2023 (6) TMI 1406 - HC - Income Tax

Applicability of provisions of Section 206AA - deducting of tax at higher rate in the absence of Permanent Account Number to the payments made to Non Resident Companies - ITAT confirmed non applicability of provision of 206AA on the ground that benefit of DTAA is available to the assessee - assessing authority rightly held that assessee is to be in default for non-compliance of Section 195 of the Act by holding that Section 206AA of Act is applicable as PAN was not quoted in respect of the payers - Delay filling appeal before High Court HELD THAT - To a pointed question as to whether the issues raised in this appeal are covered by the decision of this court in The Commissioner of Income-tax and Another Vs. M/s.WIPRO Ltd 2023 (1) TMI 173 - KARNATAKA HIGH COURT Revenue fairly submitted that questions raised in this appeal have been considered in the aforesaid decision. This appeal is filed belatedly after 273 days along with I.A.for condonation of delay. Having considered the appeal on both delay and merits, questions of law are answered in the favour of assessee and against the Revenue.

Summary

Issues:
1. Applicability of Section 206AA of the Income Tax Act to payments made to Non-Resident Companies.
2. Interpretation of Notification dated 24/6/2016 issued by CBDT relaxing the conditions of tax deduction at a higher rate under Section 206AA for Non-Residents.
3. Condonation of delay in filing the appeal.

Analysis:

Issue 1:
The primary issue in this case revolves around the applicability of Section 206AA of the Income Tax Act to payments made to Non-Resident Companies. The Tribunal held that the provisions of Section 206AA were not applicable in the absence of a Permanent Account Number (PAN) for payments made to Non-Resident Companies, citing the availability of benefits under the Double Taxation Avoidance Agreement (DTAA). However, the assessing authority found the assessee to be in default for non-compliance with Section 195 of the Act, asserting that Section 206AA was indeed applicable due to the absence of PAN. The circular No.5 of 2010 was also brought into consideration, stating that Section 206AA would apply even when payments are made to Non-Resident Companies without tax deduction at source or credit, and the recipient does not possess a PAN.

Issue 2:
The second issue pertains to the interpretation of the Notification dated 24/6/2016 issued by the Central Board of Direct Taxes (CBDT), which relaxed the conditions of tax deduction at a higher rate under Section 206AA for Non-Residents. The Tribunal was questioned for not appreciating that the notification only relaxed the conditions if the deductee furnished specific details and documents as specified in the sub-clause of the notification. This aspect raised concerns regarding the nature of the Tribunal's order and whether it could be deemed as perverse in its interpretation of the notification.

Issue 3:
Lastly, the matter of delay in filing the appeal, which was belatedly done after 273 days, was addressed. The appeal was considered on both delay and merits. Ultimately, the appeal was dismissed, and the questions of law were answered in favor of the assessee and against the Revenue. The application for condonation of delay was disposed of without any costs being imposed.

In conclusion, the judgment highlighted the complexities surrounding the applicability of Section 206AA, the interpretation of CBDT notifications, and the procedural aspect of condonation of delay in filing appeals. The decision ultimately favored the assessee, emphasizing the importance of adherence to tax laws and regulations in transactions involving Non-Resident Companies.