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TMI Blog2017 (9) TMI 107X X X X Extracts X X X X X X X X Extracts X X X X ..... ther the Ld. CIT(A)-13, Pune was right in ignoring the memorandum explaining the provisions of the Finance (No.2) Bill, 2009 which clearly states that the Sec 206AA of the I.T. Act, applies to non-residents and also Press Release of CBDT No.402/92/2066-MC (04 of 2010) dated 20.01.2010 which reiterates that sec.206AA of the I.T. Act, will also apply to all non-residents in respect of payments/remittances liable to TDS. 3. The Revenue is in appeal against the order of CIT(A) in absolving the assessee from the application of provisions of section 206AA of the Act. 4. Briefly, in the facts of the case, the assessee for the year under consideration had filed the return of income on 30.03.2013. The assessee was Non Resident company, which was part of Imerys group and an associated enterprise of Calderys India. The assessee was engaged in manufacturing and selling of refractory products which were materials used for building or repairing refractory linings and which withstand high temperatures and severe operating conditions, to its customers worldwide. The assessee was also carrying out central functions i.e. Business administration and General management, Human resources, communicati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e obtains PAN in subsequent period. In view thereof, proposition made by the assessee was rejected and the tax was charged @20% plus SC+EC as applicable. The draft assessment order proposed under section 144C(1) r.w.s. 143(3) r.w.s. 147 of the Act, was passed as per the final assessment order and the said computation of tax was assessed. 5. The CIT(A) after considering the submissions of assessee and held as under:- "2.4 I do not agree with the learned AO. According to me, the Appellant's action of filing return is of self-assessment. Thereafter, the AO assesses the taxpayer's total income and determines tax payable on such income. Therefore, the AO is required to determine the Appellant's total income at the time of the finalization of assessment in accordance with the provisions of law irrespective of the taxpayer's understanding of legal provisions and offering of tax based on such understanding. It is trite to state that there cannot be estoppel against the operation of law. The act of taxpayer offering tax at the higher rate cannot estop operation of law, if such income is taxed at the lower rate. Besides, there cannot be unjust enrichment of the State becaus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Representative for the Revenue pointed out that there was non-obstante clause in section 206AA of the Act. 8. The learned Authorized Representative for the assessee placed reliance on the order of Pune of Bench of Tribunal in DDIT Vs. Serum Institute of India Ltd. (2015) 56 taxmann.com 1 (Pune Trib) and the Special Bench of Hyderabad Tribunal in Nagarjuna Fertilizers & Chemicals Ltd. Vs. ACIT (2017) 185 TTJ 569 (Hyd - Trib) (SB). He further pointed out that the said Special Bench had held that the provisions of treaty overrides and the TDS provisions were sub-servant as per paras 30 and 31 of the said decision. 9. We have heard the rival contentions and perused the record. The limited issue which arises in the present appeal before us is against invoking of provisions of section 206AA r.w.s. 90 and 195 of the Act. The assessee during the year under consideration had received payment of Rs. 8.12 crores towards management services and IT support services rendered. The assessee had offered the same for taxation purpose in its return of income. The Indian entity i.e. Calderys India Refractories Ltd. had withheld taxes @ 20% from the said payment made to the assessee. The tax was d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 liability in India is liable to be determined in accordance with the provisions of the Act or the DTAA between India and the relevant country, whichever is more beneficial to the assessee, having regard to the provisions of section 90(2) of the Act. In this context, the CIT(A) has correctly observed that the Hon'ble Supreme Court in the case of Union of India v. Azadi Bachao Andolan [2003] 263 ITR 706/ 132 Taxman 373 has upheld the proposition t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Center (P.) Ltd. v. CIT [2010] 327 ITR 456/ 193 Taxman 234/7 taxmann.com 18 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 provisions especially section 206AA of the Act which is the controversy before us. Therefore, in our view, where the tax has been deducted on the strength of the beneficial provisions of section DTAAs, the provisions of section 206AA of the Act cannot be invoked by the Assessing Officer to insist on the tax deduction @ 20%, having regard to the overriding nature of the provisions of section 90(2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in Chapter XVII-B dealing with tax deduction at source, it follows that the treaty provisions which override even the charging provision of the Domestic Law by virtue of section 90(2) would also override the machinery provisions of section 206AA irrespective of non-obstante clause contained therein and the same is required to be restricted to that extent and read down to give effect to the relevant provisions of DTAAs, which are overriding being beneficial to the assessee. 31. There is one more basis to support the above conclusion. As rightly pointed out on behalf of the assessee, Chapter-XA containing the provision relating to General Anti-Avoidance Rule (GAAR) has been inserted in the Statute by the Finance Act, 2013 with effect from 1st April, 2016 and although the provisions contained in the said Chapter are given overriding effect by virtue of non-obstante clause contained in section 95, a separate provision has been inserted simultaneously in the form of sub-section (2A) in section 90 providing specifically that notwithstanding anything contained in sub-section (2), the provisions of Chapter XA of the Act shall apply to the assessee even if such provisions are not benefi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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