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TMI Blog2016 (2) TMI 896X X X X Extracts X X X X X X X X Extracts X X X X ..... that without giving an opportunity of hearing to the assessee, the Assessing Officer raised the demand under Section 200A including interest. The assessee further contended before the CIT (Appeals) that the computation has been done without giving effect to the provisions of section 90A(2) r.w. relevant provisions of DTAA is entered into with respective countries which provides that one will be governed by the DTAA or the provisions of I.T. Act which is more beneficial to the assessee. Thus the assessee contended before the CIT (Appeals) that the assessee has deducted the tax in accordance with the provisions of the respective DTAA and therefore there was no shortfall in the deduction of tax at source in respect of the payments made to non-residents. The CIT (Appeals) did not accept the contention of the assessee and confirmed the action of the Assessing Officer. 3. Aggrieved by the order of the CIT (Appeals), the assessee filed these appeals and raised the following grounds : "1. That the order under Section 200A read with 250 of the Income Tax Act, 1961 (in short 'the Act') issued by the learned CIT (Appeals) - IV, Bangalore is without jurisdiction and contrary to law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of DTAA as well as without giving an opportunity of hearing to the assessee is also beyond the scope of the Assessing Officer. The Assessing Officer is not permitted to make the adjustment while issuing the intimation under Section 200A when the issue involves is a highly debatable issue and require a well drawn reasoning and finding. Thus the learned Authorised Representative of the assessee has submitted that the impugned order of the Assessing Officer is not sustainable. In support of his contention, he has relied upon the decision of the co-ordinate bench of this Tribunal Dt.29.6.2015 in the case of DCIT Vs. Infosys BPO Ltd. in ITA No.1143 and 8 & 9/bang/2014 as well as cross objection Nos.83 & 84/Bang/2014. 5. On the other hand, the learned Departmental Representative has relied upon the orders of authorities below. 6. We have heard the rival submissions as well as considered the relevant material on record. At the outset we note that in the case of the assessee the Assessing Officer has made adjustment u/s. 200A on account of short deduction of tax at source by the assessee in respect of payment to non-residents on the ground that the assessee has not furnished ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; or at the rate of 20%. In the present case, assessee was responsible for deducting tax on payments made to non-residents on account of royalty and/or fee for technical services. The dispute before us relates to the payments made by the assessee to such non-residents who had not furnished their PANs to the assessee. The case 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 case of non-residents, tax liability in India is liable to be determined in accordance with the provisions of the Act or the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee to deduct tax at source on payments to a non-resident cannot be looked upon as a charging provision. In-fact, in the context of section 195 of the Act also, the Hon'ble Supreme Court in the case of CIT vs. Eli Lily & Co., (2009) 312 ITR 225 (SC) observed that the provisions of tax withholding i.e. section 195 of the Act would apply only to sums which are otherwise chargeable to tax under the Act. The Hon'ble Supreme Court in the case of GE India Technology Centre Pvt. Ltd. vs. CIT, (2010) 327 ITR 456 (SC) held that the 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat section. In view of the same, we are of the opinion that the grossing up of the amount is to be done at the rats in force for the financial year in which such income is payable and not at 20% as specified u/s 206AA of the Act". 9. It is pertinent to note the obligation of deducting tax at source arises only when there is a sum chargeable under the Act. The Hon'ble jurisdictional High Court in the case of M/s Bharti Airtel Ltd Vs DCIT Supra, has observed in para-39 as under; "39. The provisions for deduction of TAS(tax at source) which are in Chapter XVII dealing with collection of taxes and the charging provisions of the Income-tax from one single integral, inseparable Code. Therefore, the provisions relating to TDS apply only to those sums which are "Chargeable to tax" under the Income-tax Act. While interpreting the provisions of the Income-tax Act one cannot read the charging sections of that Act de hors the machinery sections. The Act is to be read as an integral Code. In order to deduct tax at source the amount being paid out must necessarily be ascertainable as income chargeable to tax in the hands of the payee. TDS is a vicarious liability and it presupposes existenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the order passed by the learned CIT(A) to the extent it is prejudicial to the respondent be quashed or in the alternative i) Appeal filed with CIT(A) against intimation passed under section 200A be held as mainatainable ii) Intimation passed under section 200A be held as without jurisdiction invalid and bad in law. iii) Section 206AA be held as inapplicable in view of the fact that non-resident deductees were not required under law to obtain PAN". 11. We have heard the learned AR as well as learned DR and considered the relevant material available on record. As we have discussed the facts while deciding the issue involved in the revenue's appeal that the AO has made the adjustment while issuing the intimation u/s 200A of the IT Act, by applying the rate of tax at 20%. The assessee has challenged jurisdiction of the AO u/s 200A of the Act, for making such adjustment and raising the consequential demand, because the issue of applying the rate of tax is not arithmetical error in the statement or an incorrect claim apparent from any information in the statement. Thus, the learned AR contended that the exercise undertaken by the AO to adopt the rate of tax at 20% and conseque ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ared or generated and sent to the deductor specifying the sum determined to be payable by, or the amount of refund due to, him under clause (c); and (e) the amount of refund due to the deductor in pursuance of the determination under clause (c) shall be granted to the deductor : Provided that no intimation under this sub-section shall be sent after the expiry of one year from the end of the financial year in which the statement is filed. Explanation.-For the purposes of this sub-section, "an incorrect claim apparent from any information in the statement" shall mean a claim, on the basis of an entry, in the statement- (i) of an item, which is inconsistent with another entry of the same or some other item in such statement; (ii) in respect of rate of deduction of tax at source, where such rate is not in accordance with the provisions of this Act. (2) For the purposes of processing of statements under sub-section (1), the Board may make a scheme for centralised processing of statements of tax deducted at source to expeditiously determine the tax payable by, or the refund due to, the deductor as required under the said sub-section." 14. As it is clear the explanation belo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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