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TMI Blog2019 (5) TMI 1161X X X X Extracts X X X X X X X X Extracts X X X X ..... PAN and TDS mechanism and that the provisions of section 206AA do not have a bearing on the ultimate tax liability of the assessee. (iii) Whether the CIT(A) has erred on facts and in law in giving precedence to the DTAA over the overriding provisions of Section 206AA(1) even when the DTAA does not deal with the rates of TDS, while section 206AA(I) deals exclusively with the rates of TDS. 3. At the very outset, the ld. AR stated that the impugned issue is squarely covered in favour of the assessee and against the revenue by the decision of the co-ordinate bench in the case of Emmsons International Ltd Vs. DCIT 171 ITD 140. 4. The ld. DR, other than supporting the findings of the Assessing Officer, could not bring any distinguishing decision in favour of the revenue. 5. We have given a thoughtful consideration to the orders of the authorities below. We find force in the contention of the ld. AR. Similar issue was considered by the co-ordinate bench [supra]. The relevant findings of the same read as under: "5. We have gone through the record in the light of the submissions on either side. At the outset it is the submission of the Ld. AR that the issue that is substantially inv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 observe that the DTAAs entered into between India and the other relevant countries in the present context provide for scope of taxation and/or a rate of taxation which was different from the scope/rate prescribed under the Act. For the said reason, 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 beneficial rate of taxation. However, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reby affirm the ultimate conclusion of the CIT(A) in deleting 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. As a consequence, Revenue fails in its appeals." 7. It is therefore, clear that 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, assessee correctly applied the rate of tax prescribed under the DTAAs and not as per Section 206 AA 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." 3. On the issue whether the treaty overrides the Act, the quarrel is settled by the decision of the Hon'ble High Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 9 of 11 context, it would be worthwhile to observe that the DTAAs entered into between India and the other relevant countries in the present context provide for scope of taxation and/or a rate of taxation which was different from the scope/rate prescribed under the Act. For the said reason, 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 scop W.P.(C) 5908/2015 Page 10 of 11 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 195 of the Act would apply only to sums which are otherwise chargeable to tax under the Act. The Hon'ble Supreme Court in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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