TMI Blog2020 (6) TMI 669X X X X Extracts X X X X X X X X Extracts X X X X ..... 17 (3) TMI 81 - ITAT HYDERABAD]. 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 assessee 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. 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%. Whether section 206AA starts with a non-obstante clause and therefore it overrides all other provisions of the Act including 90(2), 115A and 139A? - Special Bench held that DTAA overrides the Act, even if it is inconsistent with t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 206AA of the Income-tax Act, 1961, in respect of payments made to non-resident entities. 2. The learned Commissioner of Income Tax (Appeals) erred in law as well as on facts in holding that there is no scope for deduction of tax at the rate of 30%, as provided under the provisions of Section 206AA when the benefit of DTAA is available, despite the overriding effect of Section 206AA of the Income-tax Act, 1961 due to 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 Hon'ble ITAT Bangalore in ITA No. 143/(6)/2013 in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny engaged in the business of manufacturing metal cutting grinding machines, spares, accessories and related services. The DCIT, Intl. Taxation, Circle 1(1), Bangalore [DCIT] received information from the ACIT, TDS Circle 1(1), Bangalore that as per the Tax Audit Report in Form 3CD, it has been mentioned that the assessee had not deducted tax at source on a payment of ₹ 2,63,08,939 towards design charges and ₹ 29,11,816 on payment of exhibition fees, both payments had been made to the non-residents (Tax residents of Germany) and therefore the DCIT passed an order u/s. 201(1) 201(1A) of the Income-tax Act, 1961 [the Act] dated 31.03.2018 holding the assessee to be an assessee in default for non-deduction of tax at source. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esaid order, the assessee contended before the CIT(Appeals) that the rate of tax at which TDS should be made by the assessee is 10% in accordance with the Treaty for Avoidance of Double Taxation between India and Germany (DTAA) and not at the higher rate of tax @ 20% by invoking the provisions of section 206AA of the Act. This submission was accepted by the CIT(A) and on the basis of the decision of the Pune Bench of the ITAT in the case of Serum Institute of India Ltd. in ITA No.792/PN/2013. Aggrieved by the aforesaid part of the order of the CIT(Appeals) allowing relief to the assessee, the revenue has preferred the present appeal before the Tribunal. 5. We have heard the rival submissions. At the time of hearing it was not disput ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e decisions of the Hon ble Andhra Pradesh High Court in the case of Sanofi Pasteur (2013) 354 ITR 316 (AP) wherein it was observed that DTAA being a sovereign matter, the machinery provisions cannot override or control that. Reliance was also placed on the decision of the Hon ble Karnataka High Court in the case of Kaushallaya Bai and others (2012) 346 ITR 156 (Kar) wherein it has held that the provisions of section 206AA are to be read down. 7. The Special Bench held that DTAA overrides the Act, even if it is inconsistent with the Act. DTAAs are entered into between two nations in good faith and are supposed to be interpreted in good faith. Otherwise it would amount to the breach of Article 253 of the constitution. 8. The Hon ble D ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
