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Quick Flight Limited vs. ITO (ITAT Ahmedabad)

COURT:
CORAM: ,
SECTION(S): ,
GENRE:
CATCH WORDS: ,
COUNSEL:
DATE: January 4, 2017 (Date of pronouncement)
DATE: January 20, 2017 (Date of publication)
AY: 2011-12
FILE: Click here to download the file in pdf format
CITATION:
S. 206AA: In case where payments have been made to deductees on the strength of the beneficial provisions of s. 115A(1)(b) of the Act or as per DTAA rates r.w.s. 90(2) of the Act, the provisions of s. 206AA cannot be invoked by the AO insisting to deduct tax @ 20% for non-availability of PAN

The Tribunal had to consider whether section 206AA is applicable to payments made to non-residents having no permanent establishment in India and no PAN given that the non-residents are covered by section 115A(1)(b) of the Act or section 90(2) read with the DTAA. HELD by the Tribunal:

(i) In case where payments have been made to the deductees on the strength of the beneficial provisions of section 115A(1)(b) of the Act or as per DTAA rates r.w.s. 90(2) of the Act, the provisions of section 206AA cannot be invoked by the Assessing Officer insisting to deduct tax @ 20% for non-availability of PAN;

(ii) It is only elementary that, under the scheme of the Income Tax Act 1961- as set out under section 90(2) of the Act, the provisions of the applicable tax treaties override the provisions of the Income Tax Act 1961- except when the provisions of the Act are more beneficial to the assessee. The provisions of the applicable tax treaty, in the present case, prescribe the tax rate @ 10%. This rate of 10% is applicable on the related income whether or not the assessee has obtained the permanent account number. In effect, therefore, even when a foreign entity does not obtain PAN in India, the applicable tax rate is 10% in this case. Section 206AA, which provides a higher tax burden- i.e. taxability @ 20% in the event of foreign entity not obtaining the permanent account number in India, therefore, cannot be pressed into service, as has been done in the course of processing of return under section 200A. To that extent, short deduction of tax at source demand, raised in the course of processing of TDS return under section 200A, is unsustainable in law (Serum Institute of India Ltd v. Addl CIT (2012) 135 ITD 69 (Pune), Alembic Ltd. vs. ITO ITA No.1202/Ahd/2014 and Uniphos Envirotronic Private Ltd. vs. DCIT followed).

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