2021 (4) TMI 1190

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.... "Your honour, may as an act of kindness, in the interest of justice and as appropriate to the facts and circumstances of this case, be pleased to :- 1. Delete the demand of Rs. 73,00,719/-, Rs. 80,82,662/- & Rs. 57,05,582/- raised on account of short deduction of tax for second quarter, third quarter and fourth quarter of FY 2012-13 respectively. 2. Delete the demand of Rs. 15,28,222/-, Rs. 13,78,108/- &Rs. 8,07,085/- raised on account of interest on short deduction demand of Rs. 73,00,719/-, Rs. 80,82,662/- & Rs. 57,05,582/- for second quarter, third quarter and fourth quarter of FY 2012-13 respectively. 3. Issue such directions or pass such orders as your honour may deem fit and proper." 3. Briefly stated the facts necessary for adjudication of the controversy at hand are : M/s. Air India Ltd., the assessee is a Government owned company, which is into transportation of goods, passengers and parcels etc. in domestic and international sector through aircrafts and as such, is a national carrier of India. The assessee has been regularly filing their TDS return by depositing taxes in time in accordance with the Income-tax Rules, 1962. The assessee....

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....e taxable only in that state unless the enterprise carries on business in the other contracting state through a "permanent establishment" situated therein. It is also not in dispute that engine is a part of aircraft and cannot be said to be an aircraft and the payment being made for rent of engine can be covered under equipment as per section 12(4) of the DTAA between India and Neitherland. It is also not in dispute that assessee has not deducted this TDS from the payment but has deposited from their own account and has absorbed it as cost. It is also not in dispute that since payee, ELFC, being a foreign company having no PAN, the assessee reported the transaction without PAN in the quarterly TDS statements. 8. In the backdrop of the aforesaid undisputed facts and circumstances of the case, the arguments addressed and case law relied upon by the ld. Authorised Representatives of the parties to the appeals, the sole question arises for determination in this case is :- as to whether assessee was required to deduct the tax at source at the higher rate of 20% in case of payee without PAN under the provisions contained u/s 206AA of the Act, which is a nonobstante clause or ....

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....d their PANs to the assessee. The case of the Revenue is that in the absence of furnishing of PAN, assessee was under an obligation to deduct tax @ 20% following the provisions of section 206AA of the Act. However, assessee had deducted the tax at source at the rates 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 ITA Nos.1601 to 1604/PN/2014 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 o....

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....vs. Eli Lily & Co., (2009) 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 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 o....