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2016 (9) TMI 1264 - ITAT AHMEDABADShort deduction of TDS - Payments made to non-residents towards various services - TDS return processed under section 200A - the tax withholding rate was to apply @ 20%, in terms of the provisions of Section 206AA, as the German entity had not obtained the permanent account number (PAN) from the Indian tax authorities - Indo German DTAA - Held that:- The provisions of the applicable tax treaty, in the present case, prescribe the tax rate @ 10%. This rate of 10% is applicable on the related income whether or not the assessee has obtained the permanent account number. In effect, therefore, even when a foreign entity does not obtain PAN in India, the applicable tax rate is 10% in this case. Section 206AA, which provides a higher tax burden- i.e. taxability @ 20% in the event of foreign entity not obtaining the permanent account number in India, therefore, cannot be pressed into service, as has been done in the course of processing of return under section 200A. To that extent, short deduction of tax at source demand, raised in the course of processing of TDS return under section 200A, is unsustainable in law. We quash this short deduction of tax at source demand. The grievance of the assessee is indeed justified, merits acceptance and is hereby upheld. - Decided in favour of assessee
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