TMI Blog2021 (3) TMI 1001X X X X Extracts X X X X X X X X Extracts X X X X ..... per Section 206AA of the Act, having regard to the more beneficial provision in the rate of tax made in the DTAA. Hence, we find no justification in making the assessee liable to pay TDS @ 20% on the foreign remittance as held by the Revenue by the order impugned. Such decision, in our considered opinion, is of no merit and thus, rejected. The appeal preferred by the assessee is, therefore, allowed. - I.T.A. No. 666/Ahd/2018 - - - Dated:- 22-3-2021 - SHRI PRADIP KUMAR KEDIA , ACCOUNTANT MEMBER And Ms. MADHUMITA ROY , JUDICIAL MEMBER Appellant by : Shri Manish Shah , AR Respondent by: Shri R. K. Makwana , SR. DR ORDER PER Ms. MADHUMITA ROY - JM The instant appeal filed by the assessee is directed against the order dated10.01.2018 passed by the Commissioner of Income Tax (Appeals) 13, Ahmedabad arising out of the order dated 16.11.2016 passed by the DCIT, International Taxation, Barodaunder Section 201 201Aof the Income Tax Act, 1961 (hereinafter referred as to the Act ) for Assessment Year 2014-15. 2. During the course of assessment proceeding it was found that the appellant has deducted tax at source on foreign remittance @ 10% to one CKD Blansk ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 333, which is beneficial to the assessee. In the present facts and circumstances of the case, the rate has been adopted on the basis of agreement entered into by and between the two Sovereign states which will have precedence over all other local laws as was the reply of the Ld. AR. The Ld. Counsel appearing for the assessee further relied upon the specific recommendation made by the Justice Easwar s Committee in this regard. He further relied upon the judgment passed in the matter of Uniphos Envirotronic Pvt. Ltd. vs. DCIT in ITA No. 1974/Ahd/2015 for A.Y. 2014-15 passed by the Co-ordinate Bench. 5. The case of the Revenue is this that the tax deduction at source was required to be made @ 20% in the absence of furnishing of Permanent Account Number (PAN) by the recipient non-residents, having regard to the Section 206AA of the Act. The Ld. DR ultimately relied upon the order passed by the authorities below. 6. We have heard the respective parties and perused the relevant materials available on record. The case of the applicant is this that TDS has been deducted @ 10% in terms of the Double Taxation Avoidance Agreement (DTAA) entered into by and between the Governm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re is an agreement entered into between two Sovereign states then the provision which have more beneficial to the assessee as per the said sovereign agreements become applicable and the provisions of Income Tax are to the extent to be given a go by. 9. Furthermore, the specific recommendation made by the Justice Easwar s Committee in this regard is as follows:- Under the current provisions of section 206AA, tax is required to be deducted by the deductor at a higher rate as prescribed under the said section, where the deductee does not furnish his Permanent Account Number (PAN). This section was introduced with the objective that the furnishing of PAN was important with a view to trail the taxability of the payments in the hands of a non-resident. As regards non-residents, the Committee noted that in view of the specific provisions of section 115A and the provisions under the respective Double Taxation Avoidance Agreements (DTAAs) prescribing specific rates for tax deduction at source under section 195, there was no justification for providing deduction of tax at a higher rate than as prescribed under section 115A or under the respective DTAA. In fact, this provision has pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the principle enshrined in section 90(2) as held by the Hon ble Supreme Court in the case of Azadi Bachao Andolan (supra). Thus, in so far as the applicability of the scope/rate of taxation with respect to the impugned payments made 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. 12. We have further considered the judgment passed by the Coordinate Bench in ITA No. 1974/Ahd/2015 for A.Y. 2014-15 the relevant portion is as follows:- [2] To adjudicate on this appeal, only a few material facts need to be taken note of. The assessee has made a remittance to a German tax resident, and, in accordance with the provisions of the Indo German Double Taxation Avoidance Agreement, the payment so made by the assessee is taxable @10% on gross basis in the hands of the German entity. There is no dispute on these aspects. Accordingly, the assessee deducted tax at source @ 10% under section 195 and made remittance of the net amount accordingly. However, when the related TDS return was processed under section 200A, a short deduction demand was raised on the grou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned above. 13. Taking into consideration of the entire aspect of the matter the provisions of Art 12 of DTAA entered into by and between two Sovereign States India and Czech Republic, the Circular No. 333 dated 02.04.1982 issued by CBDT, the specific recommendation made by the Justice Easwar s Committee, the ratio laid down by the Hon ble Apex Court in the judgment of Azadi Bachao Andolan (supra), in our considered opinion the provision of Section 206AA of the Act cannot be invoked by the Revenue to insist the tax deduction @ 20% having regard to the overriding nature of the provision of Section 92 of the Act in the present facts and circumstances of the case. In fact, Section 206AA of the Act does not override the provision of Section 92 of the Act and in that view of the matter in the case in hand the TDS has been deducted to the non-resident rightly applying the tax rate prescribed under the DTAAs and not as per Section 206AA of the Act, having regard to the more beneficial provision in the rate of tax made in the DTAA. Hence, we find no justification in making the assessee liable to pay TDS @ 20% on the foreign remittance as held by the Revenue by the order impugned. Such ..... X X X X Extracts X X X X X X X X Extracts X X X X
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