TMI Blog2020 (10) TMI 1078X X X X Extracts X X X X X X X X Extracts X X X X ..... in DTAA? - 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 treat? HELD THAT:- As in the case of Sanofi Pasteur [ 2013 (2) TMI 589 - HIGH COURT OF ANDHRA PRADESH ] as 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 [ 2012 (6) TMI 451 - KARNATAKA HIGH COURT ] wherein it has held that the provisions of section 206AA are to be read down. The Special Bench held that DTAA overrides the Act, even if it is inconsistent with the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per Sec. 195 of the Income Tax Act, 1961 (Act). It was the plea of the Assessee that the payments made to non-resident were not chargeable to tax and therefore the Assessee was not under any obligation to deduct tax at source on the aforesaid payments. This plea was rejected by the revenue authorities in the application filed by the Assessee u/s. 248 of the Act pleading that the Assessee was not under any obligation to deduct tax at source on the aforesaid payments made to non-residents. The Assessee also made a claim in the alternative and without prejudice to the main ground that the Assessee was not under any obligation to deduct tax at source on the aforesaid payments to non-residents, that the rate at which tax has to be deducted is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... At the rate of 20% 3. The AO rejected the plea of the Assessee that it is only the rates of taxes mentioned in the DTAA that should be adopted for the purpose of grossing up and also for determining the tax liability. According to the AO, the provisions of the Act, especially non-obstante clause in Sec. 206AA of the Act have an overriding effect on the DTAA. 4. On appeal by the Assessee, the CIT(A) accepted the plea of the Assessee that the DTAA will override the provisions of the Act including Sec. 206AA of the Act and that the rate of tax to be applied for grossing up should be as per the DTAA. 5. Aggrieved by the orders of the CIT(A), the revenue is in appeal before the Tribunal. The grounds of appeal of the Revenue in AY 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 (2003) 263 ITR 706 (SC), whereby it was held that DTAA, even if inconsistent, will prevail over the Act. Reliance was also placed on the 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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