TaxTMI 
TaxTMI 
2019 (9) TMI 261
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....n-residents in respect of payments/remittances liable to TDS. 3) The CIT(A) is erred in ignoring the decision of the ITAT Bangalore in the case of Bosch Ltd. vs ITO, ITA No.552 to 558 (Bang.) of 2011 dated 11.10.2012, in which it was held that if the recipient has not furnished the PAN to the deductor, the deductor is liable to withhold tax at the higher rates prescribed u/s. 206AA. 3. The Revenue is in appeal against order of CIT(A) in directing the Assessing Officer to tax the receipts in the hands of assessee @ 10% as per provisions of DTAA and not @ 20% under the provisions of Income Tax Act. 4. Briefly, in the facts of the case, the assessee had paid technical fees of Rs. 88,66,667/- and Rs. 2,21,66,667/- on March, 16 to KEC Japan Company Ltd. The assessee had deducted tax at the applicable rates on the eligible payments in accordance with the provisions of Chapter XVII-B and has also deposited the amount. The CPC thereafter passed order u/s 200A r.w.s. 154 of the Act determining the amount payable for short deduction of tax Rs. 24,82,667/- and interest u/s 201(1A) of Rs. 2,23,434/- resulting in demand of Rs. 27,06,100/-. 5. In appeal, the assessee pointed out that it was....
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....cts of the case, the assessee had paid technical fees of Rs. 88,66,667/- and Rs. 2,21,66,667/- on March, 16 to KEC Japan Company Ltd. The assessee had deducted tax @ 10% as per provisions of DTAA and the Assessing Officer on the other hand, was of the view that tax @ 20% was to be deducted. 10. We find that similar issue arose before the Tribunal in DCIT Vs. Calderys France (supra), wherein it was held as under:- "9. We have heard the rival contentions and perused the record. The limited issue which arises in the present appeal before us is against invoking of provisions of section 206AA r.w.s. 90 and 195 of the Act. The assessee during the year under consideration had received payment of Rs. 8.12 crores towards management services and IT support services rendered. The assessee had offered the same for taxation purpose in its return of income. The Indian entity i.e. Calderys India Refractories Ltd. had withheld taxes @ 20% from the said payment made to the assessee. The tax was deducted @ 20% since the assessee company did not have any PAN number at the time of receipt of said payments. The total tax deducted was Rs. 1,89,80,100/-. However, in the return of income, the assessee ....
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....tes prescribed in the respective DTAAs between India and the relevant country of the non-residents; and, such rate of tax being lower than the rate of 20% mandated by section 206AA of the Act. The CIT(A) has found that the provisions of section 90(2) come to the rescue of the assessee. Section 90(2) provides that the provisions of the DTAAs would override the provisions of the domestic Act in cases where the provisions of DTAAs are more beneficial to the assessee. There cannot be any doubt to the proposition that in case of non-residents, tax liability in India is liable to be determined in accordance with the provisions of the Act or the DTAA between India and the relevant country, whichever is more beneficial to the assessee, having regard to the provisions of section 90(2) of the Act. In this context, the CIT(A) has correctly observed that the Hon'ble Supreme Court in the case of Union of India v. Azadi Bachao Andolan [2003] 263 ITR 706/ 132 Taxman 373 has upheld the proposition that the provisions made in the DTAAs will prevail over the general provisions contained in the Act to the extent they are beneficial to the assessee. In this context, it would be worthwhile to obser....
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....34/7 taxmann.com 18 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 beneficial to the assessee and the same also overrides the charging sections 4 and 5 of the Act which, in turn, override the DTAAs provisions especially section 206AA of the Act which is the controversy before us. Therefore, in our view, where the tax has been deducted on the strength of the beneficial provisions of section DTAAs, the provisions of section 206AA of the Act cannot be invoked by the Assessing Officer to insist on the tax deduction @ 20%, having regard to the overriding nature of the provisions of section 90(2) of the Act. The CIT(A), in our view, correctly inferred that section 206AA of the Act does not override the provisions of section 90(2) of the Act and that in the impugned cases of payments ma....
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....also override the machinery provisions of section 206AA irrespective of non-obstante clause contained therein and the same is required to be restricted to that extent and read down to give effect to the relevant provisions of DTAAs, which are overriding being beneficial to the assessee. 31. There is one more basis to support the above conclusion. As rightly pointed out on behalf of the assessee, Chapter-XA containing the provision relating to General Anti-Avoidance Rule (GAAR) has been inserted in the Statute by the Finance Act, 2013 with effect from 1st April, 2016 and although the provisions contained in the said Chapter are given overriding effect by virtue of non-obstante clause contained in section 95, a separate provision has been inserted simultaneously in the form of sub-section (2A) in section 90 providing specifically that notwithstanding anything contained in sub-section (2), the provisions of Chapter XA of the Act shall apply to the assessee even if such provisions are not beneficial to him. As rightly pointed out on behalf of the assessee, no such provision, however, is made separately and specifically in section 90 to give overriding effect to section 206AA over sec....