TMI Blog2018 (11) TMI 120X X X X Extracts X X X X X X X X Extracts X X X X ..... e DTAAs and not as per Section 206AA of the Act because the provisions of the DTAAs were more beneficial. In view of the settled position of law, we find it difficult to sustain the orders of the authorities below. With this view of the matter, we find that the orders of the authorities below are liable to be quashed and accordingly they are quashed. Thus, we hereby direct the deletion of the tax demand relatable to difference between 20% and the actual tax rate on which tax was deducted by the assessee in terms of the relevant DTAAs. Appeals are allowed accordingly. - I.T.A. Nos.6399 & 6400/Del/2015 - - - Dated:- 29-10-2018 - Shri G.D. Agrawal, Vice President And Shri K. Narasimha Chary, Judicial Member For the Appellant : Ms ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der the double taxation avoidance agreement (DTAA) with respective countries whereas the AO mechanically applied the rate of deduction in such cases to be 20% as prescribed under section 206AA of the Income tax Act, 1961 ( the Act ) as such payees do not hold PAN in India. Contention of the assessee is that they have correctly deducted the withholding tax based on the rates of tax payable by such payees on the income of interest earned in India. The request of the assessee for rectification of the said order was rejected. 3. Assessee carried the matter in appeals and Ld. CITA by way of impugned orders rejected the contentions of the assessee stating that Section 206 AA of the Act was inserted w.e.f. 01/04/2010 and it laid down that if PA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titute of India Limited, ITA Nos.1601 to 1604/PN/2014 (Assessment Year : 2011-12) wherein the Pune Tribunal hold that section 206AA of the Act does not override the provisions of Section 90(2) of the Act and that in the cases of payments made to non-residents, the rate of tax to be applied is as prescribed under the DTAA and not as per Section 206AA of the Act because the provisions of the DTAA are more beneficial. 6. The Hon ble jurisdictional High Court extracted the following observations of the Tribunal in Serum Institute of India Limited (supra) with approval: 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ason, assessee deducted the tax at source having regard to the provisions of the respective DTAAs which provided for a beneficial rate of taxation. It would also be relevant to observe that even the charging section 4 as well as section 5 of the Act which deals with the principle of ascertainment of total income under the Act are also subordinate to the principle enshrined in section 90(2) as held by the Hon'ble Supreme Court in the case of Azadi Bachao Andolan and Others (supra). Thus, in so far as the applicability of the scope/rate of taxation with respect to the impugned payments make to the non-residents is concerned, no fault can be found with the rate of taxation invoked by the assessee based on the DTAAs, which prescribed for a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt 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 b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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