TMI Blog2019 (5) TMI 277X X X X Extracts X X X X X X X X Extracts X X X X ..... t DTAAs. Double Taxation Avoidance Agreement acquires primacy in such cases, where reciprocating states mutually agree upon acceptable principles for tax treatment, the provision in Section 206AA (as it existed) has to be read down to mean that where the deductee i.e the overseas resident business concern conducts its operation from a territory, whose Government has entered into a Double Taxation Avoidance Agreement with India, the rate of taxation would be-a dictated by the provisions of the treaty. - Decided against revenue. - IT(IT)A No.1398/Bang/2018, C. O. No.116/Bang/2018 - - - Dated:- 30-4-2019 - Shri N. V. Vasudevan, Vice President And Shri Jason P. Boaz, Accountant Member For the Assessee : Shri. R. E. Balasubramanyam, CA For the Revenue : Shri. R. N. Siddappaji, Addl. CIT ORDER PER JASON P. BOAZ, ACCOUNTANT MEMBER This appeal by Revenue is directed against the order of CIT(A)-13, Bangalore, dated 23.02.2018 for Assessment Year 2011-12. The assessee has also preferred Cross Objections (C.O.) in respect of the impugned order. 2. Briefly stated, the facts relevan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the presence of a non-obstante clause in the Section and a plain reading of the section indicates that it overrides other provisions of the Act including Section 90(2). 3. The learned Commissioner of Income Tax (Appeals), erred in relying on the decisions of the Delhi High Court in the case of Danisco India Pvt. Ltd and ITAT, Pune Bench in the case of Serum Institute of India Ltd., which are not binding on the authorities working in Karnataka. 4. The learned Commissioner of Income Tax (Appeals)ought to have appreciated the fact that the Hon'ble ITAT, Bangalore in the case of of Bosch Ltd Vs ITO, International Taxation in ITA Nos.552 to 558/B/2011 dated 10/11/2012 has actually upheld the applicability of section 206AA of the Income-tax Act in favour of revenue, hence has erred in allowing the appeal of the assessee. 5. The learned Commissioner of Income Tax (Appeals)ought to have appreciated the fact that the Hon'ble ITAT, Bangalore in the case of DCIT Vs Infosys BPO [ITA No.1143(B) and 8 9(B)/2014 has misinterpreted its own earlier decision in the case of Bosch Ltd Vs ITO, International Taxation in ITA Nos.552 to 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before us is squarely covered in favour of the assessee by the decision of the Hon ble Delhi High Court in the case of Danisco India (P) Ltd., Vs. UOI (2018) 404 ITR 539 (Delhi). The Hon ble Delhi High Court in its aforesaid order (supra) at paras 6 to 8 thereof, has held as under:- 6. After hearing the counsel for the parties, it is quite apparent that the issue urged has been rendered largely academic on account of corrective amendment made by the Parliament-which substituted preexisting Sub-section (7) with the present Section 206AA (7). The amendment is mitigating to a large extent, the rigors of the pre-existing laws. The law, as it existed, went beyond the provisions of DTAA which in most cases mandates a 10% cap on the rate of tax applicable to the state parties. Section 206AA (prior to its amendment) resulted in a situation, where, over and above the mandated 10%, a recovery of an additional 10%, in the event, the non.- resident payee, did not possess PAN. 7. In this context, the ITAT in Serum Institute of India (Supra) discussed this very issue in some detail and stated, as follows: The case of the Revenue is tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al rate of taxation. However, 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 nonresidents, 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-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 v. Eli Lily Co MANU/SC/0487/2009 : (2009) 312 ITR 225 (SC) observed that the provisions of tax withholding i.e. section 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance Agreement with India, the rate of taxation would be-a dictated by the provisions of the treaty. Respectfully following the decision of the Hon ble Delhi High Court in the case of Danisco India (P) Ltd., (2018) 404-ITR 539 (Delhi), we uphold the findings rendered by the CIT(A) in the impugned order. Consequently, the grounds raised by Revenue are dismissed. 4. In the result, Revenue s appeal for Assessment Year 2011-12 is dismissed. C.O. No.116/Bang/2018 for Assessment Year 2011-12 5.1 The grounds raised in the assessee s cross objections are as under:- 1. The Ld. CIT(A) ought to have considered ground number 1 before the CIT(A) questioning the validity of notice is as much as the notice passed by the AO suffers from legal infirmity since it was sent beyond the period of limitation provided under section 200A. 2. Without prejudice to ground 1, the Assessee further submits that the relief allowed by the Ld. CIT(A) in respect of issues under section 206AA is proper and in accordance with law and do not require any reversal. 5.2 A perusal of the grounds raised in the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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