TMI Blog2016 (2) TMI 896X X X X Extracts X X X X X X X X Extracts X X X X ..... Respondent By : Shri Rajashekar, Addl. CIT (D.R) ORDER Per Bench : These four appeals by the assessee are directed against the order dt.19.9.2013 of Commissioner of Income Tax (Appeals) arising from the orders passed under Section 200A of the Income Tax Act, 1961 (in short 'the Act') for the Assessment Year 2011-12. 2. The assessee has filed its quarterly E-TDS returns in Form No.27Q in respect of the payment to non-residents. The Assessing Officer issued an intimation giving the summary of short deduction and interest payable for delayed deposit of tax. The Assessing Officer along with an intimation under Section 200A has also issued a Demand Notice under Section 156 of the Act. Therefore, the assessee challenged the action of the Assessing Officer before the CIT (Appeals) on the ground that without giving an opportunity of hearing to the assessee, the Assessing Officer raised the demand under Section 200A including interest. The assessee further contended before the CIT (Appeals) that the computation has been done without giving effect to the provisions of section 90A(2) r.w. relevant provisions of DTAA is entered into with respective countries whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. 4. Before us, the learned Authorised Representative of the assessee submitted that the demand of tax has been raised by the Assessing Officer vide intimation under Section 200A on the ground that the assessee has not furnished PAN of non-residents / recipients and accordingly as per the provisions of section 206AA of the Act, the TDS should have been deducted @ 20%. The learned Authorised Representative has submitted that the tax liability of the non-resident recipients cannot be more than as provided under DTAA and therefore payment to nonresidents is eligible for the benefit of DTAA and consequently the tax deduction cannot be more than the tax liability provided under DTAA. The learned Authorised Representative has further contended that issuing intimation under Section 200A and raising a demand without considering the provisions of DTAA as well as without giving an opportunity of hearing to the assessee is also beyond the scope of the Assessing Officer. The Assessing Officer is not permitted to make the adjustment while issuing the intimation under Section 200A when the issue involves is a highly debatable issue and require a well drawn reasoning and finding. Thus the le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -7 as under; 7. We have carefully considered the rival submissions. Section 206AA of the Act has been included in Part B of Chapter XVII dealing with Collection and Recovery of Tax Deduction at source. Section 206AA of the Act deals with requirements of furnishing PAN by any person, entitled to receive any sum or income on which tax is deductible under Chapter XVII-B, to the person responsible for deducting such tax. Shorn of other details, in so far as the present controversy is concerned, it would suffice to note that section 206AA of the Act prescribes that where PAN is not furnished to the person responsible for deducting tax at source then the tax deductor would be required to deduct tax at the higher of the following rates, namely, at 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wever, the case of the Revenue is that the tax deduction at source was required to be made at 20% in the absence of furnishing of PAN by the recipient non-residents, having regard to section 206AA of the Act. In our considered opinion, it would be quite incorrect to say that though the charging section 4 of the Act and section 5 of the Act dealing with ascertainment of total income are subordinate to the principle enshrined in section 90(2) of the Act but the provisions of Chapter XVII-B governing tax deduction at source are not subordinate to section 90(2) of the Act. Notably, section 206AA of the Act which is the centre of controversy before us is not a charging section but is a part of a procedural provisions dealing with collection and deduction 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income shall be increased to such amount as would, after deduction of tax thereon at the rates in force for the financial year in which such income is payable, be equal to the net amount payables under such agreement or arrangement . 23. Thus, it can be seen that the income shall be increased to such amount as would after deduction of tax thereto at the rate in force for the financial year in which such income is payable, be equal to the net amount payable under such agreement or arrangement. A literal reading of sec. implies that the tax is to be withheld by the assessee. The Hon ble Apex Court in the case of GE India Technology Center (P) Ltd (cited Supra) has held that the meaning and effect has to be given to the expression used in 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , apparent from any information in the statement, the intimation passed by the learned Income tax Officer, International Taxation, Ward-2(1), Bangalore does not satisfy the requirements of section 200A and consequently, the said intimation passed in invalid, bad in law and liable to be quashed without prejudice. 4. The ld.CIT(A)-IV, Bangalore has erred in concluding that section 206AA will be applicable whether or not the non-resident deductees are required to obtain PAN under section 139A. On the facts and circumstances of the case and law applicable and considering the fact that there was no requirement under law for the non-resident deductees to obtain PAN, the higher rate of TDS under section 206AA is not applicable. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atement of tax deduction at source has been made by a person deducting any sum (hereafter referred to in this section as deductor) under section 200, such statement shall be processed in the following manner, namely:- (a) the sums deductible under this Chapter shall be computed after making the following adjustments, namely:- (i) any arithmetical error in the statement; or (ii) an incorrect claim, apparent from any information in the statement; (b) the interest, if any, shall be computed on the basis of the sums deductible as computed in the statement; (c) the sum payable by, or the amount of refund due to, the deductor shall be determined after adjustment of amount computed under clause (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-secti ..... 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