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TMI Blog2018 (4) TMI 516X X X X Extracts X X X X X X X X Extracts X X X X ..... law in deleting the demand raised as per section 306AA of the I.T Act for mentioning wrong PAN which attracts applicability of tax @20% on the ground that provision of TDS are to be reads along with DTAA for computing the tax liability utterly ignoring the fact that the assessee has mentioned wrong PAN at the time of filing of original TDS return in form 27Q and again while filing rectification application u/s.154 which attracts applicability of tax @20% as per section 206AA of the I.T Act. 2. On the facts and in the circumstances of the case, the Ld. CIT(A) ought to have upheld the order of the A.O. passed 201(1)." 4. The Brief facts of the case are that the assessee company had made a payment of Rs. 6,25,290/- in Quarter 4 of Financial Year 2010-11 to Shanghai Electric Group Company, China ('SEC'), a nonresident. The payment is made against the consultancy services received from SEC on which the appellant has deducted TDS at the rate of 10% as per the treaty rate i.e. India-China DTAA. In this respect the TDS return was filed in Form 27Q vide Token Number 4100xxxxxxx9844. The assessee submits that as per the provisions of section 90(2) of the Act, the provisions of I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oceeded to compute the TDS by taking rates as per section 206AA of the Act, rates of TDS when PAN is not furnished by the deductee. However the appellant has deducted the TDS by application of beneficial provisions of section 90(2). Since the provisions of section 90 are the special provisions under the Act to avoid the double taxation, therefore they have an overriding effect over the other provisions of the Act. The appellant submits that section 206AA is introduced to check the revenue loss in order to comply with the provisions of TDS under Chapter XVII-B. In order to correctly understand the scope and purpose of the insertion of section 206AA, by the Finance (No.2) Act, 2009, it will be necessary to examine the provisions thereof, in detail. For the sake of ready reference, the provisions of section 206AA are reproduced, as follows: "Requirement to furnish Permanent Account Number. 206AA. (1) Notwithstanding anything contained in any other provisions of this Act, any person entitled to receive any sum or income or amount, on which tax is deductible under Chapter XVIIB (hereafter referred to as deductee) shall furnish his Permanent Account Number to the person responsible for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct to deduction of tax at source i.e., the deductee, shall mandatorily furnish his PAN to the deductor, failing which the deductor shall deduct tax at source at higher of the following rates (i) the rate prescribed in the Act; (ii) at the rate in force, i.e., the rate mentioned in the Finance Act; or (iii) at the rate of 20%." 10. The object of S. 206AA(1) is to ensure compliance with the PAN mechanism, to address problems associated with nonquoting/ non-obtaining of PAN in processing of returns, claiming credit for TDS and granting of refund, it is to further ensure that assessee do not give reason like non-issuance of PAN as a reason for not furnishing it, keeping in mind that the PAN allotment machinery has been fully strengthened and streamlined. 11. Further to correctly examine the scope of the section 206AA it would be pertinent to understand the provisions related to obtain permanent account number ('PAN') under the Act. 12. In the intimation the demand was raised in all three years for short deduction of TDS and Interest on such short deduction as under: Default type as per intimation A.Y. 2011-12 A.Y. 2012-13 A.Y. 2013-14 Short Deduction of TD ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deducted the tax at source at the rates prescribed in the respective DTAAs between India and the relevant country of the nonresidents; 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 Azadi Bachao Andolan and Others vs. UOI, (2003) 263 ITR 706 (SC) has upheld the proposition that the provisions made in the DTAAs will prevail over the general provisions contained in the Act to the extent they are beneficial to the assessee. In this context, it would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) 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) of the Act. The CIT(A), in our view, correctly inferred that section 206AA of the Act does not override the provisions of section 90(2) of the Act and that in the impugned cases of payments made to non-resident ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 ITA Nos.1601 to 1604/PN/2014 any doubt to the proposition that in case of nonresidents, 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 Azadi Bachao Andolan and Others vs. UOI, (2003) 263 ITR 706 (SC) has upheld the proposition that the provisions made in the DTAAs will prevail over the general provisions contained in the Act to the extent they are beneficial to the assessee. In this context, it would be worthwhile to obser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) 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 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) of the Act. The CIT(A), in our view, correctly inferred that section 206AA of the Act does not override the provisions of section 90(2) of the Act and that in the impugned cases of payments mad ..... X X X X Extracts X X X X X X X X Extracts X X X X
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