Facts of the Case

The petitioner, Huawei Technologies Cooperatief U.A., is a non-resident entity. It filed the present writ petition challenging the notice dated 27.03.2025 issued under Section 148A(1), the order dated 28.06.2025 passed under Section 148A(3), and the consequential notice dated 28.06.2025 issued under Section 148 of the Income-tax Act, 1961 for Assessment Year 2019–20.

The petitioner had granted External Commercial Borrowings to its Indian subsidiary, Huawei Telecommunications (India) Company Private Limited, under a Loan Facility Agreement dated 15.12.2014. During the relevant year, the petitioner received interest income on which tax was deducted at source by the Indian subsidiary under Section 194LC of the Act. The petitioner asserted that it had no other income in India for the assessment year in question.

The reassessment proceedings were initiated solely on the ground that the petitioner had not filed a return of income and had received interest income from India.

Issues Involved

Whether reassessment proceedings can be initiated in the absence of any information suggesting escapement of income, whether receipt of interest income on which tax has already been deducted under Section 194LC can justify initiation of reassessment, and whether the impugned proceedings suffered from lack of application of mind.

Petitioner’s Arguments

The petitioner contended that the impugned proceedings were initiated without any information remotely suggesting escapement of income. It was argued that the petitioner had no business operations in India and that the only income received during the relevant year was interest on External Commercial Borrowings, on which tax had already been deducted at source under Section 194LC.

Reliance was placed on an identical decision of the Delhi High Court in Nvent International Holding S.A.R.L. vs Union of India & Ors., where reassessment proceedings initiated on similar grounds were set aside. It was further contended that Section 115A prescribes a concessional tax rate of 5% on such interest income, which had already been complied with by the Indian subsidiary.

Respondent’s Arguments

The Revenue submitted that considering the reliance placed by the petitioner on the Loan Facility Agreement and the provisions of Section 194LC, it would be appropriate for the Assessing Officer to examine all aspects urged by the petitioner before arriving at a conclusion on the validity of reassessment.

The Revenue fairly suggested that the impugned order under Section 148A(3) and the notice under Section 148 may be set aside, with liberty to the Assessing Officer to pass a fresh, reasoned order after considering all documents and submissions placed on record.

Court Order / Findings

The Delhi High Court noted that the reassessment proceedings appeared to have been initiated without any concrete information indicating escapement of income. The Court took note of the Revenue’s submission that a fresh examination of the petitioner’s submissions and documents was warranted.

Accepting the stand of the Revenue, the Court set aside the order dated 28.06.2025 passed under Section 148A(3) and the notice dated 28.06.2025 issued under Section 148. The Court directed the Assessing Officer to pass a fresh and reasoned order after considering the documents filed earlier and those placed on record with the writ petition.

Important Clarification

The Court clarified that setting aside the impugned order and notice would not preclude the Assessing Officer from proceeding in accordance with law after passing a fresh, reasoned order. Liberty was reserved in favour of the petitioner to avail appropriate remedies if aggrieved by the fresh order.

Final Outcome

The writ petition was allowed. The Delhi High Court set aside the order dated 28.06.2025 passed under Section 148A(3) and the notice dated 28.06.2025 issued under Section 148, and directed the Assessing Officer to pass a fresh, reasoned order within four weeks and thereafter proceed in accordance with law. Pending applications, if any, were disposed of as infructuous.

Link to download order- https://www.mytaxexpert.co.in/uploads/1769682201_HUAWEITECHNOLOGIESCOOPERATIEFU.A.VsASSISTANTCOMMISSIONEROFINCOMETAXCIRCLEINTERNATIONALTAXATION211DELHI.pdf

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