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TMI Blog2019 (11) TMI 1341X X X X Extracts X X X X X X X X Extracts X X X X ..... ax at source on such payments at the time of remittance or credit to the account of the AE, as required under the provisions of Sec.195 of the Income Tax Act, 1961 (Act). The Assessee did not deduct tax source on the aforesaid payments, as according to the Assessee, the payments were not in the nature of FTS and were not chargeable to tax in India in the hands of the AE and therefore the provisions of Sec.195 of the Act are not applicable. In an order passed u/s.201(1) & 201(1A) of the Act dated 27.2.2013 for AY 2011-12 & 2012-13 and an order dated 31.3.2013 passed for AY 2009-10 & 2010-11, the Assessee was held to be liable to deduct tax and to the extent tax was not so deducted, the Assessee was held to be an Assessee in default u/s.201(1) of the Act and interest on tax not so deducted from the date on which tax ought to have been deducted till payment of the taxes to the credit of the Government were levied u/s.201(1A) of the Act. The said orders of the DCIT, International Taxation, Circle-1(1), Bangalore, (AO) are in challenge before the appellate authorities. There were also orders dated 30.4.2013 rectifying certain errors in the computation of interest for all the aforesaid A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Expenses (Rs.) Tax Rate Grossed up Amount (Rs.) 2009-10 2,18,02,449 10.51% 2,43,61,911 2010-11 5,33,03,393 10.51% 5,95,60,857 2011-12 7,62,75,089 21.02% 9,65,65,414 2012-13 6,74,38,632 21.02% 8,53,78,326 5. As far as AY 2011-12 & 2012-13 are concerned, the tax rates are higher because of the provisions of Sec.206AA of the Act, which were applicable for those years. Section 206AA was introduced from FY 2010-11. Section 206AA requires every taxpayer who receives taxable income to furnish their PAN to the payer of such income. This applies to both the resident as well as non-resident recipients. The payments in case of residents would include salary, rent, professional receipts, contractual receipts and so on. In the case of non-resident, , these would include all receipts that are taxable in India. A recipient of taxable income should furnish PAN to comply with the provisions of TDS under the Income Tax Act. Upon furnishing of the PAN, payments made to the recipient would be taxed at the rate of TDS specified under the various TDS provisions of the Income Tax Act. A recipient who does not furnish PAN would suffer TDS at the higher rates specified in S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rcharge and education cess was turned down by the ld. CIT(A), against which the assessee has come up in appeal before us. 10. We have heard the rival submissions and perused the relevant material on record. While dealing with the first issue, we have held that the assessee had suo motu deducted tax at the rate of 20% as per the prescription of clause (iii) of section 206AA(1), which cannot be interfered. This provision provides in unequivocal terms that the tax should be deducted "at the rate of twenty per cent." This is the prescribed final rate of tax and there is no mention of charging any further surcharge or education cess on the same. Once the section does not provide for the levy of surcharge and education cess on the fixed rate of 20%, we fail to see how the levy of such surcharge etc. can be inferred in the provision. The legislature cannot be understood as oblivious of the levy of surcharge etc. in certain cases in addition to the specific rates prescribed in the Act itself. The term "maximum marginal rate" has been defined in section 2(29C) to mean; 'the rate of income-tax (including surcharge on income-tax, if any) applicable in relation to the highest slab of inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her provisions as discussed above, there is no mention for the levy of any surcharge or education cess etc. on such rate of twenty per cent. 12. At this stage, it will be pertinent to have a look at para 4.8 of the Circular No.17/2014 dated 10.12.2004, whose relevant part reads as under :- '4.8 Compulsory Requirement to furnish PAN by employee Section 206AA: 4.8.1 Section 206AA in the Act makes furnishing of PAN by the employee compulsory in case of receipt of any sum or income or amount, on which tax is deductible. If employee (deductee) fails to furnish his/her PAN to the deductor , the deductor has been made responsible to make TDS at higher of the following rates: (i) at the rate specified in the relevant provision of this Act; or (ii) at the rate or rates in force; or (iii) at the rate of twenty per cent. The deductor has to determine the tax amount in all the three conditions and apply the higher rate of TDS. However, where the income of the employee computed for TDS u/s 192 is below taxable limit, no tax will be deducted. But where the income of the employee computed for TDS u/s 192 is above taxable limit, the deductor will calculate the average rate of inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bility of provisions of section 206AA of the Act, in cases of tax to be deducted at source, when the income is exigible to tax under DTAA and the payees are unable to provide valid Permanent Account Numbers, came up for consideration before the Special Bench, ITAT in the case of Nagarjuna Fertilizers & Chemicals Ltd. Vs. AC IT (2017) 78 taxmann.com 264 (Hyderabad-Tribunal) (SB). The question before the special bench was whether the provisions of section 206AA had overriding effect for all other provisions of the Act, whether the assesse has to deduct tax at source at the rates prescribed in section 206AA in case the payees are unable to furnish their PANs, even in cases where tax liability arises out of the treaty. The DTAA provides for a rate of 10% whereas as per the provisions of Sec.206AA of the Act, the rate of tax deduction at source is 20%. 13. The plea of the revenue was that section 206AA starts with a non-obstante clause and therefore it overrides all other provisions of the Act including 90(2), 115A and 139A. The plea of the Assessee was that DTAA was supreme and in this regard reliance was placed on the Hon'ble Supreme Court decision in the case of Azadi Bachao Andolan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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