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TMI Blog2023 (7) TMI 500X X X X Extracts X X X X X X X X Extracts X X X X ..... l of liability of tax or no tax which is in excess. The interpretation of Section 248 as given by the ld. CIT (A) and also as confessed before us by the ld. DR, if it is to be interpreted in such a manner, then it would lead to various anomalous situation. We hold that the deductor can challenge excess deduction u/s. 248 seeking that the rate of tax should be as per DTAA and not as per Section 206AA, if it is found that otherwise income is chargeable to tax in India and then certainly an appeal would be maintainable u/s. 248 seeking relief/refund for excess tax deducted. Thus, in our view, the word no tax was required to be deducted in Section 248 should be interpreted in such a manner so as to include claim of the deductor that no tax was required to be deducted in excess of deductible at rates in force. Section 197 provides that, assessee, here meant recipient deductee of the sum can approach the ld. AO to issue certificate for deduction of taxes at lower rate or for no deduction of tax. This Section 197 provides that the deductee or the recipient can approach to the ld. AO which here in this case deductee has not applied u/s. 197 and deductor has filed remedy of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid training of pilots were to be borne by the assessee. Since the services were in the nature of technical services, therefore, as per the provision of Section 115A of the Act (as stood at the relevant time), the applicable rate of tax was 10%. However, in the absence of PAN of deductee, the assessee deducted tax at source u/s. 195 r.w.s. 206AA of the Act @25.94% being grossed up rate of 20% u/s. 195A. Accordingly, the assessee made the following payments and deposited Rs. 10,45,390/- to the credit of the Government on 08/09/2015. Amount in USD Amount in INR WHT Rate WHT in USD WHT in INR 61,200 40,30,200 25.94% (20.60% gross upto 25.94%) 15,875 10,45,390 3. However, after making the payment of taxes, the assessee filed an appeal before the ld. CIT(A) u/s. 248 contending that the deductee, being a tax resident of the USA and Double Taxation Avoidance Agreement between India and USA are applicable to the transaction in question. As per Article 12 of DTAA, the rate of tax on fees for included services sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeal u/s. 248. The term no tax was required to be deducted on such income would mean that there is a denial of liability to the extent of excess tax deducted at source. Further, it uses the term no tax and Nil tax and the term no tax should mean correct tax and accordingly, the judgment of the Hon ble Supreme Court is clearly applicable. 7. He further submitted that section 206AA of the Act would not apply to the subject transaction. Further, as per the provisions of section 90 (2) of the Act, applying the provisions of the Act to the extent they are more beneficial to the Deductee Assessee, the applicable rate for deduction of tax would be 10% u/s 115A (plus applicable surcharge education cess) and the grossed up rate u/s 195A would work out to 11.48%. 8. Without prejudice to the above, he submitted that FIS rate in any case cannot exceed 15% as per Article 12 of the India-USA DTAA. 9. On the other hand, ld. DR submitted that from the plain reading of the provision of Section 248 as it stood after the amendment, by the Finance Act 2007, it clearly states that the tax deductible on any income u/s. 195 is to be borne by the person by whom the income is payable an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (payer of income) when following conditions are fulfilled: i. Tax deductible on any income u/s 195 shall be borne by the payer. ii. Payer can file an appeal before the CIT (A) only after payment of taxes. iii. Payer can file appeal claiming that no tax was required to be deducted on such income. 12. Since the aforesaid provision provides that tax deductible on any income u/s. 195, therefore, it would relevant to incorporate the provision of Section 195 which reads as under:- (1) Any person responsible for paying to a non-resident, not being a company, or to a foreign company, any interest (not being interest referred to in section 194LB or section 194LC) or section 194LD or any other sum chargeable under the provisions of this Act (not being income chargeable 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. in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier. deduct income-tax thereon at the rates in force (2) Where the person responsible for paying any such sum chargeable under this Act (other than salary) to a non-resident considers that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 16. The interpretation of Section 248 as given by the ld. CIT (A) and also as confessed before us by the ld. DR, if it is to be interpreted in such a manner, then it would lead to various anomalous situation. For instance if a deductor deducts tax at source u/s. 195 read with section 206AA on payment made to a non-resident and pays to the same to the Government. Having done so, the Deductor files appeal u/s 248, and challenges in its main ground of appeal that the tax was not deductible at source at all, for the reason of non- chargeability of income in India; or if without prejudice raises a ground that in any case the tax would be deductible at source at the rates as per DTAA, then the CIT (A), in such appeal u/s 248, if he decides that the sum paid by the Deductor is chargeable in India. He, then, proceeds to decide on the alternate ground and decides that the tax should be deducted at source at the rates as per DTAA. Then in such a situation he is bound to give relief that the tax should have been deducted at source as per rates prescribed in DTAA. Now, as per the interpretation of the ld. CIT (A), this appeal is only maintainable that no tax is to be deducted at all and i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manner so as to include claim of the deductor that no tax was required to be deducted in excess of deductible at rates in force. 19. The ld. CIT (A) has held that under the pre-amended provisions of Section 248, the judgment of Hon ble Supreme Court in the case of CIT vs. Wesman Engg. Co. (P) Ltd. supra is not applicable on the ground that it was rendered on the pre-amended Section 248 and it is not applicable on the amended provision. If the pre-amended section 248 and amended provision is kept in juxtaposition, the only major change is that, an additional condition has been brought that the deductor has to bear the subject tax and instead of denying the liability to make such deduction the statute in use the word claims that no tax was required to be deducted . 20. There is another way to interpret this section that the heading to the Section itself says that Appeal by a person denying liability to deduct tax in certain cases . Thus, the earlier phrase stating who denies his liability to make such deduction and now amended to phrase no tax was required to be deducted on such income will not alter the provision of Section 248 to say that only where the assessee comple ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red to as FSIS or Deductee ), for availing training of pilots in the operation. 24. Since the aforesaid services are in the nature of technical services, as per section 115A of the Income-tax Act (as stood at the relevant time), the applicable rate of tax was 10%. However, in the absence of PAN of Deductee, the Appellant deducted tax at source u/s. 195 r.w.s. 20GAA of the Act @ 25.94% (being grossed up rate of 20% u/s. 195A of the Act). Accordingly, the Appellant made below payment and deposited Rs. 8,97,975 to the credit of the Government on 7th December, 2015. Amount in Euro Amount in INR WHT Rate WHT in USD WHT in INR 48,375 34,61,715 25.94% (20.60% grossed upto 25.94%) 12,548 8,97,975 25. The claim of the assessee is that as per Article 12 of the DTAA between India and France, the rate of tax shall not exceed 10% and accordingly it filed appeal before the CIT (A) claiming that rate of tax to be deducted shall be 10%. 21. However, the aforesaid finding will also apply mutatis mutandis for this ..... X X X X Extracts X X X X X X X X Extracts X X X X
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