TaxTMI 
TaxTMI 
2022 (8) TMI 40
X X X X Extracts X X X X
X X X X Extracts X X X X
....that the ITAT has erred in holding that the provisions of Section 206AA of the Income Tax Act, 1961 ('the Act') cannot override the provisions of the Double Tax Avoidance Agreement without appreciating the fact that the provisions of Section 206AA are non obstante provisions and therefore these provisions override the provisions of other Sections of the Act including Section 90(2) of the Act under which the assessee can avail benefit of the DTAA. 3. He states that the ITAT has erred in holding that the rate of deduction of tax in the case of a non-resident who does not have a PAN and whose case does not lie in the exceptions laid down in Sub-Section 7 of Section 206AA of the Act shall be the rate prescribed in the DTAA if such rate is lowe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s 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. The relevant portion of the ITAT judgment is reproduced hereinbelow:- 7. "Undisputedly, the dispute in the instant appeals is qua applying the TDS rate at 20.12% or 10% on transfer between ELFC and the assessee for taking an engine on lease under an Agreement. It is also not in dispute that ELFC, the lessor is a foreign company having no Permanent Establishment (PE) and was a tax resident of Netherland. It is also not in dispute that under Article 7 of Double Taxation Avoidance Agreement (DTAA) between Indian and Netherland, the profits of enterprise of a con....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rafts in international traffic, the assessee is entitled for beneficial provisions of DTAA. 14. So, following the order passed by the coordinate Bench of the Tribunal in cases of DDIT (IT-II), Pune vs. Serum Institute of India Ltd., DCIT vs. M/S Infosys BPO Ltd. and the judgment of Hon'ble Delhi High Court in case of Danisco India Pvt. Ltd. vs. UOI, we are of the considered view that ld. CIT(A) has erred in holding that in this case, provisions contained u/s 206AA overrides beneficial provisions of DTAA between India and Netherland. Consequently, assessee has rightly deducted the tax @ 10% as per provisions contained under DTAA as section 206AA cannot have overriding effect on DTAA, hence no demand is payable by the assessee. Hence, quest....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 any doubt to the proposition that in ca....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he 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 subordin....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 made to non-residents, assessee correctly applied the rate of tax prescribed under the DTAAs and not as per section 206AA of the Act because the provisions of the DTAAs was more beneficial. Thus, we her....