TMI Blog2015 (9) TMI 792X X X X Extracts X X X X X X X X Extracts X X X X ..... f 20%, as provided/s 206AA of the Act. Since the benefit of DTAA is available to recipient. Therefore, in any case, the scope of deduction of tax at source cannot be more than the tax liability under DTAA. Following the decisions of M/s Bharti Airtel Ltd [2014 (12) TMI 642 - KARNATAKA HIGH COURT] we do not find any error or illegality in the order of the CIT(A) that there is no scope for deduction of tax at the rate of 20% as provided under the provisions of Section 206AA of the IT Act when the benefit of DTAA is available. In the case in hand, it is not a simple case of deduction of tax at source by applying the rate only as per the provisions of Act, when the benefit of DTAA is available to the recipient of the amount in question. Therefore, the question of applying the rate of 20% as provided u/s 206AA of the IT Act is a issue which requires a long drawn reasoning and finding. Hence, we are of the considered opinion, that applying the rate of 20% without considering the provisions of DTAA and consequent adjustment while framing the intimation u/s 200A is beyond the scope of the said provision. Thus, the AO has travelled beyond the jurisdiction of making the adjustment as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance Act, 2012, a remedy of appeal is provided against an intimation under section 200A(1) of the Act with effect from 01-07-2012. It is fairly not disputed by the learned Standing Counsel for the respondents that if the appeals had been filed on or after 01-07-2012, the appeals were maintainable. Accordingly, as o the date of consideration of the appeals, the appeals were maintainable. It is stated that the appeals in question were filed on 11-04-2012. If the petitioner had filed these appeals after 01-07-2012, the appeals could not have been dismissed on the ground of maintainability. The only additional thing the petitioner should have done was to apply for condonation of the delay in filing the appeals. Hence, in my opinion, on the facts of this case and in the interest of justice, the Appellate Authority ought to have examined the appeals on merits by treating them as having been filed on 01-07-2012 and by condoning the delay, if any. 6. In view of the above, the impugned order is set aside and the matter, is remitted to the Appellate Authority for reconsideration of the appeals on merits without going into the question of maintainability . Vide the above order of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... objections of the assessee regarding the scope of Sec.200A for making such adjustment and consequential demand. However, the CIT(A) has decided the matter in favour of the assessee by holding that the non-resident recipient of the payment is eligible for the benefit of DTAA and therefore, the tax deducted at source cannot be more than the tax liability provided under the DTAA. Thus, the revenue as well as the assessee challenged the impugned order of the CIT(A) in their respective appeal and cross objection. 6. Before us the learned DR has submitted that in the proceedings of issuing intimation u/s 200A of the Act, the AO is empowered to make the adjustment in respect of statement of tax deducted at source if interan incorrect claim is made which is apparent from the information in the statement. Thus, in the proceedings u/s 200A of the IT Act, the AO has rightly took the rate of tax as 20%, when the assessee failed to furnish the PAN of the deductee/recipient in terms of provisions r.w.s.206AA of the Act. On the other hand, learned AR of the assessee submitted that there is no dispute that the benefit of DTAA is available to the non-resident in question and therefore, the ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the rate prescribed in the relevant provisions of this Act; or at the rate/rates in force; or at the rate of 20%. In the present case, assessee was responsible for deducting tax on payments made to non-residents on account of royalty and/or fee for technical services. The dispute before us relates to the payments made by the assessee to such non-residents who had not furnished their PANs to the assessee. The case of the Revenue is that in the absence of furnishing of PAN, assessee was under an obligation to deduct tax @ 20% following the provisions of section 206AA of the Act. However, assessee had deducted the tax at source at the rates prescribed in the respective DTAAs between India and the relevant country of the non-residents; and, such rate of tax being lower than the rate of 20% mandated by section 206AA of the Act. The CIT(A) has found that the provisions of section 90(2) come to the rescue of the assessee. Section 90(2) provides that the provisions of the DTAAs would override the provisions of the domestic Act in cases where the provisions of DTAAs are more beneficial to the assessee. There cannot be any doubt to the proposition that in case of non-residents, tax liabilit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of tax at source. The provisions of section 195 of the Act which casts a duty on the assessee to deduct tax at source on payments to a non-resident cannot be looked upon as a charging provision. In-fact, in the context of section 195 of the Act also, the Hon ble Supreme Court in the case of CIT vs. Eli Lily Co., (2009) 312 ITR 225 (SC) observed that the provisions of tax withholding i.e. section 195 of the Act would apply only to sums which are otherwise chargeable to tax under the Act. The Hon ble Supreme Court in the case of GE India Technology Centre Pvt. Ltd. vs. CIT, (2010) 327 ITR 456 (SC) held that the provisions of DTAAs along with the sections 4, 5, 9, 90 91 of the Act are relevant while applying the provisions of tax deduction at source. Therefore, in view of the aforesaid schematic interpretation of the Act, section 206AA of the Act cannot be understood to override the charging sections 4 and 5 of the Act. Thus, where section 90(2) of the Act provides that DTAAs override domestic law in cases where the provisions of DTAAs are more beneficial to the assessee and the same also overrides the charging sections 4 and 5 of the Act which, in turn, override the DTAAs pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the section and while interpreting a section, one has to give weightage to every word used in that section. In view of the same, we are of the opinion that the grossing up of the amount is to be done at the rats in force for the financial year in which such income is payable and not at 20% as specified u/s 206AA of the Act . 9. It is pertinent to note the obligation of deducting tax at source arises only when there is a sum chargeable under the Act. The Hon ble jurisdictional High Court in the case of M/s Bharti Airtel Ltd Vs DCIT Supra, has observed in para-39 as under; 39. The provisions for deduction of TAS(tax at source) which are in Chapter XVII dealing with collection of taxes and the charging provisions of the Income-tax from one single integral, inseparable Code. Therefore, the provisions relating to TDS apply only to those sums which are Chargeable to tax under the Income-tax Act. While interpreting the provisions of the Income-tax Act one cannot read the charging sections of that Act de hors the machinery sections. The Act is to be read as an integral Code. In order to deduct tax at source the amount being paid out must necessarily be ascertainable as in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cable. 5. In view of the above other grounds to be adduced at the time of hearing, the respondent (cross objector) prays that the order passed by the learned CIT(A) to the extent it is prejudicial to the respondent be quashed or in the alternative i) Appeal filed with CIT(A) against intimation passed under section 200A be held as mainatainable ii) Intimation passed under section 200A be held as without jurisdiction invalid and bad in law. iii) Section 206AA be held as inapplicable in view of the fact that non-resident deductees were not required under law to obtain PAN . 11. We have heard the learned AR as well as learned DR and considered the relevant material available on record. As we have discussed the facts while deciding the issue involved in the revenue s appeal that the AO has made the adjustment while issuing the intimation u/s 200A of the IT Act, by applying the rate of tax at 20%. The assessee has challenged jurisdiction of the AO u/s 200A of the Act, for making such adjustment and raising the consequential demand, because the issue of applying the rate of tax is not arithmetical error in the statement or an incorrect claim apparent from any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b) against any amount paid under section 200 and section 201, and any amount paid otherwise by way of tax or interest; (d) an intimation shall be prepared or generated and sent to the deductor specifying the sum determined to be payable by, or the amount of refund due to, him under clause (c); and (e) the amount of refund due to the deductor in pursuance of the determination under clause (c) shall be granted to the deductor Provided that no intimation under this sub-section shall be sent after the expiry of one year from the end of the financial year in which the statement is filed. Explanation.-For the purposes of this sub-section, an incorrect claim apparent from any information in the statement shall mean a claim, on the basis of an entry, in the statement- (i) of an item, which is inconsistent with another entry of the same or some other item in such statement; (ii) in respect of rate of deduction of tax at source, where such rate is not in accordance with the provisions of this Act. (2) For the purposes of processing of statements under sub-section (1), the Board may make a scheme for centralised processing of statements of tax deducted at source to expe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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