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2019 (5) TMI 1161 - AT - Income TaxTDS rate u/s 206AA(1) - Treaty rate (DTAA) OR rate as per Act - whether provisions of DTAA shall prevail over the provisions of' section 206AA(1), even when the provision of section 206AA(1) are overriding in nature containing a clear non-obstante clause? - HELD THAT:- Section 206AA of the Act does not override the provisions of Section 90(2) of the Act and that in the cases of payments made to non-residents, assessee correctly applied the rate of tax prescribed under the DTAAs and not as per Section 206 AA of the Act because the provisions of the DTAAs were more beneficial. In view of the settled position of law, we find it difficult to sustain the orders of the authorities below. With this view of the matter, we find that the orders of the authorities below are liable to be quashed and accordingly they are quashed. Thus, we hereby direct the deletion of the tax demand relatable to difference between 20% and the actual tax rate on which tax was deducted by the assessee in terms of the relevant DTAAs. SEE M/S EMMSONS INTERNATIONAL LTD. VERSUS DCIT CPC -TDS, GHAZIABAD [2018 (4) TMI 1272 - ITAT DELHI] Whether the treaty overrides the Act ? - Having regard to the position of law explained in Azadi Bachao Andolan [2003 (10) TMI 5 - SUPREME COURT] and later followed in numerous decisions that a 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. See DANISCO INDIA PRIVATE LIMITED VERSUS UNION OF INDIA AND ORS. [2018 (2) TMI 1289 - DELHI HIGH COURT] - Decided against revenue.
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