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2017 (2) TMI 68 - AT - Income TaxRefund of TDS - Rate of Withholding tax (TDS) - assessee deducting tax at 20% instead of 15% - payment of royalty - contention of the ld. AR for refunding 5% to the assessee-deductor (difference between 20% and 15%) - Held that:- 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. 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.
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