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2016 (1) TMI 73 - AT - Income TaxTDS u/s 195 - payment to non-resident - TDS either @ 10% or @ 20% - assessee in default - assessee has not produced the Permanent Account Number of the recipients for deducting tax @ 10% - the ld. Representative submitted that the non-resident means a person who is not a resident in India. In this case, admittedly, the recipients are not residents in India, therefore, there is no obligation to obtain Permanent Account Number u/s 139A of the Act. Since there was no obligation to obtain Permanent Account Number, according to the ld. Representative, sec. 206AA of the Act is not applicable. Held that - If the recipient has no taxable income in India then the question of deduction of tax may not arise for the year under consideration. In that case, there is no question of deduction of tax either @ 10% or @ 20%. When the income received by a resident or non-resident, as the case may be, is taxable in India, tax has to be deducted under the provisions of Chapter XVII of the Act. Sec. 206AA of the Act also falls in Chapter XVII. In view of the specific provision in sec. 206AA which provides for deduction of tax @ 20% wherever the recipient failed to furnish the Permanent Account Number, this Tribunal is of the considered opinion that in view of the language used by the Parliament notwithstanding anything contained in any other provisions of this Act , sec.206AA would override the other provisions of the Income-tax Act, including sec.139A of the Act. Since admittedly the amount received by the recipient is taxable in India, this Tribunal is of the considered opinion that in the absence of any Permanent Account Number, tax has to be necessarily deducted @ 20%. Therefore, the CIT(A) has rightly confirmed the order of the Assessing Officer treating the assessee as an assessee in default - Decided against assessee
Issues:
- Applicability of sec. 206AA of the Income-tax Act, 1961 regarding deduction of tax at source. - Obligation of non-resident companies to furnish Permanent Account Number for tax deduction purposes. - Dispute over the rate of tax to be deducted for payments made to non-resident companies. Analysis: The judgment pertains to three appeals by the assessee against orders of the Commissioner of Income-tax (Appeals) for the assessment years 2011-12, 2012-13, and 2013-14. The core issue revolves around the applicability of sec. 206AA of the Income-tax Act, 1961, concerning the deduction of tax at source. The assessee made remittances to non-resident companies for availing services of embryologists, and the Assessing Officer treated the assessee as an 'assessee in default' for not producing the Permanent Account Number of the recipients, thereby imposing a higher tax deduction rate of 20% instead of 10%. The representative for the assessee argued that non-residents are exempt from obtaining Permanent Account Numbers under sec. 139A of the Act, and therefore, sec. 206AA should not apply. They contended that the non-residents obtained the Permanent Account Number during the same financial year, and as per sec. 206AA, there is no obligation for non-residents to provide the Permanent Account Number to the deductor at the time of payment. The representative emphasized that sec. 206AA does not impose an obligation to obtain Permanent Account Numbers, and the assessee cannot be treated as an 'assessee in default' for non-deduction of tax at 20%. On the other hand, the Departmental Representative argued that sec. 206AA is mandatory, requiring non-resident companies to furnish Permanent Account Numbers to the deductor for tax deduction purposes. They highlighted that the provisions of sec. 206AA override other provisions of the Income-tax Act, as stated in the decision of the Bangalore Bench of the Tribunal. The Departmental Representative contended that the assessee was rightly treated as an 'assessee in default' for not complying with the requirements of sec. 206AA. The Tribunal analyzed sec. 206AA, which specifies that tax shall be deducted at a higher rate if the Permanent Account Number is not furnished. The Tribunal observed that the section starts with "notwithstanding anything contained in any other provisions of this Act," indicating its overriding effect on other provisions. Considering that the income received by non-resident companies is taxable in India, the Tribunal upheld the applicability of sec. 206AA and confirmed the orders treating the assessee as an 'assessee in default.' The appeals of the assessee were dismissed, affirming the decision of the Commissioner of Income-tax (Appeals). In conclusion, the judgment clarifies the mandatory nature of sec. 206AA in requiring the furnishing of Permanent Account Numbers by non-resident companies for tax deduction purposes, even if they obtained the numbers later in the financial year. The Tribunal's decision underscores the importance of compliance with tax deduction provisions under the Income-tax Act, 1961, to avoid being deemed an 'assessee in default.'
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