TaxTMI 
TaxTMI 
2017 (5) TMI 1309
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.... available in the relevant columns of the returns. Assessing Officer (AO) accordingly arrived at a short deduction of tax and interest on such payments aggregating to Rs. 1,04,94,160/- for AY. 2011-12 and Rs. 68,18,600/- for AY. 2012-13. After preferring the appeals before CIT(A), assessee, however, filed revised form No. 27Q mentioning the PAN numbers to the extent it could obtain from the nonresident deductees and those revised forms have been accepted and the demands have been reduced to Rs. 10,94,301/- and Rs. 28,33,577/- for the AYs. 2011-12 and 2012-13 respectively. 3. Before the CIT(A), it was submitted by assessee that they had deducted tax at source from the payments made to the nonresidents at the rates prescribed under DTAAs with the respective countries, in accordance with the provisions of Section 90(2) of the Act. Assessee accordingly enclosed the lists of such deductees for both the assessment years, their country, nature of services rendered by these non-residents and claimed that the short deduction worked out in the intimation u/s. 200A goes against the DTAAs in force with these countries. It was further submitted that DTAA provisions prevail over the provision....
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....ties where DTAA is applicable and if the deductions are in accordance with the rates specified in the respective DTAAs agreement, the AO is directed to reduce the demand in respect of the above parties by adopting the rate as applicable in the respective DTAA agreements". 5. Revenue has raised the following grounds which are common in both the years: "(1) The order of the Ld. CIT(A) is erroneous on facts and in law. (2) The Ld. CIT(A) erred in law in holding that the provisions of Sec.206AA cannot be applied to the cases of payments made to non-residents without PAN who are residents in the countries with which India has Double Taxation Avoidance Agreement (DTAA) on the grounds that the provisions of DTAA prevail over the provisions of I.T.Act. (3) The Ld. CIT(A) ought to have appreciated that Sec.206AA starts with a non-obstante clause on account of which the provisions of the said section override all other provisions of the I.T.Act including the provisions of Sec.90(2), which provide that the provisions of the Act shall apply to the extent they are more beneficial to the assessee to whom any agreement for avoidance of double taxation is applicable. ....
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....Benches, the matter was referred to Special Bench and the Special Bench in the case of Nagarjuna Fertilizers and Chemicals Ltd., Vs. ACIT [55 ITR (Trib) 1], Hyderabad (Special Bench) has considered and held as under: "The assessee made certain payments in the nature of fees for technical services to non-residents. Some of such non-residents were residents of countries with which India did not have any Double Taxation Avoidance Agreements and in their cases, tax at the higher rate of 20 per cent was deducted by the assessee where the payees failed to furnish valid permanent account numbers according to the provisions of section 206AA of the Income-tax Act, 1961. In the case of other non-residents, who were residents of countries with which India did have Agreements, tax at the lower rate as prescribed in the relevant articles of the Agreements was deducted by the assessee even in case of payees, who did not furnish valid permanent account numbers. While processing the returns of tax deducted at source filed by the assessee for both the years 2011-12 and 2012-13 by the automatic system, the assessee was held to be liable to deduct tax at source at the higher rate of 20 per c....
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....t obliged to obtain permanent account numbers in view of section 139A(8) read with rule 114C of the Income-tax Rules, 1962. Therefore there was a clear contradiction between section 206AA and section 139A(8) read with rule 114C. The assessee's contention that the provisions of section 206AA are required to be read down so as to make them inapplicable in cases of non-residents payees who were not under an obligation to obtain the permanent account numbers was proper. SMT. A. KOWSALlA BAI V. UNION OF INDIA [2012] 346 ITR 156 (Karn) followed. (iii) That the charging provisions control and override the machinery provisions dealing with tax deduction at source. Similarly the provisions of the Agreement by virtue of section 90(2) to the extent more beneficial to the assessee override the provisions of domestic law. Since section 206AA falls in Chapter XVIl-B dealing with tax deduction at source, it follows that the provisions of the Agreement which override even the charging provision of the domestic law by virtue of section 90(2) would also override the machinery provisions of section 206AA irrespective of the non obstante clause contained therein. The clause was t....