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TMI Blog2017 (2) TMI 68X X X X Extracts X X X X X X X X Extracts X X X X ..... at source @ 5% on payments made to its parent company is devoid of any merits. The same is hereby jettisoned. Levy of surcharge and education cess - Held that:- In the context of compulsory requirement to furnish PAN of employees u/s 206AA, it becomes crystal clear that the CBDT has provided that: ‘Education cess @ 2% and secondary and higher education cess @1% is not to be deducted in case the tax is deducted at 20% u/s 206AA of the Act.’ Albeit, this part of the Circular is not relevant for the purposes of deduction of tax at source in terms of section 195, yet it throws some guidance on the non-levy of education cess and surcharge etc. in case tax is deducted in terms of section 206AA on the payments made to nonresidents. No contrary provision mandating the levy of surcharge and education cess on the rate of 20% u/s 206AA(1)(iii) has been brought to our notice by the ld. DR. In view of the foregoing discussion, we are satisfied that the ld. CIT(A) was not justified in upholding the action of the AO in levying the surcharge and education cess on the amount of tax deducted at source u/s 206AA(1)((iii) of the Act. The same is, therefore, directed to be deleted. - ITA No.4549/De ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... harge and education cess should have also been levied. The assessee is aggrieved against the order passed by the ld. CIT(A) on two issues. The first issue is that the rate of tax withholding should be 15% and, second, no surcharge and education cess should have been levied. Admittedly, there is no cross appeal by the Revenue, which implies, that the Department has accepted the decision of the ld. CIT(A) to the extent that tax was rightly deducted at source u/s 206AA at the rate of 20%, being the same rate at which the assessee made the deduction. 3. We have heard the rival submissions and perused the relevant material on record. The core of the controversy in this appeal is the interpretation of section 206AA, the relevant part of which reads as under :- `Requirement to furnish Permanent Account Number. 206AA. (1) Notwithstanding anything contained in any other provisions of this Act, any person entitled to receive any sum or income or amount, on which tax is deductible under Chapter XVIIB (hereafter referred to as deductee) shall furnish his Permanent Account Number to the person responsible for deducting such tax (hereafter referred to as deductor), failing which tax s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es. Tax was deducted at source at the rate of 15% etc. on the said payments in accordance with the rates provided in DTAAs. Since the recipients did not have PANs, the AO invoked the provisions of section 206AA and held that the tax should have been deducted @ 20% and not the lower rate, namely, 15%, etc., as provided in the DTAA. The CIT(A) upheld the assessee s stand by holding that the provisions of section 90(2) would override other provisions of the Act including section 206AA and, accordingly, deleted the tax demand. The Revenue s appeal came to be dismissed by the Tribunal. It is clear from the facts of the case in Serum Institute (supra) that the controversy therein was about the application of 20% rate as suggested by the AO or a lower rate of 15% etc. as per the DTAA, at which deduction of tax at source was actually made by the assessee. The Tribunal approved the assessee s stand holding that tax was rightly deducted at source at the lower rate of 15% as per DTAA. It is on the strength of this decision that the assessee is now urging before us that deduction of tax at source should have been made by it at 15% and the excess deduction to the extent of 5% should be refund ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of this Act, not being income under the head Salaries , shall, at the time of credit of such income to the account of the payee or at the time of payment thereof, etc., whichever is earlier, deduct income-tax thereon at the rates in force. Section 199 dealing with `Credit for tax deducted provides that any deduction of tax in accordance with the provisions of this Chapter which is paid to the Central Government : `shall be treated as a payment of tax on behalf of the person from whose income the deduction was made etc. Section 203 dealing with `Certificate for tax deducted provides that every person deducting tax shall within a prescribed period : `furnish to the person to whose account such credit is given or , a certificate to the effect that tax has been deducted, and specifying the amount so deducted, the rate at which the tax has been deducted . A conjoint reading of the above provisions boils down that the person responsible for paying to the non-resident is required to deduct tax at source (section 195); issue certificate for tax deducted to the deductee (section 203); and the credit for tax deducted at source is given to the deductee by treating it as a p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s tax at source to the tune of ₹ 12 instead of ₹ 10, he will deduct the amount of ₹ 12 from the payment due to B and will pay a net sum of ₹ 88. It will be for B to claim refund of tax, if any due to him, by filing his return of income. After deducting ₹ 12 from the payment due to B, A plays no role except issuing certificate to B for deduction of tax at source to the tune of ₹ 12. If by mistake A deducts more than due tax, it is only B, who is entitled to claim refund of excess tax, and that too, by filing his return of income. A cannot claim refund of excess tax deducted, because the deduction of tax at source, at higher rate was made on behalf of B and not on his own behalf. If the contention of A is accepted that he actually deducted excess tax to the extent of ₹ 2 and he be refunded this excess, it would mean that as against the actual net receipt of TDS of ₹ 10 (Rs.12 as deducted by A minus ₹ 2 refunded to A), the Revenue will be returning a sum of ₹ 12 to B on the basis of the original TDS certificate issued. This proposition is beyond any logic. The nitty-gritty of the matter is that A, after deducting ₹ 12 f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s with the first situation as discussed above and prevents the levy and recovery of excess taxes by unambiguously providing that taxes should not be imposed save by authority of law. On the other hand, we are confronted with a second situation in which the assessee has suo motu deducted tax at source on behalf of the payee and the payee, in turn, is entitled to claim credit for such tax deduction at source in its return of income. Ergo, it is manifest that Article 265 of the Constitution does not come into play in the circumstances as are extantly prevailing before us inasmuch as we are not determining the rightful amount of tax due on the income of the payee. The instant proceedings are in the hands of the deductor-payer and are not in any manner going to affect the tax liability of the payee as has been specifically provided for under section 190(2) of the Act that that deduction of tax at source does not prejudice the charge of tax on such income. In view of the foregoing discussion, we are of the considered opinion that the assessee s claim for refund of tax deducted at source @ 5% on payments made to its parent company is devoid of any merits. The same is hereby jettisoned. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... surcharge and education cess etc. on a particular prescribed rate of tax in a provision, it expressly provided the same. In the absence of a specific mention for the levy of surcharge on the rate of 20% as prescribed in section 206AA(1)(iii), we cannot read the same into it. 11. At this juncture, it would be apt to consider the judgment of the Hon ble Supreme Court in CIT vs. Vatika Township Pvt. Ltd. (2014) 367 ITR 466 (SC). The issue raised in that case was about the insertion of proviso to section 113 by the Finance Act, 2002 w.e.f. 1.6.2002 providing that the tax chargeable in the case of block assessment or search cases shall be increased by a surcharge, if any, levied by any Central Act and applicable in the assessment year relevant to the previous year in which the search is initiated u/s 132 or the requisition is made u/s 132A. A view was taken by some of the authorities with the insertion of proviso to section 113, that the levy of surcharge on the tax was always intended to be there and hence this proviso being clarificatory, is retrospective in nature. Rejecting this contention, the Constitution Bench of the Hon ble Supreme Court held that the provision for levy of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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