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2021 (4) TMI 1190 - AT - Income TaxTDS at the higher rate of 20% in case of payee without PAN under the provisions contained u/s 206AA - Section 206AA overriding effect on DTAA or not? - DTAA between India and Neitherland - Short deduction of TDS - non-provision of PAN in case of Engine Lease Finance B.V. (ELFC), a non-resident company, taxed resident in Neitherland, which was not mentioned at the time of return as the foreign company did not have PAN.HELD THAT:- As engine is a part of aircraft and cannot be said to be an aircraft and payment made for rent of engine are covered under equipment as per Article 12 (4) of the DTAA between India and Neitherland; that under Article 12(4) of the DTAA between India and Neitherland, the term “royalty” does not cover use of, or the right to use equipment itself; that rental of aircraft engine is neither a copyright nor a payment of any information; that under Article 12(6) of the DTAA, fee for technical services also does not include the amount paid for services that are ancillary and subsidiary to the rental of ships, aircrafts, containers or other equipment used in connection with the operation of ships or aircrafts in international traffic; the assessee is entitled for beneficial provisions of DTAA. So, following the order passed by the coordinate Bench of the Tribunal in cases of DDIT (IT-II), Pune vs. Serum Institute of India Ltd. [2015 (6) TMI 26 - ITAT PUNE], DCIT vs. M/s. Infosys BPO Ltd. [2020 (1) TMI 1011 - ITAT BANGALORE] and the judgment of Hon’ble Delhi High Court in case of Danisco India Pvt. Ltd. vs. UOI[2018 (2) TMI 1289 - DELHI HIGH COURT] we are of the considered view that ld. CIT (A) has erred in holding that in this case, provisions contained u/s 206AA overrides beneficial provisions of DTAA between India and Neitherland. Consequently, assessee has rightly deducted the tax @ 10% as per provisions contained under DTAA as section 206AA cannot have overriding effect on DTAA, hence no demand is payable by the assessee. Hence, question framed is decided in favour of the assessee.
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