TaxTMI 
TaxTMI 
TaxTMI 
2023 (1) TMI 926
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.... all the other assessment years (and relevant quarters) under consideration before us. The Department has taken the following grounds of appeal for assessment year 2011-12, Quarter-1: "1. The Ld. CIT(A) has erred in law and on facts of the case in coming to the conclusion that Sec. 206AA of the I.T. Act does not override the provisions of Section 90(2) of the Act, despite the fact that Section 206AA of the I. T. Act starts with a non-obstinate clause ? 2. The Ld. CIT(A) has erred in law and on the facts of the case in ignoring the memorandum explaining the provisions of the Finance (No.2) Bill, 2009 which clearly states that the Sec. 206AA of the I.T. Act applies to Non-Residents and also ignoring the Press Release of CBDT No.402/92/2006-MC (04 of 2010)1 dated 20/01/2010 which reiterates that Sec. 206AA of the I.T. Act will also apply' to all Non-Residents in respect of payments / remittances liable to TDS where PAN is not provided to the deductor ? 3. The Ld. CIT(A) has erred in law and on facts of the case in relying upon the decisions which were rendered before the introduction of Sec. 206AA of the IT. Act ?" 4. Any other ground that may be urged at the time of hear....
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....A) referred above, it is held that as per the provision of TDS are to be read along with DTAA for computing the tax liability on the sum in question and therefore when the recipient is eligible for benefit to DTAA the addition on the ground of short deduction of TDS applying the provision of 206AA is not correct. The assessing officer is directed to delete the on the basis of application of section 206AA. He is also directed to delete the interest which is consequential too the demand of short deduction. Accordingly the related grounds of appeal are allowed." 8. Since, the facts are identical and it has also been held in various judicial pronouncement that provision under section 206AA cannot over ride beneficial provision of DTAA. Therefore, appellant is not liable for short deduction of TDS and interest thereon as levied by AO. Therefore, these grounds of appeal are allowed. 9. In the result, the appeal is allowed. 6. The Department is in appeal before us against the aforesaid additions deleted by Ld. CIT(Appeals). The issue for consideration before us is that in case of payments made by the assessee to non-residents, whether in the absence of PAN of the non-resident payees,....
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....espective 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 BachaoAndolan [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 observe that the DTAAs entered....
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....e 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 made to non-residents, assessee co....
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....tion Avoidance Agreement, which were adopted as rates in force for the purpose of deduction of tax under section 195 in view of the specific provisions contained in sub-section (37A) of section 2. Therefore, there is no merit in the arguments raised by the department that the relevant treaties do not provide for deduction of tax at source at the rate which is lower than the rate applied by the Assessing Officer by invoking the provisions of section 206AA and that there is no question of abrogation of the relevant provisions of treaty in this regard. The arguments raised by the department that the role of the assessee as a payer of the sum is limited to deducting tax at source as per law and he has nothing to do with the determination of tax liability eventually in the hands of the payee, which is within the complete domain of the Assessing Officer, to be relevant in this context as the tax at source was deducted by the assessee from the sums paid to the non-residents as per the provisions of section 195(1) read with section 2(37A) 7.4 In the case of CIT v. Air India Ltd. [2022] 142 taxmann.com 378 (Delhi), the Delhi High Court held that provisions of section 206AA cannot have over....