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TMI Blog2022 (8) TMI 40X X X X Extracts X X X X X X X X Extracts X X X X ..... of Netherland. It is not in dispute that assessee has not deducted this TDS from the payment but has deposited from their own account and has absorbed it as cost. It is also not in dispute that since payee, ELFC, being a foreign company having no PAN, the assessee reported the transaction without PAN in the quarterly TDS statements. This Court is in agreement with the view of the Tribunal that the issues of law sought to be raised in the present appeal are squarely covered by the judgment of this Court in Danisco India (P.) Ltd. [ 2018 (2) TMI 1289 - DELHI HIGH COURT] . as held Double Taxation Avoidance Agreement acquires primacy in such cases, where reciprocating states mutually agree upon acceptable principles for tax treatment, the provision in Section 206AA (as it existed) has to be read down to mean that where the deductee i.e the overseas resident business concern conducts its operation from a territory, whose Government has entered into a Double Taxation Avoidance Agreement with India, the rate of taxation would be as dictated by the provisions of the treaty - no substantial question of law arises. - HON'BLE MR. JUSTICE MANMOHAN AND HON'BLE MS. JUSTICE MA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he DTAA between India and Netherlands. The ITAT has also held that the ELFC, the lessor, is a foreign company having no permanent establishment and was a tax resident of Netherland. It is not in dispute that assessee has not deducted this TDS from the payment but has deposited from their own account and has absorbed it as cost. It is also not in dispute that since payee, ELFC, being a foreign company having no PAN, the assessee reported the transaction without PAN in the quarterly TDS statements. The relevant portion of the ITAT judgment is reproduced hereinbelow:- 7. Undisputedly, the dispute in the instant appeals is qua applying the TDS rate at 20.12% or 10% on transfer between ELFC and the assessee for taking an engine on lease under an Agreement. It is also not in dispute that ELFC, the lessor is a foreign company having no Permanent Establishment (PE) and was a tax resident of Netherland. It is also not in dispute that under Article 7 of Double Taxation Avoidance Agreement (DTAA) between Indian and Netherland, the profits of enterprise of a contracting state shall be taxable only in that state unless the enterprise carries on business in the other contracting state ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dered to be deleted. Consequently, all the appeals filed by the assessee are allowed. 6. This Court is in agreement with the view of the Tribunal that the issues of law sought to be raised in the present appeal are squarely covered by the judgment of this Court in Danisco India (P.) Ltd. vs. Union of India [2018] 90 taxmann.com 295 (Delhi), wherein it has been held as under:- 6. After hearing the counsel for the parties, it is quite apparent that the issue urged has been rendered largely academic on account of corrective amendment made by the Parliament-which substituted pre-existing Sub-section (7) with the present Section 206AA (7). The amendment is mitigating to a large extent, the rigors of the pre-existing laws. The law, as it existed, went beyond the provisions of DTAA which in most cases mandates a 10% cap on the rate of tax applicable to the state parties. Section 206AA (prior to its amendment) resulted in a situation, where, over and above the mandated 10%, a recovery of an additional 10%, in the event, the non- resident payee, did not possess PAN. 7. In this context, the ITAT in Serum Institute of India (Supra) discussed this very issue in some detail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the rate of taxation invoked by the assessee based on the DTAAs, which prescribed for a beneficial rate of taxation. However, the case of the Revenue is that the tax deduction at source was required to be made at 20% in the absence of furnishing of PAN by the recipient non-residents, having regard to section 206AA of the Act. In our considered opinion, it would be quite incorrect to say that though the charging section 4 of the Act and section 5 of the Act dealing with ascertainment of total income are subordinate to the principle enshrined in section 90(2) of the Act but the provisions of Chapter XVII-B governing tax deduction at source are not subordinate to section 90(2) of the Act. Notably, section 206AA of the Act which is the centre of controversy before us is not a charging section but is a part of a procedural provisions dealing with collection and deduction of tax at source. The provisions of section 195 of the Act which casts a duty on the assessee 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 v. Eli Lily C ..... X X X X Extracts X X X X X X X X Extracts X X X X
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