Non-resident TDS cannot exceed 10% when DTAA rate applies, Section 206AA overridden; assessee demand deleted

HC held that for non-resident payments, TDS provisions must be applied in conjunction with the applicable DTAA. Relying on its earlier decision in Wipro Ltd., HC reiterated that where DTAA prescribes a lower withholding rate, the rate under DTAA prevails and tax cannot be deducted at a rate exceeding 10% despite Section 206AA. Since the assessee had deducted tax at 10% in accordance with DTAA, no further demand was permissible. The Revenue did not dispute this position. The appeal was dismissed, with questions of law answered in favour of the assessee.

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The High Court dismissed the Revenue's appeal after noting that the controversy was already settled by an earlier decision of the same Court in "Commissioner of Income Tax Vs. Wipro LTD. ITA No.181/2019 C/w ITA No.182/2019, ITA No.182/2019, ITA No.184/2019 decided on 29.11.2022." Counsel for the respondent-assessee submitted that the issues raised were squarely covered by the Wipro Ltd. ruling. Counsel for the Revenue did not dispute this position. Accepting that the matter was governed by the prior binding precedent, the Court held that "this appeal does not merit consideration and accordingly, it is dismissed." The Court therefore answered the "Questions of law ... in favour of assessee and against the Revenue." No order as to costs was made.

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