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2017 (1) TMI 635

Payments made to non-residents towards various services - tax deducted at source at the rates provided u/s 115A or as per the rates provided u/s 90(2) r.w.s. Double Taxation Avoidance Agreement (DTAA) with respective countries of the non-residents - payments have been made to non-residents persons having no permanent establishment in India - assessee contended that tax has been rightly deducted at source at the rates provided u/s 115A of the Act or as per the rates with reference to DTAA r.w.s. 90C(2) of the Act, whereas Revenue created demand against the assessee by observing that as the deductees do not hold PAN provisions of section 206AA of the Act comes into effect as per which tax was required to be deducted @ 20%

Held 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.

Portions of demand sustained for want of verification of agreement relating to industrial policy as well as in case of some payment for verifying the treaty rates - Held that:- 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 professional royalty and other technical services, and looking to the fact that there is no dispute to the residential status of payees, assessees have rightly deducted TDS as per rates provided in section 115A(1)(b) of the Act as well as per rates provided in DTAA with respect to countries to which the payees belong to.


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