 of the Income Tax Act, 1961 (Act of 1961),

wherein the assessee was granted a tax deduction certificate at 15% instead of the NIL withholding rate it had sought.

The assessee invoked Article 226 of the Constitution, contending that the impugned order and Section 197 certificate were contrary to binding judicial precedents and ignored the findings of the Income Tax Appellate Tribunal (Tribunal) in a closely connected matter.

Assessee’s business model and Indian operations

The assessee is:

  • A company incorporated in the United Kingdom
  • A tax resident of the UK for Assessment Year (AY) 2026–27, supported by a valid Tax Residency Certificate

Its primary business activities include providing subscription-based information and software products that permit users to access:

  • Financial, economic, commercial and regulatory data
  • Market data, analytical reports and news
  • Other financial and economic information

Additionally, the assessee offers FXall products, which constitute an electronic platform enabling real-time online dealings in various foreign exchange instruments such as:

  • Spot contracts
  • Forward contracts
  • Swaps
  • Options

To serve customers in India, the assessee entered into non-exclusive distribution agreements on a principal-to-principal basis with:

  • Refinitiv India Private Limited (RIPL), and
  • Refinitiv India Transaction Services Private Limited (RITSPL)

Under these arrangements:

  1. RIPL and RITSPL acquire the assessee’s products for onward distribution in India.
  2. They pay distribution consideration to the assessee in accordance with the terms of the distribution contracts.
  3. The sums received by the assessee are subject to analysis under the Act of 1961 as well as the India-UK Double Taxation Avoidance Agreement (DTAA).

The assessee’s case was that, having regard to the nature of the products and services and the manner in which they are supplied, no income chargeable to tax arises in India either under the domestic law or under the DTAA.

Application under Section 197 for NIL withholding

Taking the above position, the assessee filed an application dated 20.06.2025 under Section 197 for AY 2026–27, seeking a NIL rate certificate. The application:

  • Was received by the competent authority on 23.06.2025
  • Came to be disposed of by order dated 21.08.2025
  • Resulted in issuance of a Section 197 certificate dated 21.08.2025 prescribing 15% withholding on remittances to the assessee

The assessee challenged both the order and the resultant certificate before the High Court.

Petitioner’s submissions before the Delhi High Court

Claim of non-taxability under the Act and the India-UK DTAA

Counsel for the assessee argued that:

  • On a correct interpretation of the Act of 1961 and the India-UK DTAA, the receipts from India are not taxable.
  • The payments made to the assessee by RIPL and RITSPL do not qualify as “royalty”, nor do they fall under any separately taxable head in India in the absence of a Permanent Establishment (PE).

Reliance on Tribunal decision in group entity case

The assessee placed heavy reliance on an order dated 21.12.2020 passed by the Tribunal in the case of its erstwhile group entity, M/S Thomson Reuters Pvt. Ltd. vs. DCIT Circle-8(3)(1), pertaining to AYs 1998–99 and 1999–2000. In that case: