TDS u/s 195 - payment to non-resident - TDS either @ 10% or @ 20% - assessee in default - assessee has not produced the Permanent Account Number of the recipients for deducting tax @ 10%

The ld. Representative submitted that the ‘non-resident’ means a person who is not a resident in India. In this case, admittedly, the recipients are not residents in India, therefore, there is no obligation to obtain Permanent Account Number u/s 139A of the Act. Since there was no obligation to obtain Permanent Account Number, according to the ld. Representative, sec. 206AA of the Act is not applicable.

Held that:- If the recipient has no taxable income in India then the question of deduction of tax may not arise for the year under consideration. In that case, there is no question of deduction of tax either @ 10% or @ 20%. When the income received by a resident or non-resident, as the case may be, is taxable in India, tax has to be deducted under the provisions of Chapter XVII of the Act. Sec. 206AA of the Act also falls in Chapter XVII. In view of the specific provision in sec. 206AA which provides for deduction of tax @ 20% wherever the recipient failed to furnish the Permanent Account Number, this Tribunal is of the considered opinion that in view of the language used by the Parliament “notwithstanding anything contained in any other provisions of this Act”, sec.206AA would override the other provisions of the Income-tax Act, including sec.139A of the Act. Since admittedly the amount received by the recipient is taxable in India, this Tribunal is of the considered opinion that in the absence of any Permanent Account Number, tax has to be necessarily deducted @ 20%. Therefore, the CIT(A) has rightly confirmed the order of the Assessing Officer treating the assessee as an ‘assessee in default’

 

See:- M/s Prashanth Fertility Research Centre Pvt. Ltd Versus The Income Tax Officer International taxation II (1) , Chennai - 2016 (1) TMI 73 - ITAT CHENNAI
 

TDS on payments to non-residents: failure to furnish PAN triggers mandatory higher-rate deduction and default consequences. Where the income received by a non-resident is taxable in India, tax must be deducted under Chapter XVII; if the recipient fails to furnish a Permanent Account Number, the PAN-related provision requires deduction at the higher rate notwithstanding other provisions, and absence of PAN mandates deduction at that rate, leading to the payer being treated as an assessee in default.