AI Drafter 
TaxTMI 
TaxTMI 
2023 (7) TMI 500
X X X X Extracts X X X X
X X X X Extracts X X X X
.... be granted under section 248 of the Act Ground No. 3: On the facts and circumstances of the case and in law, the learned CIT(A) should have held that sum payable to Flight Safety International Inc, USA (FSII) for availing training services should be subject to withholding tax at the rate of 10% as per the provisions of India-USA Double Taxation Avoidance Agreement (DTAA) read with section 195 and section 115A of the Act and not at the rate of 20% (plus applicable surcharge and education cess) under section 206AA of the Act. 2. The facts in brief are that the assessee is a company engaged in the business of Air Transport of Passengers and is a holder of Non-Scheduled Air Transport (Passenger) Services (NSOP) permit granted by the Director General of Civil Aviation / Ministry of Civil Aviation. During the Financial Year 2015-16, the assessee had made payment of USD 61,200 (amounting to Rs. 40,30,020) to Flight Safety International Inc, USA (hereinafter referred to as "FSII" or "Deductee" for availing training of pilots. As per the arrangement between the foreign entity and the assessee, the taxes, if any, payable on said training of pilots were to be borne by the assesse....
X X X X Extracts X X X X
X X X X Extracts X X X X
....paid tax under section 195 may appeal to the AAC denying his liability to make such deduction and for a declaration that he is not liable to make such deduction. It is, thus difficult to accept the argument that total denial may enable an appeal to be filed but not a part denial with reference to part of the payment subject to deduction of tax" The ld. CIT (A) distinguished the aforesaid decision merely on the ground that the aforesaid decision was rendered in context of pre-amended section 248. 6. Before us ld. Counsel for the assessee submitted that the ld. CIT (A) has distinguished the pre-amended and amended provision of Section 248 to hold that decision of the Hon'ble Supreme Court is not applicable. He submitted that, from the plain reading of both these Sections, it could be seen that it is quite similar in language and does not alter the provisions of Section 248 to say that only where assessee completely denies his liability to deduct tax at source, then alone he can file appeal u/s. 248. The term "no tax was required to be deducted on such income" would mean that there is a denial of liability to the extent of excess tax deducted at source. Further, it uses the term....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ons 195 and 200 deducted and paid tax in respect of any sum chargeable under this Act, other than interest, who denies his liability to make such deduction, may appeal to the Commissioner (Appeals) to be declared not liable to make such deduction." The amended provisions of section 248 of the Act, vide Finance Act, 2007, reads as under- "248. Where under an agreement or other arrangement the tax deductible on any income, other than interest, under section 195 is to be borne by the person by whom the income is payable, and such person having paid such tax to the credit of the Central Government, claims that no tax was required to be deducted on such income, he may appeal to the Commissioner (Appeals) for a declaration that no tax was deductible on such income. From the plain reading of pre-amended Section, it is seen that the appeal was to be filed by a person denying the liability to deduct tax, whereas the amendment to Section 248 provides for filing of appeal by the tax deductor (payer of income) when following conditions are fulfilled: i. Tax deductible on any income u/s 195 shall be borne by the payer. ii. Payer can file an appeal before the CIT....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hichever is more beneficial to the assessee. This has been clarified by the CBDT vide Circular No.728 of 1995 which has clarified that in case of remittance to a country with which a DTAA is in force, the tax should be deducted at the rate provided in the relevant Finance Act or at the rate provided in the DTAA, whichever is more beneficial to the assessee. 15. Now, in a conjoint reading of Section 195 and Section 248, it could be clearly inferred that the term "no tax was required to be deducted' will mean and include the tax deducted at source in excess of the tax deductible u/s. 195 at the rates in force. The term "no tax" was required to be deducted in excess of the rate as per DTAA being beneficial to the deductee assessee, then it has to be reckoned that the rates provided in the DTAA are beneficial, then benefit has to be given; and in such a situation the tax can only be deducted at the rate which is beneficial to the deducted and hence, it tantamount t0 denial of liability of tax or no tax which is in excess. 16. The interpretation of Section 248 as given by the ld. CIT (A) and also as confessed before us by the ld. DR, if it is to be interpreted in such a manner, th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nd not as per DTAA though same is lower. Now if the deductor is aggrieved against said order, he can file appeal only u/s 248 as sections 246 and 246A do not provide for appeal against order u/s 195. Now, if the deductor files appeal u/s. 248 against the order u/s. 195(2) challenges that "no tax" was deductible at all as income is not chargeable to tax in India and without prejudice, challenges that rate of tax should be as per DTAA and not as per Section 206AA can it be said that if appeal is not maintainable, the answer would be in our opinion "yes, it would be maintainable". 18. Accordingly, we hold that the deductor can challenge excess deduction u/s. 248 seeking that the rate of tax should be as per DTAA and not as per Section 206AA, if it is found that otherwise income is chargeable to tax in India and then certainly an appeal would be maintainable u/s. 248 seeking relief/refund for excess tax deducted. Thus, in our view, the word "no tax was required to be deducted" in Section 248 should be interpreted in such a manner so as to include claim of the deductor that no tax was required to be deducted in excess of deductible at rates in force. 19. The ld. CIT (A) has held t....