M/s Nagarjuna Fertilizers and Chemicals Limited, Hyderabad V. ADIT, (IT) II, Hyderabad

ITA 1188/HYD/2014

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 6223 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 8 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-02-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 17-07-2015
• Assessment Year: 2012-2013
• Appeal Filed On: 13-06-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SIVA KUMAR; C S SUBRAHMANYAM
• Keywords: Recovery proceedings; Double taxation relief; Deemed to accrue or arise in india; Retrospective amendment; Permanent establishment
• Section: 206AA; 12; 10; 90

Judgement Text

I.T.A.NOS.1187 & 1188/H/2014 ASSESSMENT YEARS : 2011-2012 & 2012-2013 PAGE 1 OF 29 IN THE INCOME TAX APPELLATE TRIBUNAL, SPECIAL (B) BENCH, HYDERABAD BEFORE SHRI JUSTICE (RETD.) DEV DARSHAN SUD, PRESID ENT, SHRI D. MANMOHAN, VICE-PRESIDENT AND SHRI P.M. JAGTAP, ACCOUNTANT MEMBER I.T.A. NO. 1187/H/ 2014 ASSESSMENT YEAR: 2011-2012 M/S. NAGARJUNA FERTILIZERS AND CHEMICALS LIMITED,.. .................APPELLANT 8-2-548, CORPORATE BUILDING, NAGARJUNA HILLS, PUNJAGUTTA, HYDERABAD-500 082 [PAN: AADCK 1533 E] -VS.- ASSISTANT COMMISSIONER OF INCOME TAX,.............. .......................RESPONDENT CIRCLE-15(1), HYDERABAD, I.T. TOWERS, A.C. GUARDS, HYDERABAD & I.T.A. NO. 1188/H/ 2014 ASSESSMENT YEAR: 2012-2013 M/S. NAGARJUNA FERTILIZERS AND CHEMICALS LIMITED,.. .................APPELLANT 8-2-548, CORPORATE BUILDING, NAGARJUNA HILLS, PUNJAGUTTA, HYDERABAD-500 082 [PAN: AADCK 1533 E] -VS.- ASSISTANT DIRECTOR OF INCOME TAX,.................. ...........................RESPONDENT IT-II, HYDERABAD, I.T. TOWERS, A.C. GUARDS, HYDERABAD APPEARANCES BY: SHRI C.S. SUBRAHMANYAM, A.R. & SHRI SIVA KUMAR, A.R ., FOR THE ASSESSEE INTERVENERS: (1) SHRI RAJAN VORA, (2) SHRI K.R. SEKAR, (3) SHRI H. PADAMCHAND KHINCHA SHRI MOHAN KUMAR SINGHANIA, D.R., FOR THE DEPARTMENT DATE OF CONCLUDING THE HEARING : DECEMBER 23, 2016 DATE OF PRONOUNCING THE ORDER : FEBRUARY 13, 2017 I.T.A.NOS.1187 & 1188/H/2014 ASSESSMENT YEARS : 2011-2012 & 2012-2013 PAGE 2 OF 29 O R D E R PER SHRI P.M. JAGTAP, A.M .: HONBLE PRESIDENT OF ITAT UNDER SECTION 255(3) OF T HE I.T. ACT, 1961 HAS CONSTITUTED THIS SPECIAL BENCH TO DECIDE T HE FOLLOWING QUESTION INVOLVED IN THIS CASE:- WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE , PROVISIONS OF SECTION 206AA OF THE ACT WILL HAVE A OVERRIDING EFFECT FOR ALL OTHER PROVISIONS OF THE ACT, AND THA T BEING THE CASE, ASSESSEE IS REQUIRED TO DEDUCT TAX AT THE RAT E PRESCRIBED THEREIN IN CASE OF PERSONS HAVING TAXABL E INCOME IN INDIA, INCLUDING NON-RESIDENTS, WHO DO NOT FURNI SH THEIR PERMANENT ACCOUNT NUMBERS. 2. THE RELEVANT FACTS OF THE CASE GIVING RISE TO TH E QUESTION REFERRED TO THIS SPECIAL BENCH, WHICH INCORPORATES THE SOLIT ARY COMMON ISSUE INVOLVED IN THESE APPEALS OF THE ASSESSEE ARE AS FO LLOWS. THE ASSESSEE IS A PUBLIC LIMITED COMPANY. DURING BOTH THE YEARS UNDER CONSIDERATION, IT MADE CERTAIN PAYMENTS IN THE NATU RE OF FEES FOR TECHNICAL SERVICES TO NON-RESIDENTS. SOME OF SUCH N ON-RESIDENTS WERE THE RESIDENTS OF OTHER COUNTRIES WITH WHICH INDIA D ID NOT HAVE ANY DOUBLE TAXATION AVOIDANCE AGREEMENT (DTAA) AND IN T HEIR CASES, TAX AT THE HIGHER RATE OF 20% WAS STATED TO BE DEDUCTED BY THE ASSESSEE WHERE THE PAYEES FAILED TO FURNISH VALID PERMANENT ACCOUNT NUMBERS AS PER THE PROVISIONS OF SECTION 206AA OF THE ACT. IN CASE OF OTHER NON- RESIDENTS, WHO WERE THE RESIDENTS OF THOSE COUNTRIE S, WITH WHICH INDIA DID HAVE DTAAS, TAX AT THE LOWER RATE AS PRESCRIBED IN THE RELEVANT ARTICLES OF THE DTAA WAS DEDUCTED BY THE ASSESSEE E VEN IN CASE OF PAYEES, WHO DID NOT FURNISH VALID PERMANENT ACCOUNT NUMBERS. WHILE PROCESSING THE TDS RETURNS FILED BY THE ASSESSEE FO R BOTH THE YEARS UNDER CONSIDERATION BY THE AUTOMATIC SYSTEM, THE AS SESSEE WAS HELD TO BE LIABLE TO DEDUCT TAX AT SOURCE AT HIGHER RATE OF 20% IN SUCH CASES I.T.A.NOS.1187 & 1188/H/2014 ASSESSMENT YEARS : 2011-2012 & 2012-2013 PAGE 3 OF 29 FOR WANT OF PERMANENT ACCOUNT NUMBERS OF THE CONCER NED NON- RESIDENT PAYEES AS PER THE PROVISIONS OF SECTION 20 6AA OF THE ACT. ACCORDINGLY, THE INTIMATIONS UNDER SECTION 200A ALO NG WITH THE DEMAND NOTICES UNDER SECTION 156 WERE ISSUED BY THE DEPARTMENT TREATING THE ASSESSEE AS IN DEFAULT FOR THE SHORT-D EDUCTION OF TAX ALONG WITH INTEREST PAYABLE THEREON FOR BOTH THE YEARS UN DER CONSIDERATION AS UNDER:- A.Y. 2011-12 SL. NO. NAME PAN TRANSAC TION AMOUNT (RS.) RATE APPLIED BY AO DEDUCTIBLE AS PER AO RATE CONSIDERED BY ASSESSEE AMOUNT DEDUCTED BY ASSESSEE SHORTFALL (RS.) 1. MAN TURBO AG 3,97,759 20% 79,552 10.00% 39,776 39,776 2. SEVEN HILLS 34,517 20% 6,903 10.56% 3,645 3,258 3. SEVEN HILLS 51,81,138 20% 10,36,228 10.56% 5,47,128 4,89,099 4. EBARA CORPN. 6,42,553 20% 1,28,511 10.00% 64,255 64,255 TOTAL 5,96,389 INTEREST WORKED OUT BY AO.......................... ..........RS.1,12,670/- DEMAND RAISED...................................... .................RS.7,09,060/- A.Y. 2012-13 SL. NO . NAME OF DEDUCTEE PAN TRANSACTI ON AMOUNT (RS.) RATE APPLIE D BY AO DEDUCTIB LE AS PER AO RATE CONSIDER ED BY ASSESSEE AMOUN T DEDUCT ED BY ASSESSE E SHORTFA LL (RS.) 1. NASTAB CONSULTIN G GHANA 15,427 20% 3,085 10.30% 1,589 1496 2. GIAMMARC O-ITALY 9,38,659 20% 1,87,732 10.30% 96,682 91050 3. EPPING HERMAN- GERMANY AADCE296 2M 26,66,348 20% 5,33,270 10% 266635 26663 5 4. BANK OF MONTRAL- CANADA 14,12,564 20% 2,82,513 15% 211885 70628 5. BANK OF MONTRAL- CANADA 8,85,188 20% 1,77,038 15% 132778 44259 6. EPPING HERMAN- GERMANY AADCE296 2M 66,99,991 20% 1339,99 8 10% 669999 66999 9 I.T.A.NOS.1187 & 1188/H/2014 ASSESSMENT YEARS : 2011-2012 & 2012-2013 PAGE 4 OF 29 7. EPPING HERMAN- GERMANY AADCE296 2M 11,22,463 20% 2,24,493 10% 112246 11224 6 TOTAL 12563 20 INTEREST WORKED OUT BY AO.......................... ..........RS.1,17,120/- DEMAND RAISED...................................... ................RS.13,73,440/- [ 3. AGAINST THE INTIMATIONS ISSUED UNDER SECTION 200 A OF THE ACT FOR BOTH THE YEARS UNDER CONSIDERATION, APPEALS WERE PREFERR ED BY THE ASSESSEE BEFORE THE LD. CIT(APPEALS). DURING THE COURSE OF A PPELLATE PROCEEDINGS BEFORE THE LD. CIT(APPEALS), VARIOUS SUBMISSIONS WE RE MADE BY THE ASSESSEE IN SUPPORT OF ITS CASE, WHICH AS SUMMARIZE D BY THE LD. CIT(APPEALS) IN HIS IMPUGNED ORDER, WERE AS UNDER:- (A) BEING NON-RESIDENT, HE NEED NOT OBTAIN PAN NUM BER AS HE IS SPECIFICALLY EXEMPT AS PER RULE 114C. (B) WHEREVER THE NON-RESIDENTS BELONG TO COUNTRIES WITH WHICH INDIA HAS DOUBLE TAXATION AVOIDANCE AGREEMENT , HE SHOULD BE GIVEN BENEFICIAL TREATMENT U/S. 90(2). (C)IF LESSER TAX RATE IS PRESCRIBED IN DOUBLE TAXAT ION AVOIDANCE AGREEMENT, THE TDS SHOULD BE MADE AT THAT RATE PRESCRIBED U/S. 206AA. (D) IN CASES WHERE THE NON-RESIDENT BELONG TO COUNT RIES WITH WHICH INDIA DOES NOT HAVE DOUBLE TAXATION AVOIDANCE AGREEMENT, HIGHEST TDS RATE AS PER SECTION 206AA SH OULD BE APPLIED. (E) AS PER SECTION 115A, THE INCOME TAX RATE ON FEE S FOR TECHNICAL SERVICES IS 10.56%. THEREFORE, TDS RATES CANNOT BE MORE THAN THE TAX AT WHICH THE INCOME IS LIABLE TO BE TAXED. (F) WHEREVER DOUBLE TAXATION AVOIDANCE AGREEMENT PROVISIONS ARE APPLICABLE, THE TDS IS DEDUCTED AT T HE RATES PRESCRIBED U/S 115A, THEREFORE, THE TDS SHOULD NOT BE DEDUCTED @ 20% EVEN THOUGH PAN NUMBER OF THE DEDUCT EES IS NOT QUOTED. 4. THE LD. CIT(APPEALS) DID NOT FIND MERIT IN THE S UBMISSIONS MADE ON BEHALF OF THE ASSESSEE. ACCORDING TO HIM, SECTION 2 06AA INSERTED IN THE I.T.A.NOS.1187 & 1188/H/2014 ASSESSMENT YEARS : 2011-2012 & 2012-2013 PAGE 5 OF 29 INCOME TAX ACT W.E.F. 01.04.2010 WAS AN OVERRIDING PROVISION AND THERE WAS NO ESCAPE FOR THE ASSESSEE EXCEPT TO QUOTE DEDU CTEES PERMANENT ACCOUNT NUMBERS OR TO DEDUCT TAX AT SOURCE AT 20%. HE HELD THAT PAN WAS REQUIRED TO BE QUOTED FOR MAKING DECLARATION UNDER SECTION 197A OF THE ACT FOR CLAIMING EXEMPTION FROM TDS TO BE VALID. HE ALS O HELD THAT SECTION 206AA STARTING WITH N ON-OBSTANTE CLAUSE OVERRIDES ALL OTHER SECTIONS INCLUDING SECTION 90(2), SECTION 115A AND SECTION 1 39A. RELIANCE WAS PLACED BY HIM IN THIS REGARD ON THE DECISION OF BAN GALORE BENCH OF ITAT IN THE CASE OF BOSCH LIMITED VS.- ITO (2013) 115 TTJ 354, WHEREIN IT WAS HELD THAT NON-RESIDENTS HAVING INCOME EXCEEDING THE TAXABLE LIMIT WERE BOUND TO OBTAIN AND FURNISH THE PERMANENT ACCOUNT N UMBERS AND IF THERE WAS A FAILURE TO DO SO, THE ASSESSEE WAS LIABLE TO WITHHOLD TAX AT HIGHER OF THE RATES PRESCRIBED UNDER SECTION 206AA OF THE INC OME TAX ACT, I.E. 20%. THE INTIMATIONS ISSUED UNDER SECTION 200A BY THE AS SESSING OFFICER TREATING THE ASSESSEE TO BE IN DEFAULT FOR SHORT-DE DUCTION OF TAX AT SOURCE, ACCORDINGLY, WERE UPHELD AND CONFIRMED BY THE LD. C IT(APPEALS) BY HER COMMON APPELLATE ORDER DATED 25.03.2014 PASSED FOR BOTH THE YEARS UNDER CONSIDERATION I.E. A.Y. 2011-12 AND 2012-13. AGGRIE VED BY THE ORDER OF THE LD. CIT(APPEALS), THE ASSESSEE HAS PREFERRED THESE APPEALS BEFORE THE TRIBUNAL. 5. BOTH THESE APPEALS FILED BY THE ASSESESE WERE IN ITIALLY FIXED FOR HEARING BEFORE THE DIVISION BENCH OF THIS TRIBUNAL AND KEEPING IN VIEW THE CONFLICTING DECISIONS OF ITAT, BANGALORE BENCH IN T HE CASE OF BOSCH LIMITED VS.- ITO (2013) 115 TTJ 354 AND ITAT, PUNE BENCH I N THE CASE OF DEPUTY DIRECTOR OF INCOME TAX VS.- SERUM INSTITUTE OF IND IA LIMITED [56 TAXMAN.COM 1 (PUNE) AS WELL AS FOR OTHER REASONS GI VEN IN ITS REFERRAL ORDER, A REFERENCE WAS MADE BY THE DIVISION BENCH T O THE HONBLE PRESIDENT TO CONSTITUTE A SPECIAL BENCH TO DECIDE THE ISSUE A ND RESOLVE THE CONTROVERSY. ACCORDINGLY, THE HONBLE PRESIDENT HAS CONSTITUTED THIS SPECIAL BENCH AND WE HAVE HEARD THE ARGUMENTS OF BO TH THE SIDES ON THE ISSUE INCLUDING THE ARGUMENTS OF THE LD. REPRESENTA TIVES OF THE INTERVENERS. I.T.A.NOS.1187 & 1188/H/2014 ASSESSMENT YEARS : 2011-2012 & 2012-2013 PAGE 6 OF 29 6. INITIATING THE ARGUMENTS ON BEHALF OF THE ASSESS EE, SHRI C.S. SUBRAHMANYAM SUBMITTED THAT THE ISSUE INVOLVED IN T HE PRESENT CONTEXT FOR THE CONSIDERATION OF THIS SPECIAL BENCH IS WHET HER THE PROVISION OF SECTION 206AA OVERRIDES ALL OTHER PROVISIONS OF THE ACT INCLUDING ESPECIALLY THE PROVISION OF SECTION 90(2) AND ARE APPLICABLE I N THE CASE OF PAYMENTS MADE TO NON-RESIDENTS, WHO ARE THE RESIDENTS OF THE COUNTRIES WITH WHICH INDIA HAS ENTERED INTO DTAAS. HE CONTENDED THAT THE LIMITED PURPOSE OF INSERTING THE PROVISIONS OF SECTION 206AA IN THE ST ATUTE IS TO STRENGTHEN THE PAN MECHANISM BY ENCOURAGING THE USE OF PAN TO ENABLE THE DEPARTMENT TO GIVE CREDIT FOR THE CORRESPONDING TDS . IN THIS REGARD, HE RELIED ON THE RELEVANT EXTRACTS OF BOARD CIRCULAR N O. 5 OF 2010 CLARIFYING THAT THE NEW SECTION 206AA HAS BEEN INSERTED IN THE INCOME TAX ACT IN ORDER TO STRENGTHEN THE PAN MECHANISM BY PROVIDING THAT ANY PERSON, WHOSE RECEIPTS ARE SUBJECT TO DEDUCTION OF TAX AT S OURCE I.E. THE DEDUCTEE, SHALL MANDATORILY FURNISH HIS PAN TO THE DEDUCTOR F AILING WHICH THE DEDUCTOR SHALL DEDUCT TAX AT SOURCE AT HIGHER OF TH E RATES SPECIFIED THEREIN. 7. MR. C.S. SUBRAHMANYAM INVITED OUR ATTENTION TO T HE PROVISION OF SECTION 195 DEALING WITH THE OBLIGATION TO DEDUCT T AX AT SOURCE FROM THE PAYMENTS MADE TO NON-RESIDENTS AND POINTED OUT THAT SUCH TAX IS DEDUCTIBLE FROM THE PAYMENT OF A SUM CHARGEABLE UN DER THE PROVISIONS OF THE ACT. HE CONTENDED THAT SECTION 4 OF THE ACT LA YS DOWN THE CHARGE OF TAX ON INCOME WHILE SECTION 5 READ WITH SECTION 9 DEFIN ES THE SCOPE OF INCOME INCLUDING THE DEEMED INCOME WHICH IS CHARGEABLE TO TAX IN THE HANDS OF THE NON-RESIDENT. HE SUBMITTED THAT IF THE INCOME IS FO UND TO BE CHARGEABLE TO TAX IN THE HANDS OF A NON-RESIDENT IN INDIA AS PER SECTIONS 4, 5 & 9 OF THE DOMESTIC LAW, THEN THE RELEVANT DTAA IS TO BE LOOKE D INTO FOR ANY PROVISION CONTAINED THEREIN, WHICH IS MORE BENEFICIAL TO THE ASSESSEE. HE CONTENDED THAT IF AS PER THE BENEFICIAL PROVISION OF THE TREA TY, THE TAX IS PAYABLE BY A NON-RESIDENT AT A LOWER RATE, THE PERSON MAKING PAY MENT TO SUCH NON- RESIDENT CANNOT BE HELD TO BE LIABLE TO DEDUCT TAX AT HIGHER RATE BY VIRTUE OF SECTION 206AA AS THE BENEFICIAL PROVISIONS OF TH E TREATY ARE REQUIRED TO BE APPLIED IN SUCH CASE AND NOT THE PROVISION OF SE CTION 206AA. IN SUPPORT I.T.A.NOS.1187 & 1188/H/2014 ASSESSMENT YEARS : 2011-2012 & 2012-2013 PAGE 7 OF 29 OF THIS CONTENTION, SHRI SUBRAHMANYAM RELIED ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF UNION OF INDIA & ANOTHER VS.- AZADI BACHAO ANDOLAN & ANOTHER [263 ITR 706], WHEREIN IT WAS HELD THAT THE PROVISIONS OF SUCH AN AGREEMENT, WITH RESPECT TO CA SES TO WHICH THEY APPLY, WOULD OPERATE EVEN IF INCONSISTENT WITH THE PROVISI ONS OF THE INCOME TAX ACT. HE ALSO RELIED ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS.- P.V.A.L. KULANDAGAN CHETTIAR [267 ITR 654], WHEREIN IT WAS HELD THAT WHEN THE TAX LIABILITY IS IMPOSED BY THE ACT, THE AGREEMENT MAY BE RESORTED TO EITHER FOR REDUCING THE TAX LIABILITY O R ALTOGETHER AVOIDING THE TAX LIABILITY. IT WAS ALSO HELD THAT IN CASE OF ANY CONFLICT BETWEEN THE PROVISIONS OF THE AGREEMENT AND THE ACT, THE PROVIS ION OF THE AGREEMENT WOULD PREVAIL OVER THE PROVISIONS OF THE ACT AS IS CLEAR FROM THE PROVISIONS OF SECTION 90(2). HE ALSO RELIED ON THE DECISION OF THE HONBLE ANDHRA PRADESH HIGH COURT IN THE CASE OF SANOFI PASTEUR HO LDING SA - VS.- DEPARTMENT OF REVENUE AND OTHERS [354 ITR 316], WHE REIN IT WAS HELD THAT THE DTAA IS A TREATY AND THE PROVISIONS CONTAINED T HEREIN ARE EXPRESSIONS OF SOVEREIGN POLICY OF MORE THAN ONE SOVEREIGN STAT E. HE CONTENDED THAT THE DTAA THUS IS SUPREME AND IT BEING A SOVEREIGN P OLICY, THE MACHINERY PROVISION OF SECTION 206AA OF THE ACT CANNOT BE SO INTERPRETED TO OVERRIDE THE TREATY LAW. HE CONTENDED THAT IF SUCH A MEANING IS ASSIGNED TO THE PROVISION OF SECTION 206AA OF THE ACT, THE ENTIRE T REATY NETWORK AND SECTION 90(2) READ WITH SECTION 195 WOULD BECOME REDUNDANT. MR. C.S. SUBRAHMANYAM ALSO RELIED ON THE DECISION OF THE HON BLE SUPREME COURT IN THE CASE OF CIT VS.- ELI LILLY AND CO. (INDIA) P. LIMITED [312 ITR 225], WHEREIN IT WAS HELD THAT TDS PROVISIONS ARE IN THE NATURE OF MACHINERY PROVISIONS AND THE SAME CANNOT BE READ INDEPENDENT OF CHARGING PROVISION WHICH DETERMINE THE ASSESSABILITY OF INCOME CHARGEA BLE UNDER THE INCOME TAX ACT. 8. AS REGARDS THE DECISION OF THE BANGALORE BENCH O F ITAT IN THE CASE OF BOSCH LIMITED (SUPRA), MR. C.S. SUBRAHMANYAM CONTEN DED THAT THE OVERRIDING EFFECT OF BENEFICIAL PROVISION OF TREATY OVER THE DOMESTIC LAW I.T.A.NOS.1187 & 1188/H/2014 ASSESSMENT YEARS : 2011-2012 & 2012-2013 PAGE 8 OF 29 WAS NEITHER ARGUED NOR CONSIDERED BY THE BANGALORE BENCH OF THE TRIBUNAL. HE CONTENDED THAT IN THE CASE OF SERUM INSTITUTE OF INDIA LIMITED (SUPRA), PUNE BENCH OF ITAT, HOWEVER, CONSIDERED THIS ASPECT IN THE LIGHT OF VARIOUS JUDICIAL PRONOUNCEMENTS INCLUDING THAT OF HONBLE S UPREME COURT AND DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY HOLD ING THAT WHERE THE TAX HAS BEEN DEDUCTED ON THE STRENGTH OF THE BENEFICIAL PROVISION OF THE DTAA, THE PROVISION OF SECTION 206AA OF THE ACT CANNOT BE INVOKED BY THE ASSESSING OFFICER. HE SUBMITTED THAT A SIMILAR VIEW IN FAVOUR OF THE ASSESSEE HAS BEEN TAKEN CONSISTENTLY BY OTHER BENCH ES THEREAFTER INCLUDING THE BANGALORE BENCH OF ITAT IN THE CASE OF INFOSYS BPO LIMITED [154 ITD 816], WHEREIN IT WAS HELD THAT APPLYING THE RATE OF 20% WITHOUT CONSIDERING THE PROVISION OF RELEVANT DTAA AND MAKI NG THE CONSEQUENT ADJUSTMENT WHILE FRAMING THE INTIMATION UNDER SECTI ON 200A WAS BEYOND THE SCOPE OF THE PROVISION OF SECTION 206AA. HE POI NTED OUT THAT WHILE COMING TO THE SAID CONCLUSION IN THE CASE OF INFOSY S BPO LIMITED (SUPRA), THE BANGALORE BENCH OF ITAT HAS NOT ONLY RELIED ON THE DECISION OF THE PUNE BENCH OF ITAT IN THE CASE OF SERUM INSTITUTE OF IND IA LIMITED (SUPRA) BUT HAS ALSO RELIED ON ITS EARLIER DECISION IN THE CASE OF BOSCH LIMITED (SUPRA), ESPECIALLY THE OBSERVATIONS RECORDED IN PARAGRAPH N O. 22 AND 23 THEREIN. HE CONTENDED THAT DOUBLE TAXATION AVOIDANCE AGREEME NT THUS IS MINI- LEGISLATION AND AS HELD, INTER ALIA, BY THE HONBLE SUPREME COURT IN THE CASE OF AZADI BACHAO ANDOLAN & ANOTHER (SUPRA), THE PROV ISIONS OF THE SAME TO THE EXTENT BENEFICIAL TO THE ASSESSEE OVERRIDE THE PROVISION OF THE DOMESTIC LAW AND THE PROVISIONS OF SECTION 206AA OF THE DOME STIC LAW, WHICH ARE MERELY MACHINERY PROVISION IN RELATION TO TAX RECOV ERY, CANNOT THEREFORE OVERRIDE THE BENEFICIAL PROVISIONS OF THE DTAA. 9. SHRI RAJAN VORA, CHARTERED ACCOUNTANT, APPEARING FOR M/S. SERUM INSTITUTE OF INDIA LIMITED AS INTERVENER SUBMITTED THAT AS PER SECTION 5 AND SECTION 9, THE INCOME OF NON-RESIDENT IS CHARGEABLE TO TAX IN INDIA TO THE EXTENT PROVIDED THEREIN, WHILE THE PROVISIONS OF SE CTION 115A PRESCRIBE THE RATES OF TAX PAYABLE ON SUCH INCOME. HE THEN INVITE D OUR ATTENTION TO I.T.A.NOS.1187 & 1188/H/2014 ASSESSMENT YEARS : 2011-2012 & 2012-2013 PAGE 9 OF 29 SECTION 90(2) TO POINT OUT THAT THE TREATY PROVISIO NS TO THE EXTENT MORE BENEFICIAL TO THE ASSESSEE SHALL OVERRIDE THE DOMES TIC LAW AS PROVIDED IN SECTION 90(2). HE CONTENDED THAT SECTION 90(2) MAKE S IT MANIFEST THAT THE PROVISIONS OF TREATY WILL PREVAIL OVER THE PROVISIO NS OF INCOME TAX ACT TO THE EXTENT THEY ARE MORE BENEFICIAL TO THE ASSESSEE . HE CONTENDED THAT TDS PROVISIONS INCLUDING SECTION 206AA ARE MACHINERY PR OVISIONS AND SINCE THE RELEVANT PROVISIONS OF THE TREATY GOVERNING THE TAX RATE IN CASE OF NON- RESIDENT ARE MORE BENEFICIAL, THE LATTER SHALL APPL Y AND PREVAIL BEING MORE BENEFICIAL AND NOT SECTION 206AA. AS REGARDS THE DE CISION OF BANGALORE BENCH OF ITAT IN THE CASE OF BOSCH LIMITED (SUPRA), HE SUBMITTED THAT THE OBSERVATIONS MADE BY THE TRIBUNAL IN PARAGRAPHS NO. 22 AND 23 OF ITS ORDER ARE ACTUALLY IN FAVOUR OF THE ASSESSEE ON THE ISSUE UNDER CONSIDERATION. IN THIS REGARD, HE REFERRED TO THE DECISION OF BANGALO RE BENCH OF ITAT RENDERED SUBSEQUENTLY IN THE CASE OF INFOSYS BPO LI MITED (SUPRA) TO POINT OUT THAT THE OBSERVATIONS RECORDED IN THE CASE OF B OSCH LIMITED (SUPRA) WERE RELIED UPON BY THE TRIBUNAL, BESIDES THE DECIS ION OF THE PUNE BENCH OF ITAT IN THE CASE OF SERUM INSTITUTE OF INDIA LIM ITED (SUPRA) TO DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE. HE CONTENDED T HAT THERE IS THUS REALLY NO DIFFERENT OR DIVERGENT VIEW, WHICH CAN BE SAID T O HAVE BEEN TAKEN BY THE TRIBUNAL ON THIS ISSUE AND EVEN THE SUBSEQUENT DECI SIONS RENDERED BY THE VARIOUS BENCHES OF THE ITAT TAKING THE VIEW IN FAVO UR OF THE ASSESSEE CLEARLY SHOWS THAT A CONSISTENT VIEW HAS BEEN TAKEN BY THE TRIBUNAL IN FAVOUR OF THE ASSESSEE ON THE ISSUE UNDER CONSIDERA TION. 10. MR. K.R. SEKAR, ADVOCATE, REPRESENTING DR. REDD YS LABORATORIES LIMITED, AS INTERVENER SUBMITTED THAT SECTIONS 190 AND 191 ARE MACHINERY PROVISIONS DEALING WITH COLLECTION OF TAXES. RELYIN G ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS.- ELI LILLY AND CO. (INDIA) P. LIMITED (2009) 312 ITR 225 AND THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF G,E. TECHNOLOGY CENTRE (P) LIMITED VS.- CIT REPORTED IN 327 ITR 456, HE CONTENDED THAT THE MACHINERY PROVISIONS OF SECTION 206AA CANNOT CONTROL THE CHARGING PROVISIONS OF SECTIONS 4, 5 AND 9, OTHERWISE I.T.A.NOS.1187 & 1188/H/2014 ASSESSMENT YEARS : 2011-2012 & 2012-2013 PAGE 10 OF 29 SECTION 90(2) WILL BECOME REDUNDANT. HE REFERRED TO THE PROVISIONS OF SECTION 2(37A) TO POINT OUT THAT THE RATES GIVEN IN DTAA IN THE CASE OF NON- RESIDENTS ARE REQUIRED TO BE CONSIDERED FOR DEDUCTI ON OF TAX AT SOURCE. HE CONTENDED THAT GOING BY THE LEGISLATIVE INTENTION O F INTRODUCTION OF SECTION 206AA, THE OVERRIDING EFFECT GIVEN TO THE SAID PROV ISION HAS TO BE CONSIDERED IN A RESTRICTIVE SENSE AND THE SAME CANN OT BE APPLIED QUA THE ENTIRE ACT. IN THIS REGARD, HE RELIED ON THE DECISI ON OF THE HONBLE SUPREME COURT IN THE CASE OF BHARAT HARI SINGHANIA & OTHERS VS.- CWT & OTHERS [207 ITR 1] TO CONTEND THAT THE EFFECT OF OVERRIDIN G PROVISIONS IS TO BE CONSIDERED KEEPING IN VIEW THE INTENT OR OBJECT OF THE RELEVANT PROVISIONS. HE ALSO RELIED ON THE DECISION OF THE HONBLE ANDHR A PRADESH HIGH COURT IN THE CASE OF SANOFI PASTEUR HOLDING SA VS.- DEPARTM ENT OF REVENUE & OTHERS [354 ITR 316], AND CONTENDED THAT THE MACHINERY PRO VISIONS OF SECTION 206AA CANNOT OVERRIDE THE SOVEREIGN POLICY CHOICE. 11. MR. H. PADAMCHAND KHINCHA, CHARTERED ACCOUNTANT , APPEARING FOR INFOSYS BPO LIMITED AS INTERVENER, REFERRED TO THE PROVISIONS OF SECTION 190(2) TO POINT OUT THAT THE SAID PROVISION IS VERY SPECIFIC IN THE SENSE THAT NOTHING CONTAINED IN THE RELEVANT TDS PROVISION SHA LL PREJUDICE THE CHARGE OF TAX ON INCOME UNDER THE PROVISIONS OF SUB-SECTIO N (1) OF SECTION 4. HE CONTENDED THAT THE PROVISIONS RELATING TO PERMANENT ACCOUNT NUMBER ARE CONTAINED IN SECTION 139A OF THE ACT AND THERE ARE TWO OBLIGATIONS CAST ON THE ASSESSEE UNDER THE SAID PROVISION- ONE TO OBTAI N THE PAN AND OTHER TO FURNISH THE PAN SO OBTAINED. HE SUBMITTED THAT AS P ER THE PROVISIONS OF SUB-SECTION (8) OF SECTION 139A READ WITH RULE 114C , NON-RESIDENT AT THE RELEVANT TIME WAS NOT REQUIRED TO OBTAIN PAN. HE CO NTENDED THAT WHEN THERE WAS NO OBLIGATION TO OBTAIN PAN, HOW THERE CA N BE REQUIREMENT TO FURNISH THE SAME AS ENVISAGED IN SECTION 206AA OF T HE ACT. IN THIS REGARD, HE RELIED ON THE DECISION OF THE HONBLE ANDHRA PRA DESH HIGH COURT IN THE CASE OF MULLAPUDI VENKATARAYUDU VS.- UNION OF INDI A REPORTED IN 99 ITR 448 TO CONTEND THAT ANY FAILURE TO PERFORM PRE-SUPP OSES AN OBLIGATION TO PERFORM. HE ALSO CONTENDED THAT AS PER SECTION 90(2 ), THE PROVISIONS OF I.T.A.NOS.1187 & 1188/H/2014 ASSESSMENT YEARS : 2011-2012 & 2012-2013 PAGE 11 OF 29 DTAA TO THE EXTENT MORE BENEFICIAL TO THE ASSESSEE SHALL PREVAIL OVER THE DOMESTIC LAW AND IF LEGISLATURE WANTS TO MAKE ANY P ROVISION OF DOMESTIC LAW TO OVERRIDE THE TREATY, A SPECIFIC PROVISION IS REQUIRED TO BE MADE IN THE STATUTE TO THAT EFFECT AS MADE IN SUB-SECTION ( 2A) OF SECTION 90 TO GIVE OVERRIDING EFFECT TO GAAR PROVISIONS. HE CONTENDED THAT WHEN THE NON- RESIDENT ASSESSEE IS NOT REQUIRED TO OBTAIN PAN AND NEED NOT FILE THE RETURN OF INCOME WHERE TDS IS DONE AT APPROPRIATE RATE, SE CTION 206AA, IF IS HELD TO BE APPLICABLE IN SUCH CASES, WILL PUT AN OBLIGAT ION ON THE ASSESSEE TO FILE THE RETURN AND CLAIM THE REFUND OF TDS, WHICH CANNO T BE THE PURPOSE OR INTENT OF THE LEGISLATURE. HE CONTENDED THAT AS PER THE PROPOSITION PROPOUNDED BY THE HONBLE SUPREME COURT, CHAPTER XV IIB WILL YIELD TO SECTIONS 4 & 5 AND SECTION 4 & 5 WILL YIELD TO SECT ION 90(2). HE CONTENDED THAT THE INFERENCE THAT IS REQUIRED TO BE DRAWN THU S IS THAT CHAPTER XVIIB WILL HAVE TO YIELD TO SECTION 90(2). HE ALSO CONTEN DED THAT WHEN THE NON- RESIDENT IS OTHERWISE ENTITLED TO TREATY BENEFITS E VEN WITHOUT PERMANENT ACCOUNT NUMBER, HOW SECTION 206AA CAN TAKE AWAY THE SAID BENEFIT. RELYING ON THE DECISION OF THE HONBLE KARNATAKA HI GH COURT IN THE CASE OF KAUSHALLAYA BAI & OTHERS VS.- UNION OF INDIA [(201 2) 346 ITR 156], HE CONTENDED THAT THE OVERRIDING PROVISIONS OF SECTION 206AA ARE REQUIRED TO BE READ DOWN IN SUCH A SITUATION. 12. THE LD. CIT(D.R.) SHRI MOHAN K. SINGHANIA IN RE PLY SUBMITTED ON BEHALF OF THE REVENUE THAT ALTHOUGH THE PRINCIPLE O F TREATY OVERRIDE IS WELL KNOWN, THE TREATY DOES NOT CONTAIN A COMPLETE CODE OR COMPLETE MECHANISM PROVIDING FOR LEVY AND COLLECTION OF TAX. HE CONTEN DED THAT IT CONTAINS SOME BENEFICIAL PROVISIONS, WHICH NEED TO BE APPLIED WHI LE DETERMINING THE TAX LIABILITY IN A PARTICULAR CASE AND TO THAT EXTENT O NLY, THE PROVISIONS OF INCOME TAX ACT GET MODIFIED/OVERRIDDEN. HE CONTENDE D THAT THE TREATY IN ANY CASE DOES NOT PROVIDE FOR THE RATE AT WHICH TAX IS REQUIRED TO BE DEDUCTED AT SOURCE AND NOT A SINGLE INSTANCE HAS BE EN BROUGHT ON RECORD ON BEHALF OF THE ASSESSEE TO SHOW THAT THE TREATY P ROVIDES FOR TDS AT LOWER RATE THAN APPLIED BY THE ASSESSING OFFICER BY INVOK ING THE PROVISION OF I.T.A.NOS.1187 & 1188/H/2014 ASSESSMENT YEARS : 2011-2012 & 2012-2013 PAGE 12 OF 29 SECTION 206AA. HE CONTENDED THAT IF THERE IS NO PRO VISION IN A TREATY PROVIDING FOR TDS AT LOWER RATE THAN APPLIED BY THE ASSESSING OFFICER, THERE IS NO QUESTION OF TREATY OVERRIDING THE DOMESTIC LA W AS SOUGHT TO BE CONTENDED ON BEHALF OF THE ASSESSEE. 13. AS REGARDS THE RELIANCE PLACED ON BEHALF OF THE ASSESSEE ON THE PROVISION OF SECTION 90(2) OF THE ACT AND ALLEGED V IOLATION TO THE SAID PROVISION MADE BY SECTION 206AA OF THE ACT, HE CONT ENDED THAT SECTION 90(2) PROVIDES THAT THE DTAA NOTWITHSTANDING, THE R EGULAR PROVISIONS OF THE INCOME TAX ACT WOULD BE APPLIED IF THE LATER IS MORE BENEFICIAL TO THE NON-RESIDENT TAX PAYER CONCERNED. HE CONTENDED THAT SECTION 90(2) THUS LAYS DOWN THE PRINCIPLE BY WHICH THE TREATY DOES NO T OVERRIDE THE PROVISIONS OF THE INCOME TAX ACT BUT GETS OVERRIDDE N BY THE LATER. HE CONTENDED THAT SECTION 90(2) WOULD KICK IN ONLY IN A SITUATION WHERE A REGULAR PROVISION OF THE INCOME TAX ACT WOULD BE MO RE BENEFICIAL THAN THE CORRESPONDING PROVISION CONTAINED IN THE TREATY AND THE RELIANCE PLACED ON THE SAME IN SUPPORT OF THE ASSESSEES CASE IS CL EARLY MISPLACED AS THE SAME IS NOT RELEVANT IN THE PRESENT CONTEXT IN THE ABSENCE OF ANY SPECIFIC PROVISION CONTAINED IN THE RELEVANT TREATY REGARDIN G THE LOWER RATE OF TDS THAN THE ONE APPLIED BY THE ASSESSING OFFICER. 14. AS REGARDS THE CONTENTION RAISED ON BEHALF OF T HE ASSESSEE THAT THERE BEING NO OBLIGATION ON A NON-RESIDENT TO HAVE PAN A S PER THE PROVISIONS OF SECTION 139A(8)(D) READ WITH RULE 114C(1)(B), SECTI ON 206AA CASTS THE IMPOSSIBLE OBLIGATION OF FURNISHING THE PAN OF SUCH PERSONS, THE LD. CIT (D.R.) CONTENDED THAT SECTION 206AA DOES NOT CAST A NY MANDATORY OBLIGATION ON SUCH PERSON TO OBTAIN PAN. HE CONTEND ED THAT SUCH PERSON CAN STILL CHOOSE NOT TO OBTAIN PERMANENT ACCOUNT NU MBER OR EVEN AFTER OBTAINING THE SAME, NOT TO FURNISH IT AND THE ONLY CONSEQUENCE IN SUCH CASE AS PER SECTION 206AA IS THAT HE WOULD BE SUBJECTED TO TDS WHICH MAY BE HIGHER THAN THE NORMAL RATE. HE CONTENDED THAT THE FACT THAT THE PARLIAMENT HAS ENACTED THE PROVISIONS OF SECTION 206AA REQUIRI NG A NON-RESIDENT TO FURNISH HIS PAN TO THE PAYER INSPITE OF PROVISION O F SECTION 139(8)(D) AND I.T.A.NOS.1187 & 1188/H/2014 ASSESSMENT YEARS : 2011-2012 & 2012-2013 PAGE 13 OF 29 RULE 114C(1)(B) CLEARLY SHOWS THE INTENTION OF THE LEGISLATURE AND THE NON- OBSTANTE CLAUSE CONTAINED IN SECTION 206AA FURTHER MAKES IT CLEAR THAT THE SAID PROVISION OVERRIDES OTHER PROVISIONS OF LAW. R ELYING ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CHANDAV ARKAR SITA RATNA RAO VS.- ASHALATA S. GURAM (1987) AIR 117, HE CONTENDED THAT THE PROVISION OF SECTION 206AA WILL HAVE ITS FULL OPERATION INSPITE OF ANYTHING CONTRARY CONTAINED IN ANY OTHER PROVISIONS OF THE ACT. HE CO NTENDED THAT SECTION 206AA THUS WOULD PREVAIL EVEN IF THE SAME IS IN CON FLICT WITH OTHER PROVISIONS OF THE ACT AND ONCE A PERSON IS CAUGHT W ITHIN THE MISCHIEF OF SECTION 206AA, THE OTHER PROVISIONS OF THE ACT WOUL D NOT HAVE ANY APPLICATION. 15. AS REGARDS THE PLEA TAKEN ON BEHALF OF THE ASSE SSEE BY RELYING, INTER ALIA, ON THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF HYDERABAD INDUSTRIES LIMITED VS.- ITO [188 ITR 149 ] THAT SECTION 206AA RELATES TO COLLECTION OF TAX AND THE SAME BEING A M ACHINERY PROVISION MUST YIELD TO THE CHARGING PROVISION OF SECTION 4, LD. C IT(D.R.) CONTENDED THAT THE RATIO AS LAID DOWN BY THE HONBLE KARNATAKA HIG H COURT IN THE CASE OF HYDERABAD INDUSTRIES LIMITED (SUPRA) IS THAT IF AN AMOUNT IS NOT CHARGEABLE TO TAX, IT SHOULD NOT BE SUBJECTED TO TDS. HE SUBMI TTED THAT THE UNDISPUTED POSITION IN THE PRESENT CASE, HOWEVER, IS THAT THE AMOUNT IN QUESTION CONSTITUTED THE INCOME OF THE PAYEE AND EVEN TAX WA S ALSO DEDUCTED BY THE ASSESSEE AS PAYER FROM THE PAYMENT OF THE SAID AMOU NT. HE CONTENDED THAT THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF HYDERABAD INDUSTRIES LIMITED (SUPRA) THUS HAS NO APPLICATION IN THE FACTS OF THE ASSESSEES CASE. 16. AS REGARDS THE CONTENTION RAISED ON BEHALF OF T HE ASSESSEE THAT THE TAX DEDUCTED AT SOURCE CANNOT EXCEED THE TAX LIABIL ITY ON THE PAYEE, THE LD. CIT(D.R.) CONTENDED THAT THE DETERMINATION OF TAX L IABILITY IS A FUNCTION OF ASSESSMENT, WHICH IS WITHIN THE COMPLETE DOMAIN OF THE ASSESSING OFFICER AND THE DEDUCTION OF TAX AT SOURCE HAS NOTHING TO D O WITH THE EVENTUAL TAX I.T.A.NOS.1187 & 1188/H/2014 ASSESSMENT YEARS : 2011-2012 & 2012-2013 PAGE 14 OF 29 LIABILITY IN THE HANDS OF THE PAYEE. IN THIS REGARD , RELIANCE WAS PLACED BY HIM ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF TRANSMISSION CORPORATION OF A.P. LIMITED VS.- CIT [239 ITR 587], WHEREIN IT WAS HELD THAT THE RELEVANT PROVISIONS OF TDS ARE FOR TENTATIVE DEDUCTION OF INCOME-TAX SUBJECT TO REGULAR ASSESSMENT AND BY THE DEDUCTION OF INCOME-TAX, RIGHTS OF THE PARTIES ARE NOT, IN ANY M ATTER, ADVERSELY AFFECTED. HE CONTENDED THAT THE ROLE OF THE ASSESSEE AS A PAY ER OF THE SUM IS LIMITED TO DEDUCTING TAX AS PER LAW AND IF AT ALL ANYONE IS SAID TO BE AGGRIEVED BY THE FACT OF TDS EXCEEDING THE EVENTUAL LIABILITY, I T IS THE PAYEE. HE CONTENDED THAT THE ASSESSEE, BEING THE PAYER, HAS N O LOCUS-STANDI EVEN FOR RAISING THIS ISSUE. HE CONTENDED THAT SECTION 195, NO DOUBT, DOES TALK ABOUT DETERMINATION OF SUM CHARGEABLE TO TAX BUT SUCH DET ERMINATION IS ONLY A ROUGH ESTIMATE FOR THE LIMITED PURPOSE OF TDS ON TH AT PARTICULAR SUM AND IT IS NEITHER POSSIBLE NOR DESIRABLE TO TRY DETERMI NING THE TOTAL INCOME OF THE PAYEE AT THE STAGE OF DEDUCTION OF TAX AT SOURC E. 17. AS REGARDS THE OBSERVATIONS OF THE BANGALORE BE NCH OF ITAT RECORDED IN PARAGRAPHS NO. 12, 22 AND 23 OF ITS ORDER PASSED IN THE CASE OF BOSCH LIMITED (SUPRA) AS RELIED ON BEHALF OF THE ASSESSEE TO CONTEND THAT THE SAME ARE IN FAVOUR OF THE ASSESSEE ON THE ISSUE UNDER CO NSIDERATION, THE LD. CIT(D.R.) CONTENDED THAT THE SAID OBSERVATIONS WERE RECORDED BY THE TRIBUNAL WHILE DEALING WITH THE QUESTION OF GROSSIN G-UP UNDER SECTION 195A OF THE INCOME TAX ACT TO CONCLUDE THAT FOR THE PURPOSE OF GROSSING UP, IT IS THE RATE IN FORCE AND NOT THE RATE UNDER SECTION 206AA WOULD BE APPLICABLE. HE SUBMITTED THAT THE ISSUE INVOLVED BE FORE THIS SPECIAL BENCH IN THE PRESENT CASE IS NOT IN THE CONTEXT OF GROSSI NG-UP AND THE SAME AS SPECIFICALLY INVOLVED IN THE PRESENT CASE HAS ACTUA LLY BEEN DECIDED BY THE BANGALORE BENCH IN FAVOUR OF THE REVENUE IN PARA NO . 21 OF ITS ORDER BY HOLDING THAT THE RECIPIENTS ARE UNDER OBLIGATION TO OBTAIN A PAN AND FURNISH THE SAME TO THE PAYER AND IF THERE IS A FAILURE TO DO SO, THE PAYER IS LIABLE TO WITHHOLD TAX AT THE HIGHER OF THE RATES PRESCRIB ED UNDER SECTION 206AA OF THE ACT, I.E. 20%. HE SUBMITTED THAT THE DECISIO N OF THE BANGALORE BENCH I.T.A.NOS.1187 & 1188/H/2014 ASSESSMENT YEARS : 2011-2012 & 2012-2013 PAGE 15 OF 29 OF ITAT IN THE CASE OF BOSCH LIMITED (SUPRA) THUS I S SQUARELY IN FAVOUR OF THE REVENUE ON THE ISSUE UNDER CONSIDERATION AND WH ILE DECIDING THE SIMILAR ISSUE IN FAVOUR OF THE ASSESSEE IN THE CASE OF SERUM INSTITUTE OF INDIA LIMITED (SUPRA), PUNE BENCH OF ITAT HAS NOT T AKEN COGNIZANCE OF THE SAID DECISION, WHICH WAS SUBSISTING. HE SUBMITTED T HAT EVEN THE BANGALORE BENCH OF ITAT WHILE DECIDING THE SIMILAR ISSUE IN F AVOUR OF THE ASSESSEE IN THE CASE OF INFOSYS BPO LIMITED (SUPRA) COMPLETELY MISREAD ITS EARLIER DECISION RENDERED IN THE CASE OF BOSCH LIMITED (SUP RA). HE SUBMITTED THAT THE SUBSEQUENT DECISION RENDERED BY THE OTHER BENCH ES OF THE TRIBUNAL IN FAVOUR OF THE ASSESSEE ON THIS ISSUE HAS SIMPLY FOL LOWED THE DECISION OF THE PUNE BENCH IN THE CASE OF SERUM INSTITUTE OF INDIA LIMITED (SUPRA) AND BANGALORE BENCH IN THE CASE OF INFOSYS BPO LIMITED (SUPRA). 18. THE LD. CIT(D.R.) CONTENDED THAT THE DISPUTE IN VOLVED IN THE PRESENT CONTEXT IS REGARDING THE RATE AT WHICH TAX AT SOURC E IS DEDUCTIBLE BY THE ASSESSEE AS PAYER FROM THE PAYMENT MADE TO THE NON- RESIDENT PAYEES. HE REITERATED THAT THE ASSESSEE IN THIS REGARD AS A PA YER HAS TO SATISFY HIMSELF THAT THE AMOUNT IN QUESTION CONSTITUTES SUM CHARGE ABLE UNDER THE PROVISIONS OF THE ACT AND IF IT IS SO, TO DEDUCT T HE TAX AT THE RATE APPLICABLE AS PROVIDED IN THE DOMESTIC LAW, IF THERE IS NO ORD ER OBTAINED BY HIM FROM THE CONCERNED ASSESSING OFFICER UNDER SECTION 195(2 ) OR CERTIFICATE OBTAINED BY THE PAYEE UNDER SECTION 197 FOR NO DEDU CTION OF TAX OR DEDUCTION OF TAX AT LOWER RATE THAN PRESCRIBED IN T HE DOMESTIC LAW. HE CONTENDED THAT THE ASSESSEE IN THE PRESENT CASE HAS MADE PAYMENTS OF SUMS CHARGEABLE TO TAX TO NON-RESIDENTS AND SINCE THERE WAS FAILURE ON THE PART OF THE SAID NON-RESIDENTS TO FURNISH THEIR PANS, HE WAS REQUIRED TO DEDUCT TAX AT A HIGHER RATE OF 20% AS PER THE PROVISIONS O F SECTION 206AA, WHICH ARE OVERRIDING, ESPECIALLY WHEN THE MITIGATING PROV ISIONS OF SECTIONS 195(2) AND 197 WERE NOT AVAILED EITHER BY THE ASSES SEE AS A PAYER OR BY THE RECIPIENT AS DEDUCTEE OR PAYEE. I.T.A.NOS.1187 & 1188/H/2014 ASSESSMENT YEARS : 2011-2012 & 2012-2013 PAGE 16 OF 29 19. IN THE REJOINDER, SHRI C.S. SUBRAHMANYAM, LD. C OUNSEL FOR THE ASSESSEE SUBMITTED THAT THE INTERPRETATION PLACED BY THE LD. D.R. ON SECTION 90(2) TO CONTEND THAT THE TREATY DOES NOT OVERRIDE THE PROVI SION OF THE INCOME TAX ACT, BUT GETS OVERRIDDEN BY THE LATER IS CONTRARY T O THE LEGAL POSITION, WHICH IS WELL SETTLED BY THE VARIOUS COURTS INCLUDING THE HONBLE APEX COURT IN THE DECISIONS ALREADY CITED ON BEHALF OF THE ASSESS EE. HE SUBMITTED THAT EVEN THE CONTENTION OF THE LD. D.R. THAT SECTION 20 6AA CONTAINING NON- OBSTANTE CLAUSE HAS A OVERRIDING EFFECT OVER THE OTHER PROV ISIONS OF THE ACT INCLUDING SECTION 139A READ WITH RULE 114C IS CONTR ARY TO THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF HYD ERABAD INDUSTRIES LIMITED (SUPRA), WHEREIN IT WAS HELD THAT THE PROVI SION OF SECTION 206AA IN CASE OF CONFLICT WITH OTHER PROVISIONS IS REQUIR ED TO BE READ DOWN. HE SUBMITTED THAT THE RATE OF TAX APPLICABLE ON INCOME IN THE CASE OF NON- RESIDENT FOR TAX WITHHOLDING PURPOSES IS REQUIRED T O BE DETERMINED AS PER THE PROVISIONS OF SECTION 4, 5 & 9 READ WITH THE RE LEVANT DTAA PROVISIONS AND THE SAME BEING CHARGING PROVISIONS WOULD OVERRI DE THE MACHINERY PROVISIONS OF SECTION 206AA. HE CONTENDED THAT THIS PRINCIPLE IS CLEARLY LAID DOWN BY THE HONBLE KARNATAKA HIGH COURT IN THE CAS E OF HYDERABAD INDUSTRIES LIMITED (SUPRA) EVEN THOUGH THE FACTS IN VOLVED IN THE SAID CASE MIGHT BE DIFFERENT. HE SUBMITTED THAT THE CONTENTIO N OF THE LD. D.R. THAT TAX DEDUCTION AT SOURCE HAS NOTHING TO DO WITH THE EVEN TUAL TAX LIABILITY IN THE HANDS OF THE PAYEE IS DEVOID OF ANY MERIT IN VIEW O F THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF G,E. TECHNOLOG Y CENTRE (P) LIMITED (SUPRA), WHEREIN IT WAS HELD THAT SECTION 195 HAS T O BE READ IN CONFORMITY WITH THE CHARGING PROVISION OF SECTIONS 4, 5 & 9. H E CONTENDED THAT RELIANCE PLACED BY THE LD. D.R. IN THIS REGARD ON THE DECISI ON OF THE HONBLE SUPREME COURT IN THE CASE OF TRANSMISSION CORPORATION (SUPR A) IS CLEARLY MISPLACED AS THE ISSUE INVOLVED IN THE SAID CASE WAS RELATING TO THE AMOUNT ON WHICH TAX WAS REQUIRED TO BE DEDUCTED AND NOT THE RATE AT WHICH TAX SHOULD HAVE BEEN DEDUCTED. HE CONTENDED THAT IN CASE OF PAYMENT MADE ON ACCOUNT OF ROYALTY, FEES FOR TECHNICAL SERVICES, INTEREST, ETC . AS INVOLVED IN THE PRESENT CASE, TAX IS REQUIRED TO BE DEDUCTED AT PRESCRIBED RATE ON THE GROSS AMOUNT I.T.A.NOS.1187 & 1188/H/2014 ASSESSMENT YEARS : 2011-2012 & 2012-2013 PAGE 17 OF 29 AND, THEREFORE, THE EXACT RATE OF TAX PAYABLE ON SU CH AMOUNTS IS REQUIRED TO BE DETERMINED AT THE TIME OF DEDUCTING TAX AT SO URCE ITSELF. HE CONTENDED THAT TDS IN ANY CASE CANNOT EXCEED THE FINAL TAX LI ABILITY AND THE DEDUCTOR CANNOT DEDUCT TAX MORE THAN THE FINAL TAX LIABILITY OF THE DEDUCTEE IN VIEW OF THE PROVISIONS OF DTAA. 20. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND AL SO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. WE HAVE ALSO DELIBERATED UPON THE VARIOUS JUDICIAL PRONOUNCEMENTS CITED BY THE LD. RE PRESENTATIVES OF BOTH THE SIDES IN SUPPORT OF THEIR RESPECTIVE STANDS ON THE ISSUE UNDER CONSIDERATION IN THE LIGHT OF THE RELEVANT PROVISIO NS OF LAW. THE ISSUE INVOLVED IN THIS CASE FOR THE CONSIDERATION OF SPEC IAL BENCH IS RELATING TO THE DETERMINATION OF RATE AT WHICH TAX AT SOURCE IS DEDUCTIBLE BY THE ASSESSEE FROM THE PAYMENTS MADE TO NON-RESIDENTS IN THE NATURE OF FEES FOR TECHNICAL SERVICES WHERE THE SAID NON-RESIDENT PERS ONS ARE RESIDENTS OF THE COUNTRIES WITH WHICH INDIA HAS ENTERED INTO DOUBLE TAXATION AVOIDANCE AGREEMENTS AND THEY HAVE FAILED TO FURNISH THEIR PE RMANENT ACCOUNT NUMBERS TO THE ASSESSEE. CHAPTER-XVII OF THE INCOME TAX ACT, 1961 CONTAINS THE PROVISIONS RELATING TO COLLECTION AND RECOVERY OF TAX AND IT STARTS WITH SECTION 190 WHICH PROVIDES THAT NOTWITH STANDING THAT THE REGULAR ASSESSMENT IN RESPECT OF ANY INCOME IS TO B E MADE IN A LATER ASSESSMENT YEAR, THE TAX ON SUCH INCOME SHALL BE PA YABLE, INTER ALIA, BY DEDUCTION AT SOURCE IN ACCORDANCE WITH THE RELEVANT PROVISIONS. THE RELEVANT PROVISIONS DEALING WITH DEDUCTION OF TAX A T SOURCE ARE GIVEN IN PART B OF CHAPTER XVII AND SECTION 195 OF PART XVII -B, WHICH DEALS WITH DEDUCTION OF INCOME-TAX ON THE PAYMENTS MADE TO NON -RESIDENT, INTER ALIA, ON ACCOUNT OF FEES FOR TECHNICAL SERVICES BEING REL EVANT IN THE PRESENT CONTEXT IS REPRODUCED BELOW:- (1) ANY PERSON RESPONSIBLE FOR PAYING TO A NON- RESIDEN T, NOT BEING A COMPANY, OR TO A FOREIGN COMPANY, ANY INTEREST (NOT BEING IN TEREST ON SECURITIES) OR ANY OTHER SUM CHARGEABLE UNDER THE PROVISIONS OF THIS A CT (NOT BEING INCOME CHARGEABLE UNDER THE HEAD' SALARIES') SHALL, AT THE TIME OF CREDIT OF SUCH INCOME TO THE ACCOUNT OF THE PAYEE OR AT THE TIME OF PAYME NT THEREOF IN CASH OR BY THE ISSUE OF A CHEQUE OR DRAFT OR BY ANY OTHER MODE, WH ICHEVER IS EARLIER, DEDUCT INCOME- TAX THEREON AT THE RATES IN FORCE. I.T.A.NOS.1187 & 1188/H/2014 ASSESSMENT YEARS : 2011-2012 & 2012-2013 PAGE 18 OF 29 21. AS PROVIDED IN SECTION 195(1), ANY PERSON RESPO NSIBLE FOR PAYING TO A NON-RESIDENT, NOT BEING A COMPANY, OR TO A FOREIG N COMPANY, INTER ALIA, ANY OTHER SUM CHARGEABLE UNDER THE PROVISIONS OF TH E ACT (NOT BEING INCOME CHARGEABLE UNDER THE HEAD SALARIES) SHALL DEDUCT INCOME-TAX THEREON AT THE RATES IN FORCE. THE MEANING OF THE TERM RATES IN FORCE USED IN SECTION 195(1) IS GIVEN IN SECTION 2(37A) O F THE ACT AND CLAUSE (III) THEREOF BEING RELEVANT IN THE PRESENT CONTEXT IS RE -PRODUCED HEREUNDER:- CLAUSE 2(37A)- RATE OR RATES IN FORCE OR RATES IN FORCE IN RELATION TO AN ASSESSMENT OR FINANCIAL YEAR, MEAN- (I)...................... (II).................... (III) FOR THE PURPOSES OF DEDUCTION OF TAX U/S 195 OF THE ACT, THE RATE OR RATES OF INCOME-TAX SPECIFIED IN THIS BEHALF IN THE FINANCE ACT OF THE RELEVANT YEAR OR THE RATE OR RATES OF INCOME-TAX SP ECIFIED IN AN AGREEMENT ENTERED INTO BY THE CENTRAL GOVERNMENT U/S 90 OR AN AGREEMENT NOTIFIED BY THE CENTRAL GOVERNMENT UNDER SECTION 90A, WHICHE VER IS APPLICABLE BY VIRTUE OF THE PROVISIONS OF SECTION 90, OR SECTION 90A, AS THE CASE MAY BE. 22. THE AGREEMENT ENTERED INTO BY THE CENTRAL GOVER NMENT UNDER SECTION 90 AS REFERRED TO IN CLAUSE (III) OF SUB-SECTION (3 7A) OF SECTION 2 IS THE DOUBLE TAXATION AVOIDANCE AGREEMENT, WHICH GOVERNME NT OF INDIA HAS ENTERED INTO WITH THE GOVERNMENT OF ANY COUNTRY OUT SIDE INDIA OR SPECIFIED TERRITORY OUTSIDE INDIA. IN THE PRESENT CASE, THERE WERE SUCH AGREEMENTS ENTERED INTO BY INDIA WITH THE RESPECTIVE COUNTRIES OF WHICH THE CONCERNED NON-RESIDENT ENTITIES ARE RESIDENTS AND THE RATES O F INCOME TAX PAYABLE BY SUCH NON-RESIDENTS ON THE AMOUNTS IN QUESTION PAID BY THE ASSESSEE IN THE NATURE OF FEES FOR TECHNICAL SERVICES WERE SPECIFIE D IN THE SAID DTAAS AT 10%, 10.56%, 10.30% AND 15%. THE ASSESSEE ACCORDING LY DEDUCTED TAX AT SOURCE AT THE SAID RATES FROM THE CORRESPONDING AMO UNTS PAID TO THE RESPECTIVE NON-RESIDENTS AS REQUIRED BY THE PROVISI ONS OF SECTION 195 READ WITH SECTION 2(37A). IT IS THUS CLEAR THAT DEDUCTIO N OF TAX UNDER SECTION 195 FROM THE PAYMENTS MADE TO THE NON-RESIDENTS IN THE NATURE OF FEES FOR TECHNICAL SERVICES WAS MADE BY THE ASSESSEE AT THE RATE OR RATES OF INCOME TAX SPECIFIED IN THE RELEVANT DOUBLE TAXATION AVOID ANCE AGREEMENT, WHICH WERE ADOPTED AS RATES IN FORCE FOR THE PURPOSE OF D EDUCTION OF TAX UNDER I.T.A.NOS.1187 & 1188/H/2014 ASSESSMENT YEARS : 2011-2012 & 2012-2013 PAGE 19 OF 29 SECTION 195 IN VIEW OF THE SPECIFIC PROVISIONS CONT AINED IN SUB-SECTION (37A) OF SECTION 2. WE, THEREFORE, FIND NO MERIT IN THE ARGUMENTS RAISED BY THE LD. CIT(D.R.) THAT THE RELEVANT TREATIES DO NOT PROVIDE FOR DEDUCTION OF TAX AT SOURCE AT THE RATE WHICH IS LOWER THAN THE R ATE APPLIED BY THE ASSESSING OFFICER BY INVOKING THE PROVISIONS OF SEC TION 206AA AND THAT THERE IS NO QUESTION OF ABROGATION OF THE RELEVANT PROVISIONS OF TREATY IN THIS REGARD. WE ALSO DO NOT FIND THE ARGUMENTS RAIS ED BY THE LD. CIT(D.R.) THAT THE ROLE OF THE ASSESSEE AS A PAYER OF THE SUM IS LIMITED TO DEDUCTING TAX AT SOURCE AS PER LAW AND HE HAS NOTHING TO DO W ITH THE DETERMINATION OF TAX LIABILITY EVENTUALLY IN THE HANDS OF THE PAY EE, WHICH IS WITHIN THE COMPLETE DOMAIN OF THE ASSESSING OFFICER TO BE RELE VANT IN THIS CONTEXT AS THE TAX AT SOURCE WAS DEDUCTED BY THE ASSESSEE FROM THE SUMS PAID TO THE NON-RESIDENTS AS PER THE PROVISIONS OF SECTION 195( 1) READ WITH SECTION 2(37A) OF THE ACT. 23. WE ALSO FIND NO RELEVANCE OF THE PROVISIONS OF SECTION 4, 5 AND 9 RELIED UPON ON BEHALF OF THE ASSESSEE IN THIS CONTE XT AS WELL AS THE VARIOUS JUDICIAL PRONOUNCEMENTS CITED ON BEHALF OF THE ASSE SSEE IN SUPPORT OF THE STAND THAT CHARGING PROVISIONS OF SECTIONS 4, 5 & 9 OVERRIDE THE MACHINERY PROVISIONS GOVERNING THE TAX DEDUCTION AT SOURCE AS THE SAME HAVE BEEN RENDERED IN THE CONTEXT WHERE THE ISSUE RELATING TO THE LIABILITY TO DEDUCT TAX AT SOURCE FROM THE PAYMENTS MADE TO THE NON-RES IDENTS HAD ARISEN APPARENTLY WHEN THE AMOUNT IN QUESTION PAID TO THE NON-RESIDENTS WAS NOT CHARGEABLE TO TAX AS PER THE CHARGING PROVISIONS OF SECTIONS 4, 5 AND 9 READ WITH THE PROVISIONS OF THE RELEVANT DTAA. THESE ARG UMENTS AND CASE LAWS NO DOUBT WILL BE RELEVANT WHILE CONSIDERING THE EXT ENT OF OVERRIDING EFFECT OF SECTION 206AA AND WE SHALL CONSIDER AND DEAL WIT H THE SAME AT THE APPROPRIATE STAGE. SUFFICE IT TO SAY AT THIS STAGE THAT TAX AT SOURCE WAS DEDUCTED BY THE ASSESSEE FROM THE PAYMENTS IN QUEST ION MADE TO THE NON- RESIDENTS ON ACCOUNT OF FEES FOR TECHNICAL SERVICES AS PER THE RATES OF TAX PROVIDED IN THE RELEVANT DTAAS, WHICH WERE ADOPTED AS THE RATES IN FORCE I.T.A.NOS.1187 & 1188/H/2014 ASSESSMENT YEARS : 2011-2012 & 2012-2013 PAGE 20 OF 29 FOR THE PURPOSE OF DEDUCTION OF TAX UNDER SECTION 1 95 BY VIRTUE OF SECTION 2(37A). 24. HAVING COME TO THE CONCLUSION THAT THE CONCERNE D NON-RESIDENT PERSONS TO WHOM THE AMOUNT ON ACCOUNT OF FEES FOR T ECHNICAL SERVICES WAS PAID BY THE ASSESSEE WERE LIABLE TO TAX IN INDIA AT THE RATES PRESCRIBED IN THE RELEVANT DTAAS AND THE ASSESSEE AS PAYER OF THE SAID AMOUNTS HAD DEDUCTED TAX AT SOURCE FROM THE SAID PAYMENTS AS PE R SECTION 195(1) AT THE SAID RATES, WHICH WERE ADOPTED AS THE RATES FOR TDS BEING THE RATES IN FORCE WITHIN THE MEANING OF SECTION 2(37A), THE ISSUE BOI LS DOWN TO WHETHER THE ASSESSEE CAN STILL BE HELD TO BE LIABLE TO DEDUCT T AX AT SOURCE AT HIGHER RATE BY VIRTUE OF SECTION 206AA OF THE ACT AS A RESULT O F FAILURE OF SAID PAYEES TO FURNISH THEIR PANS. THE PROVISIONS OF THE SAID SECT ION READ AS UNDER:- '206AA. REQUIREMENT TO FURNISH PERMANENT ACCOUNT NUMBER. (1) NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER PRO VISIONS OF THIS ACT, ANY PERSON ENTITLED TO RECEIVE ANY SUM OR INCOME OR AMO UNT, ON WHICH TAX IS DEDUCTIBLE UNDER CHAPTER XVIIB (HEREAFTER REFERRED TO AS DEDUC TEE) SHALL FURNISH HIS PERMANENT ACCOUNT NUMBER TO THE PERSON RESPONSIBLE FOR DEDUCTING SUCH TAX (HEREAFTER REFERRED TO AS DEDUCTOR), FAILING WHICH TAX SHALL BE DEDUCTED AT THE HIGHER OF THE FOLLOWING RATES, NAMELY: ( I ) AT THE RATE SPECIFIED IN THE RELEVANT PROVISION OF THIS ACT; OR ( II ) AT THE RATE OR RATES IN FORCE; OR ( III ) AT THE RATE OF TWENTY PER CENT. (2) NO DECLARATION UNDER SUB-SECTION (1) OR SUB-SEC TION (1A) OR SUB-SECTION (1C) OF SECTION 197A SHALL BE VALID UNLESS THE PERSON FURNI SHES HIS PERMANENT ACCOUNT NUMBER IN SUCH DECLARATION. (3) IN CASE ANY DECLARATION BECOMES INVALID UNDER S UB-SECTION (2), THE DEDUCTOR SHALL DEDUCT THE TAX AT SOURCE IN ACCORDANCE WITH THE PRO VISIONS OF SUB-SECTION (1). (4) NO CERTIFICATE UNDER SECTION 197 SHALL BE GRANT ED UNLESS THE APPLICATION MADE UNDER THAT SECTION CONTAINS THE PERMANENT ACCOUNT N UMBER OF THE APPLICANT. (5) THE DEDUCTEE SHALL FURNISH HIS PERMANENT ACCOUN T NUMBER TO THE DEDUCTOR AND BOTH SHALL INDICATE THE SAME IN ALL THE CORRESPONDE NCE, BILLS, VOUCHERS AND OTHER DOCUMENTS WHICH ARE SENT TO EACH OTHER. (6) WHERE THE PERMANENT ACCOUNT NUMBER PROVIDED TO THE DEDUCTOR IS INVALID OR DOES NOT BELONG TO THE DEDUCTEE, IT SHALL BE DEEMED THAT THE DEDUCTEE HAS NOT FURNISHED HIS PERMANENT ACCOUNT NUMBER TO THE DEDUC TOR AND THE PROVISIONS OF SUB- SECTION (1) SHALL APPLY ACCORDINGLY.'. I.T.A.NOS.1187 & 1188/H/2014 ASSESSMENT YEARS : 2011-2012 & 2012-2013 PAGE 21 OF 29 25. IT IS EVIDENT THAT SECTION 206AA CONTAINS A NON-OBSTANTE CLAUSE AND RELYING ON THE SAME, THE STAND TAKEN BY THE AUTHORI TIES BELOW, WHICH IS SUPPORTED BY THE LD. CIT(D.R.) AT THE TIME OF HEARI NG BEFORE US, IS THAT THE PROVISIONS OF SECTION 206AA HAVE A OVERRIDING EFFEC T AND SINCE THE SAID PROVISIONS OVERRIDE ALL OTHER PROVISIONS OF THE INC OME TAX ACT, 1961, THE SAME ARE REQUIRED TO BE GIVEN EFFECT TO. ON THE OTH ER HAND, ONE OF THE CONTENTIONS RAISED ON BEHALF OF THE ASSESSEE IN THI S REGARD IS THAT THE NON- RESIDENTS AT THE RELEVANT TIME WERE NOT EVEN REQUIR ED TO OBTAIN PERMANENT ACCOUNT NUMBERS AS PER THE PROVISIONS OF SECTION 1 39A(8) READ WITH RULE 114C AND SINCE THEY WERE NOT OBLIGED TO EVEN OBTAIN THE PAN, THEY CANNOT BE REQUIRED TO FURNISH THE SAME AS ENVISAGED IN SEC TION 206AA AND THE SAID PROVISIONS, THEREFORE, CANNOT BE APPLIED IN THE CAS E OF NON-RESIDENTS EVEN BY THE OVERRIDING EFFECT GIVEN TO THE SAID PROVISIO NS, WHICH IS REQUIRED TO BE READ DOWN. IN SUPPORT OF THIS CONTENTION, RELIAN CE HAS BEEN PLACED ON BEHALF OF THE ASSESSEE ON THE DECISION OF THE HONB LE ANDHRA PRADESH HIGH COURT IN THE CASE OF MULLAPUDI VENKATARAYUDU VS.- UNION OF INDIA (SUPRA), WHEREIN IT WAS HELD THAT ANY FAILURE TO FILE RETURN MUST CONNOTE OBLIGATION TO FILE THE RETURN. RELIANCE IS ALSO PLACED ON BEHA LF OF THE ASSESSEE IN SUPPORT OF THIS STAND ON THE DECISION OF THE HONBL E KARNATAKA HIGH COURT IN THE CASE OF SMT. KAUSHALLAYA BAI & OTHERS (SUPRA ). 26. IN THE CASE OF SMT. KAUSHALLAYA BAI & OTHERS (S UPRA), THE ASSESSEES HAVING INCOME BELOW THE TAXABLE LIMIT WERE NOT REQU IRED TO OBTAIN PERMANENT ACCOUNT NUMBERS AS PER SECTION 139A OF TH E ACT AND STILL THE PROVISIONS OF SECTION 206AA WERE INVOKED TO DEDUCT TAX AT HIGHER RATE FROM THE AMOUNT OF INTEREST INCOME PAID TO THEM AS A RES ULT OF THEIR FAILURE TO FURNISH THE PERMANENT ACCOUNT NUMBERS TO THE PAYERS /DEDUCTORS. TAKING NOTE OF THIS CONTRADICTION BETWEEN THE PROVISIONS O F SECTION 139A AND 206AA, HONBLE KARNATAKA HIGH COURT READ DOWN THE O VERRIDING PROVISIONS OF SECTION 206AA AND MADE THEM INAPPLICABLE TO THE PERSONS, WHO WERE NOT EVEN REQUIRED TO OBTAIN THE PERMANENT ACCOUNT NUMBE RS BY VIRTUE OF SECTION 139A. ALTHOUGH THE FACTS INVOLVED IN THE PR ESENT CASE ARE SLIGHTLY I.T.A.NOS.1187 & 1188/H/2014 ASSESSMENT YEARS : 2011-2012 & 2012-2013 PAGE 22 OF 29 DIFFERENT, INASMUCH AS, THE NON-RESIDENT PAYEES IN THE PRESENT CASE WERE HAVING TAXABLE INCOME IN INDIA, THE FACTS REMAIN TO BE SEEN IS THAT THEY WERE NOT OBLIGED TO OBTAIN THE PERMANENT ACCOUNT NU MBERS IN VIEW OF SECTION 139A(8) READ WITH RULE 114C. THERE IS THUS A CLEAR CONTRADICTION BETWEEN SECTION 206AA AND SECTION 139A(8) READ WITH RULE 114C, AS WAS PREVAILED IN THE CASE OF KAUSHALLAYA BAI & OTHERS ( SUPRA) AND BY APPLYING THE ANALOGY OF THE SAID DECISION, WE FIND MERIT IN THE CONTENTION RAISED ON BEHALF OF THE ASSESSEE THAT THE PROVISIONS OF SECTI ON 206AA ARE REQUIRED TO BE READ DOWN SO AS TO MAKE IT INAPPLICABLE IN THE C ASES OF CONCERNED NON- RESIDENTS PAYEES WHO WERE NOT UNDER AN OBLIGATION T O OBTAIN THE PERMANENT ACCOUNT NUMBERS. 27. THE NEXT ISSUE THAT REQUIRES OUR CONSIDERATION IN THIS CONTEXT IS WHETHER THE RATE OF TAX AS PROVIDED IN THE RELEVANT DTAAS AND ADOPTED FOR THE PURPOSE OF TAX DEDUCTION AT SOURCE BEING RATE I N FORCE BY VIRTUE OF SECTION 2(37A) WOULD BE APPLICABLE OR THE HIGHER RA TE AS PROVIDED IN SECTION 206 BY VIRTUE OF THE OVERRIDING EFFECT GIVE N TO THE SAID PROVISION, FOR THE PURPOSE OF DEDUCTION OF TAX AT SOURCE. HERE IT IS NECESSARY TO UNDERSTAND THE SCOPE AND APPLICABILITY OF THE PROVI SIONS OF TAX TREATY, VIS- A-VIS, THE PROVISIONS OF DOMESTIC LAW AND THE NORMS GOVERNING THE CO- EXISTENCE OF TAX TREATIES AND DOMESTIC LAW LEGISLAT ION. A USEFUL REFERENCE IN THIS REGARD CAN BE MADE TO THE LANDMARK DECISION OF THE HONBLE ANDHRA PRADESH HIGH COURT IN THE CASE OF SANOFI PASTEUR HO LDING SA VS.- DEPARTMENT OF REVENUE & OTHERS (SUPRA). IN THE SAID CASE, THE CORE ISSUE WAS REQUIRED TO BE DECIDED ON APPRECIATION OF SYNER GIES BETWEEN THE DTAA PROVISIONS AND THOSE OF THE DOMESTIC LAW AND WHILE DECIDING THE SAME, THE ORIGINS AND EVOLUTION OF TAX TREATIES AND HOW THOSE CONFLATE, COOPERATE WITH DOMESTIC TAX LEGISLATION AND CONVERGE TO SIGNAL A U NIFIED RAFT OF APPLICABLE NORMS, WERE TAKEN INTO CONSIDERATION BY THE HONBLE ANDHRA PRADESH HIGH COURT IN THE LIGHT OF RELEVANT JUDICIAL PRONOUNCEME NTS INCLUDING THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F AZADI BACHAO ANDOLAN (SUPRA) AND P.V.A.L. KULANDAGAN CHETTIAR (SUPRA). I N THIS REGARD, A I.T.A.NOS.1187 & 1188/H/2014 ASSESSMENT YEARS : 2011-2012 & 2012-2013 PAGE 23 OF 29 REFERENCE WAS MADE TO THE DECISION OF THE HONBLE S UPREME COURT IN THE CASE OF AZADI BACHAO ANDOLAN (SUPRA), WHEREIN IT WA S HELD THAT WHEN DOUBLE TAXATION AVOIDANCE TREATY, CONVENTION OR AGR EEMENT (FOR SHORT, TREATY) BECOMES OPERATIONAL AND IS NOTIFIED BY TH E CENTRAL GOVERNMENT FOR IMPLEMENTATION OF ITS TERMS UNDER SECTION 90 OF THE ACT, PROVISIONS OF THE TREATY, WITH RESPECT TO CASES TO WHICH THEY WOU LD APPLY, WOULD OPERATE EVEN IF INCONSISTENT WITH PROVISIONS OF THE ACT. AS A CONSEQUENCE, IF A TAX LIABILITY IS IMPOSED BY THE ACT, THE TREATY MAY BE REFERRED TO FOR NEGATIVING OR REDUCING IT AND IN CASE OF CONFLICT BETWEEN THE PROVISIONS OF THE ACT AND OF THE TREATY, THE PROVISIONS OF THE TREATY WOULD P REVAIL AND ARE LIABLE TO BE ENFORCED. IT WAS ALSO HELD THAT SINCE THE GENERA L PRINCIPLE OF CHARGEABILITY OF TAX UNDER SECTION 4 AND THE GENERA L PRINCIPLE OF ASCERTAINMENT OF TOTAL INCOME UNDER SECTION 5 OF TH E ACT ARE SUBJECT TO THE PROVISIONS OF THE ACT, THE PROVISIONS OF THE TREATY WOULD AUTOMATICALLY OVERRIDE THE PROVISIONS OF THE ACT IN THE MATTER OF ASCERTAINMENT OF CHARGEABILITY TO INCOME TAX AND ASCERTAINMENT OF TH E TOTAL INCOME, TO THE EXTENT OF INCONSISTENCY WITH TREATY TERMS. 28. HONBLE ANDHRA PRADESH HIGH COURT IN THE CASE O F SANOFI PASTEUR HOLDING S.A. VS.- DEPARTMENT OF REVENUE & OTHERS ( SUPRA) ALSO RELIED ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CA SE OF CIT VS.- P.V.A.L. KULANDAGAN CHETTIAR (SUPRA), WHEREIN IT WAS HELD TH AT THE TAXATION POLITY IS WITHIN THE POWER OF THE GOVERNMENT AND SECTION 9 0 OF THE ACT ENABLES THE GOVERNMENT TO FORMULATE ITS POLICIES THROUGH TR EATIES ENTERED INTO BY IT AND SUCH TREATIES DETERMINE THE FISCAL DOMICILE IN ONE STATE OR THE OTHER AND THIS DETERMINATION IN THE TREATY PREVAILS OVER THE OTHER PROVISIONS OF THE ACT. AFTER TAKING INTO CONSIDERATION, INTER ALI A, THE DECISIONS OF THE HONBLE SUPREME COURT IN THE CASE OF AZADI BACHAO A NDOLAN & ANOTHER (SUPRA) AND P.V.A.L. KULANDAGON CHETTIAR (SUPRA), T HE ORIGINS AND EVOLUTION OF TAX TREATIES AND OTHER RELEVANT ASPECTS, IT WAS HELD BY THE HONBLE ANDHRA PRADESH HIGH COURT THAT TREATY PROVISIONS AR E EXPRESSIONS OF SOVEREIGN POLICY OF MORE THAN ONE SOVEREIGN STATE, NEGOTIATED AND ENTERED INTO AT A POLITICAL OR DIPLOMATIC LEVEL AND HAVE SE VERAL EXPLICIT, SUBLIMINAL I.T.A.NOS.1187 & 1188/H/2014 ASSESSMENT YEARS : 2011-2012 & 2012-2013 PAGE 24 OF 29 AND UNARTICULATED CONSIDERATIONS AS THEIR BASIS. PR INCIPLES RELEVANT TO TREATY INTERPRETATION ARE NOT THE SAME AS THOSE PER TAINING TO INTERPRETATION OF MUNICIPAL LEGISLATION. A STRAINED CONSTRUCTION W HICH SUBVERTS THE POLICY UNDERLYING INDIA ENTERING INTO A DOUBLE TAXATION AV OIDANCE TREATY WITH ANOTHER STATE, BY ENABLING DUAL TAXATION THROUGH AR TIFICIAL INTERPRETATION OF TREATY PROVISIONS, EITHER BY THE TAX ADMINISTRAT OR OR BY THE JUDICIAL BRANCH AT THE INVITATION OF THE REVENUE OF ONE OF T HE CONTRACTING STATES TO A TREATY WOULD TRANSGRESS THE INHERENT AND VITAL CO NSTITUTIONAL SCHEME, OF SEPARATION OF POWERS. IT WAS HELD THAT THE PROVISIO NS OF THE TREATY MUST RECEIVE A GOOD FAITH INTERPRETATION AND WHERE THE O PERATIVE TREATYS PROVISIONS ARE UNAMBIGUOUS AND THEIR LEGAL MEANING CLEARLY DISCERNIBLE AND LEND TO AN UN-CONTESTABLE COMPREHENSION ON GOOD FAITH INTERPRETATION, NO FURTHER INTERPRETIVE EXERTION IS AUTHORIZED FOR THAT WOULD TANTAMOUNT TO UNLAWFUL ENCROACHMENT INTO THE DOMAIN OF TREATY- MAKING UNDER ARTICLE 253. IT WAS FURTHER HELD THAT WHERE THE PROVISIONS OF THE ACT AND OF THE DTAA ARE OVERLAPPING AND COMPETING LEGAL MAGISTERIA , THE PROPER INTERPRETIVE ROLE REQUIRES, ON HARMONIOUS CONSTRUCT ION AND IN ACCORDANCE WITH THE RELATIVE WEIGHT AND PRIORITY, TO GIVE EFFE CT TO BOTH COMPETING PROVISIONS, AS PER THE INTER SE WEIGHTAGE MANDATE BY THE OVERREACHING LEGAL NORMS, SET OUT IN SECTION 90(2) OF THE ACT. THE RAT IO LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASES OF AZADI BACHAO ANDOLAN AND ANOTHER (SUPRA) AND P.V.A.L. KULANDAGAN CHETTIAR (SUPRA) AS FURTHER EXPLAINED AND CLARIFIED BY THE HONBLE ANDHRA PRADESH HIGH COURT IN THE CASE OF SANOFI PASTEUR HOLDING SA VS.- DEPARTMENT OF REVENUE & OT HERS (SUPRA) MAKES IT ABUNDANTLY CLEAR THAT WHENEVER THERE IS A CONFLI CT BETWEEN THE PROVISIONS OF THE TREATY AND THE PROVISIONS OF THE DOMESTIC LAW, THE PROVISIONS OF TREATY WILL PREVAIL AND OVERRIDE EVEN THE CHARGING PROVISIONS OF THE DOMESTIC LAW. KEEPING IN VIEW THIS LEGAL POS ITION, WE DO NOT FIND MERIT IN THE CONTENTION RAISED BY THE LD. CIT(D.R.) THAT AS PER SECTION 90(2) OF THE ACT, TREATY DOES NOT OVERRIDE THE ACT BUT GE TS OVERRIDDEN AND REJECT THE SAME BEING COMPLETELY CONTRARY TO THE PROPOSITI ON PROPOUNDED INTER ALIA BY THE HONBLE APEX COURT. I.T.A.NOS.1187 & 1188/H/2014 ASSESSMENT YEARS : 2011-2012 & 2012-2013 PAGE 25 OF 29 29. THE LD. D.R. IN SUPPORT OF THE REVENUES CASE O N THE ISSUE UNDER CONSIDERATION HAS RAISED AN ARGUMENT THAT THE ROLE OF THE ASSESSEE AS A PAYER OF THE SUM IS LIMITED TO DEDUCTING TAX AT SOU RCE AS PER THE RELEVANT PROVISIONS OF CHAPTER-XVII-B AND HE HAS NOTHING TO DO WITH THE DETERMINATION OF TAX LIABILITY EVENTUALLY IN THE HA NDS OF THE PAYEE, WHICH IS TO BE DONE BY THE ASSESSING OFFICER ALONE AS PER THE RELEVANT CHARGING PROVISIONS OF THE ACT. TO COUNTER THIS ARGUMENT OF THE LD. D.R., RELIANCE HAS BEEN PLACED ON BEHALF OF THE ASSESESE ON THE DECISI ON OF THE HONBLE SUPREME COURT IN THE CASE OF ELI LILLY AND CO. (IND IA) P. LIMITED, WHEREIN IT WAS HELD THAT IT CANNOT BE STATED AS A BROAD PRO POSITION THAT THE TDS PROVISIONS, WHICH ARE IN THE NATURE OF MACHINERY PR OVISIONS TO ENABLE COLLECTION AND RECOVERY OF TAX, ARE INDEPENDENT OF CHARGING PROVISIONS, WHICH DETERMINE THE ASSESSABILITY IN THE HANDS OF T HE PAYEE. RELIANCE IS ALSO PLACED ON BEHALF OF THE ASSESSEE ON THE DECISI ON OF THE HONBLE SUPREME COURT IN THE CASE OF G.E. TECHNOLOGY CENTRE (P) LIMITED. IN THE SAID CASE, THE CONTENTION WAS RAISED ON BEHALF OF T HE DEPARTMENT THAT THE MOMENT THERE IS REMITTANCE, THE OBLIGATION TO DEDUC T TAX AT SOURCE ARISES AND THE SAME WAS REJECTED BY THE HONBLE SUPREME CO URT BY OBSERVING THAT THE OBLIGATION TO DEDUCT TAX AT SOURCE ARISES ONLY WHEN THERE IS A SUM CHARGEABLE UNDER THE ACT. IT WAS HELD THAT THE RELE VANT TDS PROVISIONS AS CONTAINED IN SECTION 195 HAVE TO BE READ IN CONFORM ITY WITH THE CHARGING PROVISIONS OF SECTIONS 4, 5 & 9 AND WHILE INTERPRET ING THE PROVISIONS OF THE INCOME TAX ACT, ONE CANNOT READ THE CHARGING SECTIO N OF THAT ACT DE HORS THE MACHINERY SECTION. IT WAS HELD THAT THE ACT IS TO BE READ AS AN INTEGRATED CODE. IT WAS HELD THAT THE PROVISIONS FOR DEDUCTION OF TAX AT SOURCE AS CONTAINED IN CHAPTER-XVII AND THE CHARGING PROVISIO NS OF THE INCOME TAX ACT FORM ONE SINGLE INTEGRAL INSEPARABLE CODE AND, THEREFORE, THE PROVISIONS RELATING TO TDS CANNOT BE APPLIED INDEPE NDENT OF THE CHARGING PROVISIONS. IT IS PERTINENT TO NOTE HERE THAT THIS DECISION IN THE CASE OF G.E. TECHNOLOGY CENTRE (P) LIMITED IS RENDERED BY THE HO NBLE SUPREME COURT AFTER TAKING INTO CONSIDERATION THE EARLIER DECISIO N RENDERED IN THE CASE OF I.T.A.NOS.1187 & 1188/H/2014 ASSESSMENT YEARS : 2011-2012 & 2012-2013 PAGE 26 OF 29 TRANSPORTATION CORPORATION OF A.P. LIMITED (SUPRA) ON WHICH RELIANCE HAS BEEN PLACED BY THE LD. CIT, D.R. 30. THE RATIO OF THE TWO DECISIONS OF THE HONBLE S UPREME COURT IN THE CASE OF ILI LILLY AND CO. (INDIA) P. LIMITED (SUPRA ) AND G.E. TECHNOLOGY CENTRE (P) LIMITED (SUPRA) AS DISCUSSED ABOVE CLEAR LY SHOWS THAT THE CHARGING PROVISIONS CONTROL AND OVERRIDE THE MACHIN ERY PROVISIONS DEALING WITH TAX DEDUCTION AT SOURCE. SIMILARLY, THE PROVIS IONS OF DTAAS BY VIRTUE OF SECTION 90(2) TO THE EXTENT MORE BENEFICIAL TO T HE ASSESSEE OVERRIDE THE PROVISIONS OF DOMESTIC LAW AS HELD, INTER ALIA, BY THE HONBLE SUPREME COURT IN THE CASE OF AZADI BACHAO ANDOLAN & ANOTHER (SUPRA) AND P.V.A.L. KULANDAGAN CHETTIAR (SUPRA). SINCE SECTION 206AA FA LLS IN CHAPTER XVII-B DEALING WITH TAX DEDUCTION AT SOURCE, IT FOLLOWS TH AT THE TREATY PROVISIONS WHICH OVERRIDE EVEN THE CHARGING PROVISION OF THE D OMESTIC LAW BY VIRTUE OF SECTION 90(2) WOULD ALSO OVERRIDE THE MACHINERY PROVISIONS OF SECTION 206AA IRRESPECTIVE OF NON-OBSTANTE CLAUSE CONTAINED THEREIN AND THE SAME IS REQUIRED TO BE RESTRICTED TO THAT EXTENT AND REA D DOWN TO GIVE EFFECT TO THE RELEVANT PROVISIONS OF DTAAS, WHICH ARE OVERRID ING BEING BENEFICIAL TO THE ASSESSEE. 31. THERE IS ONE MORE BASIS TO SUPPORT THE ABOVE CO NCLUSION. AS RIGHTLY POINTED OUT ON BEHALF OF THE ASSESSEE, CHAPTER-XA C ONTAINING THE PROVISION RELATING TO GENERAL ANTI-AVOIDANCE RULE (GAAR) HAS BEEN INSERTED IN THE STATUTE BY THE FINANCE ACT, 2013 WITH EFFECT FROM 1 ST APRIL, 2016 AND ALTHOUGH THE PROVISIONS CONTAINED IN THE SAID CHAPT ER ARE GIVEN OVERRIDING EFFECT BY VIRTUE OF NON-OBSTANTE CLAUSE CONTAINED IN SECTION 95, A SEPARATE PROVISION HAS BEEN INSERTED SIMULTANEOUSLY IN THE F ORM OF SUB-SECTION (2A) IN SECTION 90 PROVIDING SPECIFICALLY THAT NOTWITHST ANDING ANYTHING CONTAINED IN SUB-SECTION (2), THE PROVISIONS OF CHA PTER XA OF THE ACT SHALL APPLY TO THE ASSESSEE EVEN IF SUCH PROVISIONS ARE N OT BENEFICIAL TO HIM. AS RIGHTLY POINTED OUT ON BEHALF OF THE ASSESSEE, NO S UCH PROVISION, HOWEVER, IS MADE SEPARATELY AND SPECIFICALLY IN SECTION 90 T O GIVE OVERRIDING EFFECT TO SECTION 206AA OVER SECTION 90(2), WHICH CLEARLY SHOWS THAT THE INTENTION I.T.A.NOS.1187 & 1188/H/2014 ASSESSMENT YEARS : 2011-2012 & 2012-2013 PAGE 27 OF 29 OF THE LEGISLATURE IS NOT TO GIVE OVERRIDING EFFECT TO SECTION 206AA OVER THE PROVISIONS OF THE RELEVANT DTAA WHICH ARE BENEFICIA L TO THE ASSESSEE. IN THE CASE OF SANOFI PASTEUR HOLDING SA VS.- DEPARTMENT OF REVENUE & OTHERS (SUPRA), THE CONTENTION RAISED ON BEHALF OF THE REV ENUE WAS THAT THE RELEVANT RETROSPECTIVE AMENDMENTS MADE IN THE INCOM E TAX ACT, 1961 OVERRIDE THE TAX TREATIES AND THE SAME WAS REJECTED BY THE HONBLE ANDHRA PRADESH HIGH COURT ON THE GROUND THAT THE RELEVANT AMENDMENTS WERE NOT FORTIFIED BY A NON-OBSTANTE CLAUSE EXPRESSED TO OVERRIDE TAX TREATIES AS WAS MADE IN CASE OF THE GAAR PROVISIONS SPECIFICALL Y BY INSERTING SUB- SECTION (2A) IN SECTION 90 TO ENABLE APPLICATION OF CHAPTER X-A EVEN IF THE SAME BE NOT BENEFICIAL TO THE ASSESSEE THEREBY ENAC TING AN OVERRIDE EFFECT OVER THE PROVISIONS OF SECTION 90(2). IN THE CASE O F BHARAT HARI SINGHANIA (SUPRA), IT WAS HELD BY THE HONBLE SUPREME COURT T HAT THE SCOPE AND PURPORT OF THE NON-OBSTANTE CLAUSE HAS TO BE ASCERTAINED BY READING IT IN THE CONTEXT OF THE RELEVANT PROVISIONS AND CONSISTE NT WITH THE SCHEME OF THE ENACTMENT. AS EXPLAINED BY CBDT WHILE INSERTING THE PROVISION OF SECTION 206AA VIDE CIRCULAR NO. 5 OF 2010, THE INTE NTION OF THE SAID PROVISION IS MAINLY TO STRENGTHEN PAN MECHANISM AND KEEPING IN VIEW THIS LIMITED FUNCTION AND PURPOSE, WE ARE OF THE VIEW TH AT NON-OBSTANTE CLAUSE CONTAINED IN THE MACHINERY PROVISION OF SECTION 206 AA IS REQUIRED TO BE ASSIGNED A RESTRICTIVE MEANING AND THE SAME CANNOT BE READ SO AS TO OVERRIDE EVEN THE RELEVANT BENEFICIAL PROVISIONS OF THE TREATIES, WHICH OVERRIDE EVEN THE CHARGING PROVISIONS OF THE INCOME TAX ACT BY VIRTUE OF SECTION 90(2). IN OUR OPINION, IT, THEREFORE, CANNO T BE SAID THAT THE PROVISIONS OF SECTION 206AA, DESPITE THE NON-OBSTANTE CLAUSE CONTAINED THEREIN, WOULD OVERRIDE THE PROVISIONS OF DTAA TO T HE EXTENT THEY ARE MORE BENEFICIAL TO THE ASSESSEE AND IT IS THE BENEFICIAL PROVISION OF TREATY THAT WILL OVERRIDE THE MACHINERY PROVISIONS OF SECTION 2 06AA. 32. IN THE CASE OF BOSCH LIMITED (SUPRA) RELIED UPO N BY THE LD. CIT(D.R.) IN SUPPORT OF THE REVENUES CASE, THE ISSUE RELATIN G TO THE APPLICABILITY OF SECTION 206AA HAD COME UP FOR CONSIDERATION BEFORE THE BANGALORE BENCH OF THIS TRIBUNAL IN TWO CONTEXTS. FIRST, IT WAS CON SIDERED IN THE CONTEXT OF I.T.A.NOS.1187 & 1188/H/2014 ASSESSMENT YEARS : 2011-2012 & 2012-2013 PAGE 28 OF 29 GROSSING UP AND WHILE DECIDING THE SAME, IT WAS HEL D BY THE TRIBUNAL THAT THE VERY NATURE OF RELEVANT INCOME BEING BUSINESS I NCOME NOT CHARGEABLE TO TAX IN THE HANDS OF THE NON-RESIDENT RECIPIENTS HAVING NO PERMANENT ESTABLISHMENT IN INDIA, THE PAYMENTS DID NOT REQUIR E WITHHOLDING OF TAX AT SOURCE UNDER SECTION 195 OF THE ACT AND THE ASSESSE E WAS NOT UNDER AN OBLIGATION TO WITHHOLD TAX EVEN AS PER THE PROVISIO NS OF SECTION 206AA AT HIGHER RATE OF 20%. IN OTHER CONTEXT, THE AMOUNT PA ID TO THE NON-RESIDENT WAS FOUND BY THE TRIBUNAL TO BE IN THE NATURE OF FE ES FOR TECHNICAL SERVICES CHARGEABLE TO TAX IN THE HANDS OF THE NON-RESIDENT IN INDIA AND SINCE THERE WAS A FAILURE ON THE PART OF THE CONCERNED NON-RESI DENT TO FURNISH PAN TO THE ASSESSEE, THE ASSESSEE WAS HELD TO BE LIABLE TO WITHHOLD TAX AT HIGHER OF RATES PRESCRIBED IN SECTION 206AA BY THE TRIBUNA L. IT, HOWEVER, APPEARS THAT ALL THE RELEVANT ASPECTS AS DISCUSSED ABOVE, S UCH AS OVERRIDING EFFECT OF THE TREATY PROVISIONS AS PER SECTION 90(2), THE LIMITED EFFECT OF NON- OBSTANTE CLAUSE CONTAINED IN THE MACHINERY PROVISION OF SEC TION 206AA ETC. WERE NOT ARGUED BEFORE THE TRIBUNAL ON BEHALF OF TH E ASSESSEE AND THE TRIBUNAL, THEREFORE, HAD NO OCCASION TO CONSIDER TH E SAME WHILE DECIDING THIS ISSUE. ON THE OTHER HAND, PUNE BENCH OF ITAT I N THE CASE OF SERUM INSTITUTE OF INDIA LIMITED (SUPRA) HAS CONSIDERED S OME OF THESE RELEVANT ASPECTS AND AFTER CONSIDERING THE PROPOSITIONS PROP OUNDED BY THE HONBLE SUPREME COURT IN THE CASE OF AZADI BACHAO ANDOLAN & ANOTHER (SUPRA), ELI LILLY AND CO. (INDIA) P. LIMITED (SUPRA) AND G.E. T ECHNOLOGY CENTRE (P) LIMITED (SUPRA), IT WAS HELD BY THE TRIBUNAL, AND I N OUR OPINION, RIGHTLY SO, THAT SECTION 206AA OF THE ACT CANNOT OVERRIDE THE PROVISIONS OF SECTION 90(2) OF THE ACT. 33. IN VIEW OF THE ABOVE DISCUSSION, WE ARE OF THE VIEW THAT THE PROVISIONS OF SECTION 206AA OF THE ACT WILL NOT HAV E A OVERRIDING EFFECT FOR ALL OTHER PROVISIONS OF THE ACT AND THE PROVISIONS OF THE TREATY TO THE EXTENT THEY ARE BENEFICIAL TO THE ASSESSEE WILL OVERRIDE S ECTION 206AA BY VIRTUE OF SECTION 90(2). IN OUR OPINION, THE ASSESSEE THEREFO RE CANNOT BE HELD LIABLE TO DEDUCT TAX AT HIGHER OF THE RATES PRESCRIBED IN SECTION 206AA IN CASE OF I.T.A.NOS.1187 & 1188/H/2014 ASSESSMENT YEARS : 2011-2012 & 2012-2013 PAGE 29 OF 29 PAYMENTS MADE TO NON-RESIDENT PERSONS HAVING TAXABL E INCOME IN INDIA IN SPITE OF THEIR FAILURE TO FURNISH THE PERMANENT ACC OUNT NUMBERS. WE, ACCORDINGLY, ANSWER THE QUESTION REFERRED TO THIS S PECIAL BENCH IN THE NEGATIVE AND IN FAVOUR OF THE ASSESSEE AND ALLOW BO TH THE APPEALS OF THE ASSESSEE FOR A.YS. 2011-12 AND 2012-13. 34. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON FEBRUARY 13 TH , 2017. SD/- SD /- SD/- (JUSTICE DEV DARSHAN SUD) (D. MANMOHAN) ( P.M. JAGTAP) PRESIDENT VICE-PRESIDENT ACCOUNTANT MEMBER HYDERABAD, THE 13 TH DAY OF FEBRUARY, 2017 COPIES TO : (1) M/S. NAGARJUNA FERTILIZERS AND CHEMICALS LIMITED, 8-2-548, CORPORATE BUILDING, NAGARJUNA HILLS, PUNJAGUTTA, HYDERABAD-500 082 (2) ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-15(1), HYDERABAD, I.T. TOWERS, A.C. GUARDS, HYDERABAD (3) ASSISTANT DIRECTOR OF INCOME TAX, IT-II, HYDERABAD, I.T. TOWERS, A.C. GUARDS, HYDERABAD (4) COMMISSIONER OF INCOME TAX(APPEALS)-II, HYDERA BAD; (5) COMMISSIONER OF INCOME TAX- , HYDERABA D, (6) THE DEPARTMENTAL REPRESENTATIVE (7) GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, HYDERABAD BENCHES, HYDERABAD LAHA/SR. P.S.