TaxTMI 
TaxTMI 
2018 (4) TMI 1272
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....ited company engaged in the business of import and export of merchandise, and they have filed their statement of deduction of tax at source for all the quarters of the AY 2013-14, but the assessing officer (DCIT, central processing TDS cell) has computed the short deduction and interest thereon. According to the assessee they have deducted the TDS at the rates applicable under the double taxation avoidance agreement (DTAA) with respective countries whereas the CPC mechanically applied the rate of deduction in such cases to be 20% as prescribed under section 206AA of the Income tax Act, 1961( "the Act") as such payees do not hold PAN in India. Contention of the assessee is that they have correctly deducted the withholding tax based on the ra....
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....ate of tax to be applied, whether it is as per Section 206AA or as per the provisions of DTAA. He submitted that in a number of decisions of the tribunal this issue has been decided in favour of the assessee and recently in Danisco India Private Limited Vs. Union Of India WP(C) 5908/2015 decided on 05/02/2018, the Hon'ble jurisdictional High Court noted the order of the Pune tribunal in DCIT Vs Serum Institute of India Limited, ITA Nos.1601 to 1604/PN/2014 (Assessment Year : 2011-12) to hold that section 206AA of the Act does not override the provisions of Section 90(2) of the Act and that in the cases of payments made to non-residents, the rate of tax to be applied is as prescribed under the DTAA and not as per Section 206AA of the Act bec....
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....er the general provisions contained in the Act to the extent they are beneficial to the assessee. In this context, it would be worthwhile to observe that the DTAAs entered into between India and the other relevant countries in the present context provide for scope of taxation and/or a rate of taxation which was different from the scope/rate prescribed under the Act. For the said reason, assessee deducted the tax at source having regard to the provisions of the respective DTAAs which provided for a beneficial rate of taxation. It would also be relevant to observe that even the charging section 4 as well as section 5 of the Act which deals with the principle of ascertainment of total income under the Act are also subordinate to the principle ....
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....) 312 ITR 225 (SC) observed that the provisions of tax withholding i.e. section 195 of the Act would apply only to sums which are otherwise chargeable to tax under the Act. The Hon'ble Supreme Court in the case of GE India Technology Centre Pvt. Ltd. vs. CIT, (2010) 327 ITR 456 (SC) held that the provisions of DTAAs along with the sections 4, 5, 9, 90 & 91 of the Act are relevant while applying the provisions of tax deduction at source. Therefore, in view of the aforesaid schematic interpretation of the Act, section 206AA of the Act cannot be understood to override the charging sections 4 and 5 of the Act. Thus, where section 90(2) of the Act provides that DTAAs override domestic law in cases where the provisions of DTAAs are more benef....