M/s. Arvind Lifestyle Brands Limited, Bengaluru V. Assistant Commissioner Of Income Tax, CPC- TDS, Ghaziabad

ITA 2270/BANG/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 6990 (ITAT-BANGALORE)
• Duration Of Justice: 3 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-02-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 30-01-2020
• Assessment Year: 2011-2012
• Appeal Filed On: 29-10-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: BIREN V SHAH
• Keywords: Double taxation relief; TDS
• Section: 206AA; 200A; 201; 264; 13; 22; 27; 12; 154; 2; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH ES : A , BANGALORE BEFORE SHRI N.V.VASUDEVAN, VICE PRESIDENT AND S HRI B.R.BASK A R A N, A CCOUNTANT MEMBER ITA NO S . 2 2 7 0 TO 2278 ( BANG)/ 20 1 9 ( ASSESSMENT YEAR S : 20 11 - 12 , 2012 - 13 & 2013 - 14) M/S ARVIND LIFESTYLES BRANDS LIMITED 8H FLOOR, DUPARC, TRINITY, NO.17, MG ROAD, BANGALORE - 560 001 PAN NO. A A ACH7252A APPELLANT VS THE ASST. COMMISSIONER OF INCOME TAX , C PC, TDS, SECTOR - 3, VAISHALI, GHAZIABAD, UTTAR PRADESH - 201 010 RESPONDENT APPELLANT BY : S HRI BIREN V SHAH, CA RE VENUE BY : SHRI PRAVEEN KARANTH , ADDL. C IT DATE OF HEARING : 30 - 01 - 2020 DATE OF PRONOUNCEMENT : 06 - 02 - 2020 O R D E R PER BENCH : THESE ARE APPEALS FILED BY THE ASSESSEE AGAINST T WO SET OF ORDERS CIT(A) - 10, BANGALORE, BOTH DATED 27 - 08 - 2019 RELATING TO ASSESSMENT YEARS 2011 - 12, 2012 - 13 & 2013 - 14 RESPECTIVELY. 2. ITA NOS.2270 - 2272(B)/2019 ARE APPEAL S AGAINST THE ORDER DATED 27 - 08 - 2019 OF CIT(A) - 10, BANGA LORE IN WHICH DISPUTE RELATES TO THE DEMAND FOR SHORT DEDUCTION OF TAX MADE BY THE AO RELATING TO TAX DEDUCTION AT SOURCE ITA NO S .2 270 - 2278( BANG/201 9 2 (TDS) RETURNS RELATING TO (Q=QUARTER)Q - 2, Q - 3 & Q - 4 OF FY 2010 - 11. ITA NO S.2 273 TO 2278(B)/2019 ARE APPEALS AGAINST COMMON ORDER DATED 27 - 08 - 2019 OF CIT(A) - 10 , BANGALORE AND THESE APPEALS ARIS E OUT OF THE DEMAND FOR SHORT DEDUCTION OF TAX AT SOURCE IN RELATION TO RETURN OF TAX DEDUCTION AT SOURCE (TDS) IN RELATION TO Q - 1, TO 3 OF A SSESSMENT Y EAR 2012 - 13 AND Q - 1 & Q - 2 AND Q - 4 OF A SSESSMENT Y EAR 2013 - 14. 3. AS FAR AS ITA NO.2270 TO 2272 (B)/2019 THE FACTS ARE THAT THE ASSESSEE FILED RETURN OF INCOME TD S FOR Q - 2 TO Q - 4 OF F Y 2010 - 11 (AY:2011 - 12) ON 06 - 06 - 2011. THE TDS RETURN WERE IN RESPECT OF TDS PAYMENT MADE TO NON - RESIDENT . A DMITTEDLY, THE A SSESSEE DID NOT FURNISH PERMANENT ACCOUNT NUMBER (PAN) OF NON - RESIDENT WITH THE INCOME TAX DEPARTMENT, GOVERNMENT OF INDIA, TO WHOM THE PAYMENTS WERE MA D E. AS PER THE P ROVISIONS OF SEC.206AA OF THE INCOME TAX ACT, 1961 (ACT) , IF THE PAN OF THE NON - RESIDENT IS NOT MENTIONED IN THE TDS RETURN AND THE PAYEE IS A NON - RESIDENT THEN THE RATE AT WHICH THE TDS IS TO BE EFFECTED IS 20% , A S AGAINST THE LESSER/ NORMAL RATE OF TDS AS PER THE PROVISIONS OF THE DTAA BETWEEN INDIA AND THE COUNTRY OF WHICH THE RECIPIENT OF THE PAYMENTS ARE TAX RESIDENTS. WHILE PROCESSING THE TDS RETURNS ELECTRONICALLY , THE ACIT, CPC - TDS, CENTRALIZED PROCESSING CELL ( CPC ) DID NOT APPLY THE HIGHER RATE OF TAX AS PER THE PROVISIONS OF SEC.206 - AA OF THE ACT. HOWEVER BY ORDER S PASSED U/S.154 OF THE ACT DATED 11 - 03 - 2018 FOR Q3 & Q4 OF AY:2011 - 12 AND 22.03.2018 FOR Q2 OF AY: 2011 - 12 , THE ACIT, CPC - TDS APPLIED HIGHER RATE OF TAX A S HE FOUND THAT THE TAX DEDUCTED BY THE ASSESSEE A T SOURCE WAS AT A LESSER RATE AS PER DTAA WHEREAS THE RATE OF TAX THAT OUGHT TO HAVE BEEN APPLIED WAS THE HIGHER RATE OF TAX IN TERMS OF SEC.206AA OF THE ACT. THEREFORE, THE D EMAND TO THE EXTENT OF SHORT DEDUCTION WAS RAISED BY THE CPC - TD S BY THE INTIMATION U/S.154 OF THE ACT DATED 22.3.2018 . 4. THE A SSESSEE WAS AGGRIEV E D BY THE AFORESAID DEMAND FOR SHORT DEDUCTION OF TAX AT SOURCE RAISED BY THE CPC. THE ASSESSEE FOUND FROM THE JUSTIFICATION REPORT FOR RAISING THE AFORESAID DEMAND THAT BE CAUSE THE ITA NO S .2 270 - 2278( BANG/201 9 3 ASSESSEE DID NOT FURNISH PERMANENT ACCOUNT NUMBER (PAN) OF NON - RESIDENT WITH THE INCOME TAX DEPARTMENT, GOVERNMENT OF INDIA, TO WHOM THE PAYMENTS WERE MADE, THE ACIT - CPC, TDS APPLIED THE PROVISIONS OF SEC.206AA OF THE INCOME TAX ACT, 1961 (ACT) W HICH PROVIDES THAT IF THE PAN OF THE NON - RESIDENT IS NOT MENTIONED IN THE TDS RETURN AND THE PAYEE IS A NON - RESIDENT THEN THE RATE AT WHICH THE TDS IS TO BE EFFECTED IS 20%, AS AGAINST THE LESSER/NORMAL RATE OF TDS AS PER THE PROVISIONS OF THE DTAA BETWEEN INDIA AND THE COUNTRY OF WHICH THE RECIPIENT OF THE PAYMENTS ARE TAX RESIDENTS AND HENCE THE DEMAND FOR SHORT DEDUCTION OF TAX AT SOURCE. 5. THE ASSESSEE FILED APPEAL AGAINST THE INTIMATION U/S 154 OF THE ACT DATED 11 - 03 - 2018 FOR Q - 3 & 4 OF AY 201 1 - 1 2 AND ORDER DATED 22 - 03 - 2018 FOR Q - 2 OF A Y 201 1 - 1 2 ON 07 - 04 - 2018. IT WAS THE CASE OF ASSESSEE THAT IT HAD DEDUCTED TAX AT SOURCE ON THE PAYMENTS MADE TO NON - RESIDENT AS PER THE RATES PRESCRIBED BY THE DTAA AND THAT THE PROVISION OF SEC. 2 06AA OF THE ACT PRE SCRIBING A HIGHER RATE OF TAX AT SOURCE IS NOT VALID AS AGAINST THE PROVISIONS OF DTAA. ACCORDING TO THE ASSESSEE AS PER THE PROVISIONS OF SEC.90(2) OF THE ACT, IF THE RE IS A CONFLICT BETWEEN THE DTAA AND THE ACT, PROVISIONS OF DTAA WILL PREVAIL AND THERE FORE, THE HIGHER RATE OF TDS DEMANDED BY THE CPC IS CONTRARY TO THE PROVISIONS OF SECTION 90(2) OF THE ACT AND DTAA AND THEREFORE, SHOULD BE CANCELLED. 6. THE CIT(A) DISMISSED THE APPEAL OF THE ASSESSEE HOLDING THAT THE ISSUE WHETHER THE PROVISIONS OF THE ACT I.E., SEC.206AA OF THE ACT WOULD PREVAIL OVER THE DTAA WAS A DEBATABLE ISSUE AND HENCE CANNOT BE DECIDED IN AN APPLICATION U/S.154 OF THE ACT. SECONDLY, HE HELD THAT THE DEMAND FOR SHORT DEDUCTION OF TAX AT SOURCE WAS IN RELATION TO AY 2011 - 12 AND THEREFORE ANY RECTIFICATION U/S.154 OF THE ACT CANNOT BE DONE AFTER A PERIOD OF 4 YEARS FROM THE END OF THE FINANCIAL YEAR IN WHICH THE ORDER SOUGHT TO BE AMENDED WAS PASSED AS IS LAID DOWN IN THE PROVISI ONS OF SEC.154(7) OF THE ACT. ITA NO S .2 270 - 2278( BANG/201 9 4 7 . AS FAR AS ITA NO.2273 TO 2278(B)/2019 ARE CONCERNED, THE FACTS WITH REGARD TO FILING OF TDS RETURN BY T HE ASSESSEE FOR VARIOUS QUARTERS INVOLVED IN THESE APPEALS ARE AS FOLLOWS : Q - 1 OF AY 2012 - 13 DATE OF FILING RETURN OF TDS: 22.12.2011 Q - 2 OF AY 2012 - 13 - DO - : 22.12.2011 Q - 3 OF AY 2012 - 13 - DO - : 16.02.2012 Q - 1 OF AY 2013 - 14 - DO - : 25.02.2013 Q - 2 OF AY 2013 - 14 - DO - : 25.02.2013 Q - 4 OF AY 2013 - 14 - DO - : 25.02 .2013 8 . WHILE PROCESSING THE TDS RETURNS ELECTRONICALLY, THE ACIT, CPC - TDS, CENTRALIZED PROCESSING CELL (CPC) DID NOT APPLY THE HIGHER RATE OF TAX AS PER THE PROVIS IONS OF SEC.206 - AA OF THE ACT. HOWEVER BY ORDERS PASSED U/S.154 OF THE ACT DATED 11.3 .2018 FOR Q1 TO Q - 3 OF AY 2012 - 13 AND ORDER DATED 15.03.2018 AND 10.3.2018 AND 10.3.2018 RESPECTIVELY FOR Q - 1, Q - 2 AND Q - 4 OF AY 2013 - 14, THE ACIT, CPC - TDS APPLIED HIGHER RATE OF TAX AS HE FOUND THAT THE TAX DEDUCTED BY THE ASSESSEE AT SOURCE WAS AT A LESS ER RATE AS PER DTAA WHEREAS THE RATE OF TAX THAT OUGHT TO HAVE BEEN APPLIED WAS THE HIGHER RATE OF TAX IN TERMS OF SEC.206AA OF THE ACT. THEREFORE, THE DEMAND TO THE EXTENT OF SHORT DEDUCTION AND INTEREST ON SHORT DEDUCTION OF TAX AT SOURCE WAS RAISED BY THE CPC - TDS BY THE INTIMATIONS U/S.154 OF THE ACT FOR THE VARIOUS QUARTERS OF AY 2012 - 13 & 2013 - 14. 9. THE ASSESSEE FILED APPEAL AGAINST THE INTIMATIONS U/S 154 OF THE ACT FOR Q - 1 TO Q - 3 OF AY 2012 - 13 AND Q - 1, Q - 2 AND Q - 4 OF AY 2013 - 14 . IT WAS THE C ASE OF ASSESSEE THAT IT HAD DEDUCTED TAX AT SOURCE ON THE PAYMENTS MADE TO NON - RESIDENT AS PER THE RATES PRESCRIBED BY THE DTAA AND THAT THE PROVISION OF SEC.206AA OF THE ACT PRESCRIBING A HIGHER RATE OF TAX AT SOURCE IS NOT VALID ITA NO S .2 270 - 2278( BANG/201 9 5 AS AGAINST THE PROVISIONS OF DTAA. ACCORDING TO THE ASSESSEE AS PER THE PROVISIONS OF SEC.90(2) OF THE ACT, IF THERE IS A CONFLICT BETWEEN THE DTAA AND THE ACT, PROVISIONS OF DTAA WILL PREVAIL AND THEREFORE, THE HIGHER RATE OF TDS DEMANDED BY THE CPC IS CONTRARY TO THE PROVISIONS OF SECTION 90(2) OF THE ACT AND DTAA AND THEREFORE, SHOULD BE CANCELLED. 10. THE CIT(A) DISMISSED THE APPEALS OF THE ASSESSEE HOLDING THAT THE ISSUE WHETHER THE PROVISIONS OF THE ACT I.E., SEC.206AA OF THE ACT WOULD PREVAIL OVER THE DTAA WAS A DEBATABLE ISSUE AND HENCE CANNOT BE DECIDED IN AN APPLICATION U/S.154 OF THE ACT. 11. AGGRIEVED BY THE AFORESAID TWO SET OF ORDERS PASSED BY THE CIT(A) THE ASSESSEE HAS FILED THE PRESENT APPEALS BEFORE THE TRIBUNAL. THE GRIEVANCE PROJECTED IN THE GROUNDS OF APP EAL ARE COMMON AND THAT IS: (I) WHILE PROCESSING THE RETURN OF TDS U/S 200A OF THE ACT THE CPC CANNOT MAKE ANY ADDITIONS ON ISSUES WHICH ARE DEBATABLE AND THE CPC CAN ONLY CORRECT ERRORS WHICH ARE APPARENT FROM THE RECORDS AND THEREFORE, THE CPC WERE NOT JUSTIFIED IN HOLDING THAT THE RATES PRESCRIBED U/S 206AA OF THE ACT SHOULD BE APPLIED. (II) THE BENEFICIAL PROVISIONS OF DTAA WILL PREVAIL OVER THE PROVISIONS OF SEC.206AA OF THE ACT. 12. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE STAND OF THE ASSESSEE AS PUT FORTH BEFORE THE REVENUE AUTHORITIES. T HE LD.DR RELIED ON THE ORDER S OF LD.CIT(A). 1 3 . WE HAVE CAREFULLY CONSIDERED THE RIVAL STAND OF THE ASSESSEE AND THE REVENUE ON THE ISSUE IN THE APPEAL. WE FIND THAT THE C I T(A) HAS REJECTED THE APPEA LS OF THE A S SESSEE ON THE GROUND THAT THE ISSUE WHETHER DTAA WILL PREVAIL OVER THE PROVISIONS OF SEC.206AA OF THE ACT IS A DEBATABLE ISSUE. ON ITA NO S .2 270 - 2278( BANG/201 9 6 THIS ISSUE, WE FIND THAT THE LAW AS IT EVOLVED IS THAT THE SPECIAL BENCH OF THE ITAT, HYDERABAD IN THE CASE OF NAGARJUNA FERTILIZERS AND CHEMICALS LTD. VS ACIT(2017) 78 TAXMAN.COM 264 HAS HELD THAT DTAA WILL PREVAIL OVER THE PROVISIONS OF SEC.206AA OF T H E ACT. THEREFORE, THE TDS DONE AS PER THE DTAA IS CORRECT. SIMILAR VIEW HAS BEEN TAKEN BY THE HONBLE DELHI HIGH COURT IN THE CASE OF DANISCO INDIA (P) LTD. V S UNION OF INDIA OTHERS IN W.P.NO.(C ) 5908/15) DATED 05 - 02 - 2018. IT WAS THE ACIT - CPC - TDS WHO PASSED THE ORDER U/S.154 OF THE ACT AND THEREFORE IF THE CIT(A) IS OF THE VIEW THAT THE ISSUE WAS DEBATABLE THEN THE ORDER U/S.154 OF THE ACT SHOULD HAVE BEEN CANCELLED BY HIM. HE DISMISSE D THE APPEALS OF THE ASSESSEE W ITHOUT REALIZING THAT THE ORDER U/S.154 OF THE ACT WAS PASSED BY THE ACIT - CPC - TDS AND NOT ON ANY APPLICATION FILED BY THE ASSESSEE. AGAIN THE QUESTION OF LIMITATION WILL ALSO GO AGAINST THE REVENUE AND NOT AGAINST THE ASSESSEE BECAUSE IT WAS THE REVENUE I.E., THE ACIT - CPC - TDS, WHO PASSED THE ORDER U/S.154 OF THE ACT. THE LAW AS INTERPRETED BY THE JUDICIAL FORUMS BY THE HONBLE DELHI HIGH COURT ON 5.2.20 18 PRIOR TO THE ORDER U/S.154 OF THE ACT PASSED BY THE ACIT - CPC - TDS SUPPORTS THE PLEA OF THE ASSESSEE. IN THE GIVEN AND FACTS AND CIRCUMSTANCES OF THE CASE AND THE LEGAL POSITION ON THE ISSUE, WE ARE OF THE VIEW THAT THE ORDERS U/S.154 OF THE ACT RAISING DEMAND FOR SHORT DEDUCTION OF TAX AT SOURCE AND INTEREST THEREON CANNOT BE SUSTAINED AND THE SAME IS DIRECTED TO BE CANCELLED. THE APPEALS OF THE ASSESSEE ARE ACCORDINGLY ALLOWED. 1 4 . IN THE RESULT, ALL THESE APPEALS ARE ALLOWED . O RDER PRONOUNCED IN THE OPEN COURT ON 5 TH FEBRUARY, 2020. SD/ - SD/ - ( B .R.BASK A RAN ) ( N.V.VASUDEVAN ) ACCOUNTANT MEMBER VIC E PRESIDENT DATED: 05 - 02 - 2020 *AM ITA NO S .2 270 - 2278( BANG/201 9 7 COPY OF THE ORDER FORWARDED TO: 1.APPELLANT; 2.RESPONDENT; 3.CIT; 4.CIT (A); 5. DR 6. ITO (TDS) 7.GUARD FILE BY ORDER ASST. REGISTRAR