AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2015 (9) TMI 792
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....ether ld.CIT(A) was right in holding that the section 206AA(1) does not apply to those cases whose alight tax liability u/s 115AA and under DTAA while ignoring the fact that 206AA begins with non-obstante clause. 2. Whether on the facts and circumstances of the case the ld.CIT(A) was right in holding that the tax deduction at source cannot be at a rate prescribed u/s 206AA which is higher than the rate at which the relevant income is chargeable to tax under Act or DTAA. 3. Whether on the facts and circumstances of the case ld.CIT(A) was right in deleting the interest under section 200A(1)(b) levied on short deduction of tax". 3. We have heard the learned DR as well as learned AR and considered the relevant material on record. At the outset our attention was brought to the order of the Hon'ble jurisdictional High Court dated 11-08-2014 in the Writ Petition Nos.377311/2013 & 38706-38708/2013 filed by the assessee against adjustment made by the AO u/s 200A(1) of the IT Act, 1961 and intimation issued for raising the demand. The Hon'ble jurisdictional High Court while considering with the issue of applicability of amended provisions of Section 246A of the Act, vide Finance Act, 20....
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....DTAA. 3. Whether on the facts and circumstances of the case ld.CIT(A) was right in deleting the interest under section 200A(1)(b) levied on short deduction of tax". 5. The assessee is engaged in the business of business process outsourcing (BPO). The assessee filed statements of deduction of tax at source in the form-2Q for various quarters of the financial year 2010-11 and 2012-13 relevant to assessment year under consideration in respect of payments made to non-resident during the period. The AO after processing issued intimation u/s 200A of the IT Act, wherein he pointed out short deduction of tax at source and accordingly, raised the tax demand alongwith the interest charged on such short deduction. This demand of tax was raised by the AO by issuing the intimation u/s 200A on the ground that the assessee has not furnished the PAN of the nonresident deductee/recipient and accordingly, as per the provisions of Sec.206AA of the Act, the TDS should have been deducted at the rate of 20%. Aggrieved by this intimation the assessee challenged the action of the AO before the CIT(A) including the objections raised against the jurisdiction of the AO u/s 200A for making such adjustment....
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....n the case in hand, the AO while issuing the intimation u/s 200A has computed the tax liability at the rate of 20%, as provided/s 206AA of the Act. Since the benefit of DTAA is available to recipient. Therefore, in any case, the scope of deduction of tax at source cannot be more than the tax liability under DTAA. In the latest decision of the Pune Bench of the Tribunal in the case of Dy.DIT Vs M/s Serum Institute of India Ltd. (Supra) an identical issue has been considered by the Tribunal in para-7 as under; "7. We have carefully considered the rival submissions. Section 206AA of the Act has been included in Part B of Chapter XVII dealing with Collection and Recovery of Tax Deduction at source. Section 206AA of the Act deals with requirements of furnishing PAN by any person, entitled to receive any sum or income on which tax is deductible under Chapter XVII-B, to the person responsible for deducting such tax. Shorn of other details, in so far as the present controversy is concerned, it would suffice to note that section 206AA of the Act prescribes that where PAN is not furnished to the person responsible for deducting tax at source then the tax deductor would be required to deduct....
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....e of ascertainment of total income under the Act are also subordinate to the principle enshrined in section 90(2) as held by the Hon'ble Supreme Court in the case of Azadi Bachao Andolan and Others (supra). Thus, in so far as the applicability of the scope/rate of taxation with respect to the impugned payments make to the non-residents is concerned, no fault can be found with the rate of taxation invoked by the assessee based on the DTAAs, which prescribed for a beneficial rate of taxation. However, the case of the Revenue is that the tax deduction at source was required to be made at 20% in the absence of furnishing of PAN by the recipient non-residents, having regard to section 206AA of the Act. In our considered opinion, it would be quite incorrect to say that though the charging section 4 of the Act and section 5 of the Act dealing with ascertainment of total income are subordinate to the principle enshrined in section 90(2) of the Act but the provisions of Chapter XVII-B governing tax deduction at source are not subordinate to section 90(2) of the Act. Notably, section 206AA of the Act which is the centre of controversy before us is not a charging section but is a part of a pr....
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.... Supra, in para-22 & 23 as under; "22. As regards the grossing up u/s 195A of the Income tax Act is concerned, we find that the provision reads as under; "In a case other than that referred to in subsection (1A) of sec.192, where under an agreement or other arrangement, the tax chargeable on any income referred to in the foregoing provisions of this Chapter is to be borne by the person by whom the income is payable, then for the purposes of deduction of tax under those provisions such income shall be increased to such amount as would, after deduction of tax thereon at the rates in force for the financial year in which such income is payable, be equal to the net amount payables under such agreement or arrangement". 23. Thus, it can be seen that the income shall be increased to such amount as would after deduction of tax thereto at the rate in force for the financial year in which such income is payable, be equal to the net amount payable under such agreement or arrangement. A literal reading of sec. implies that the tax is to be withheld by the assessee. The Hon'ble Apex Court in the case of GE India Technology Center (P) Ltd (cited Supra) has held that the meaning and effect h....
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....ithout prejudice. 2. The ld.CIT(A)-IV, Bangalore has erred in upholding the validity of intimation passed by the learned Income tax Officer, International Taxation, Ward-2(1), Bangalore under section 200A of the IT Act. On facts and in the ci8rcumstandfes of the case and law applicable, the intimation so passed is without jurisdiction, invalid, bad in law and liable to be quashed. 3. Even otherwise, in the absence of any arithmetical error in the statement or an incorrect claim, apparent from any information in the statement, the intimation passed by the learned Income tax Officer, International Taxation, Ward- 2(1), Bangalore does not satisfy the requirements of section 200A and consequently, the said intimation passed in invalid, bad in law and liable to be quashed without prejudice. 4. The ld.CIT(A)-IV, Bangalore has erred in concluding that section 206AA will be applicable whether or not the nonresident deductees are required to obtain PAN under section 139A. On the facts and circumstances of the case and law applicable and considering the fact that there was no requirement under law for the non-resident deductees to obtain PAN, the higher rate of TDS under section 206AA ....
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....fore us. Thus, the issue of applying the rate of tax at 20% and ignoring the provisions of DTAA is a debatable issue and does not fall in the category of any arithmetical error or incorrect claim apparent from any information in the statement, as per the provisions of section 200A (1) of the IT Act, 1961. For ready reference, we quote the provisions of section 200A of the IT Act, 1961 as under; 200A. Processing of statements of tax deducted at source.- (1) Where a statement of tax deduction at source has been made by a person deducting any sum (hereafter referred to in this section as deductor) under section 200, such statement shall be processed in the following manner, namely:- (a) the sums deductible under this Chapter shall be computed after making the following adjustments, namely:- (i) any arithmetical error in the statement; or (ii) an incorrect claim, apparent from any information in the statement; (b) the interest, if any, shall be computed on the basis of the sums deductible as computed in the statement; (c) the sum payable by, or the amount of refund due to, the deductor shall be determined after adjustment of amount computed under clause (b) against any amount pai....