During the financial year 2015-16, the assessee had made payment of USD 61,200 to a U. S. A. company for training of pilots. Under the arrangement between the foreign entity and the assessee, the taxes, if any, payable on training of pilots were to be borne by the assessee. Since the services were in the nature of technical services, the applicable rate of tax u/s. 115A of the Act was 10 per cent. However, in the absence of the permanent account number of the deductee, the assessee deducted TDS u/s. 195 r.w.s. 206AA at 25.94 per cent. being grossed up rate of 20 per cent u/s. 195A. However, after making payment of the taxes, the assessee filed an appeal before the CIT (A) u/s.248 contending that the deductee, being a tax resident of the U. S. A. and the Double Taxation Avoidance Agreement between India and U.S.A. are applicable to the transaction in question. Under article 12 of the Double Taxation Avoidance Agreement, the rate of tax on “fees for included services” shall not exceed 15 per cent. The CIT (A) dismissed the appeal as not maintainable on the ground that s. 248 states that an appeal would lie only where a person claimed that no tax was required to be deducted on such income and not where the assessee sought a reduced rate of tax to be deducted.

However, Tribunal held that, appeal is maintainable and the Assessing Officer was directed to apply the rates in force which was the applicable rate of tax in accordance with law. (AY. 2016-17)