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TMI Blog2017 (1) TMI 669X X X X Extracts X X X X X X X X Extracts X X X X ..... ent without appreciating that the agreement with Honeywell falls under the industrial policy and hence the rates of S.115A(l)(b) should be applicable. 2. Re: Levy of Interest u/s 201(1A) 2.1 On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in levying interest u/s. 201(1 A) on the alleged IDS default of the Appellant. 3. The Appellant craves leave to add to, alter, amend or delete any ground of appeal. 2. Briefly stated facts of the case are that the assessee is a limited company engaged in the business of chartering, hiring and leasing aircraft. During the year payment was made to a non-resident namely M/s Honeywell, USA not having PAN. Tax was deducted at source @ 10% + surcharge and education cess on the payment of fees for technical services as per provisions of section 115A of the Act. However, ld. Assessing Officer alleged that tax was required to be deducted @ 20% in view of the provisions of section 206AA of the Act as the assessee was not having PAN and accordingly raised demand of Rs. 30,250/- towards short deduction and Rs. 5750/- towards interest on short deduction. 3. Aggrieved, assessee went in appeal before ld. CIT(A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dia. 139A being a special provisions will override section 206AA which is general in nature. Further the rates prescribed in section 115A are special rates and does overrides thus are applicable against the section 206AA which is general in nature. However the rates prescribed in section 1.15A are only when the agreement pertains to a matter included in Industrial Policy as subsection (1) clause of (b). No such evidences have been produced before by the appellant i.e. agreement with the Honeywell falls under Industrial policy, it is inconceivable that the until and unless the matter pertains to industrial policy the rates of section 115A (l)(b) would be applicable and hence the action of the AO applying the rate of 20 per cent is confirmed. Accordingly ground nos. 1 and 2 are dismissed. 4. Aggrieved, assessee is now in appeal before the Tribunal. 5. At the outset ld. AR submitted that the issue raised in this appeal is squarely covered in favour of assessee by the decision of the Tribunal in the case of Alembic Ltd. vs. ITO in ITA No.1202/Ahd/2014 and others. 6. On the other hand, ld. DR supported the orders of lower authorities. 7. We have heard the rival contentions a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith that policy, then, subject to the provisions of sub-sections (1A) and (2), the income-tax payable shall be the aggregate of,- [(A) the amount of income-tax calculated on the income by way of royalty, if any, included in the total income, at the rate of ten per cent; (B) the amount of income-tax calculated on the income by way of fees for technical services, if any, included in the total income, at the rate of ten per cent; and] (C) the amount of income-tax with which it would have been chargeable had its total income been reduced by the amount of income by way of royalty and fees for technical services. Explanation.-For the purposes of this section,- (a) "fees for technical services" shall have the same meaning as in Explanation 2 to clause (vii) of sub-section (1) of section 9 ; (b) "foreign currency" shall have the same meaning as in the Explanation below item (g) of sub-clause (iv) of clause (15) of section 10 ; Sec. 206AA. 69. After section 206A of the Income-tax Act, the following section shall be inserted with effect from the 1st day of April, 2010, namely:- "206AA. Requirement to furnish Permanent Account Number.-(1) Notwithstanding anything ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 90(2) of the Act refers to DTAA entered into by Central Government with the Government of any other country for granting of relief. 29. Further from going through the decisions of ld. CIT(A) Gandhinagar, Ahmedabad and ld. CIT(A) Baroda we observe that both of them have taken different views in deciding the issue. Ld. CIT(A) Gandhinagar in his appellate order dated 15.1.2014 has not objected to the fact that separate rates u/s 115A of the Act/DTAA agreement are provided for the deductees but has not allowed the assessees claim either due to absence of material evidence on the part of the assessee in order to prove that there existed an agreement pertaining to industrial policy or in the alternative has directed the Assessing Officer to check the treaty rates. In totality ld. CIT(A), Gandhinagar is in consensus with the TDS rates applied by assessee but has objected only for want of verification. 30. On the other hand, ld. CIT(A), Baroda has completely scratched down the modus operandi adopted by the assessee for deducting tax at source at lower rates than 20% in the absence of PAN of the deductees by confirming application of provisions of section 206AA of the Act and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 o! 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 Azadi Bachao Andolan and Others vs. UOI, (2003) 263 ITR 706 (SC) has upheld the proposition that the provisions made in the DTAAs will prevail over the general provis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der 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, in our view, where the tax has been deducted on the strength of the beneficial provisions of section DTAAs, the revisions 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 on the provisions of section 90(2) of the Act. The CIT(A), in our view, correctly inferred that section 206A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isions, we are of the view that in case where payments have been made to the deductees on the strength of the beneficial provisions of section 115A(1)(b) of the Act or as per DTAA rates r.w.s. 90(2) of the Act, then provisions of section 206AA cannot be invoked by the Assessing Officer insisting to deduct tax @ 20% for non-availability of PAN. 35. Now taking up the second question wherein ld. CIT(A) Gandhinagar sustained some portions of demand for want of verification of agreement relating to industrial policy as well as in case of some payment for verifying the treaty rates, we observe that during the course of hearing ld. AR has affirmed that such type of payments by assessee are being regularly made to the deductees which have been dealt by ld. CIT(A) in appeal before the Tribunal. Ld. AR has also submitted that all the payments have been made through banking channels and automatic route of RBI with due certification of the nature of payment, details of payees, rates of taxes deducted at source. We are, therefore, of the view that as assessee is making such payments consistently to the payees for various types of services relating to produce registration, marketing and profes ..... X X X X Extracts X X X X X X X X Extracts X X X X
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