Rathi Super Steel Ltd., Delhi V. ITO (TDS), New Delhi

ITA 2490/DEL/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 7445 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 3 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-08-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 11-07-2016
• Assessment Year: 2012-2013
• Appeal Filed On: 28-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANIMA BARNWAL
• Keywords: Capital asset; Recovery proceedings; Double taxation relief; Permanent establishment
• Section: 206AA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: G NEW DELHI BEFORE SHRI H. S. SIDHU, JUDICIAL MEMBER AND SHRI O.P. KANT, ACCOUNTANT MEMBER I.T.A. NO. 2490/DEL/2015 ASSESSMENT YEAR: 2012-13 M/S RATHI SUPER STEEL LIMITED, VS. ITO(TDS), FLAT NO. 207, VARDHMAN MAYUR WARD 2(1), (INTL. TA XATION) MARKET AT CSC, AAYAKAR BHAWAN, LAXMI MAYUR VIHAR, PHASE-III, NAGAR, DELHI 110 092 KONDLI GHAROLI, DELHI 110 096 (PAN: AAACR0182M) (APPELLANT) (RESPONDENT) ASSESSEE BY : MR. VED JAIN, CA REVENUE BY : SMT. ANIMA BARNWAL, SR. DR DATE OF HEARING : 11-07-2016 DATE OF ORDER : 08-08-2016 ORDER PER H.S. SIDHU : JM ASSESSEE HAS FILED THIS APPEAL AGAINST THE IMPUGNED ORDER DATED 31.3.2015 PASSED BY THE LD. CIT(A)-43, NEW DEL HI RELEVANT TO ASSESSMENT YEAR 2012-13 ON THE FOLLOWING GROUNDS:- 1. THAT THE LEARNED ASSESSING OFFICER (INT. TAX) ERR ED IN LAW IN DETERMINING SHORT DEDUCTION OF TDS OF RS.5,12,5101- (INCLUSIVE OF INTEREST) IN RESPECT OF A NON- RESIDENT M/S SIDIFORNI S.R.L. ITALY ON REMITTANCE OF FEE FOR ITA NO.2490/DEL/2015 2 TECHNICAL SERVICES ON ACCOUNT OF NON-APPLYING OF PA N IN INDIA. 2. THAT THE AFORESAID NON-RESIDENT HAVING NO PERMANE NT ESTABLISHMENT IN INDIA, THE SAID NON-RESIDENT IS UNDER NO OBLIGATION TO OBTAIN PAN IN INDIA IN VIEW OF SPECIFIC PROVISION OF SECTION 139A(8)(D) READ WITH RULE 114C( 1)(B) OF THE INCOME TAX RULES AS NOTIFIED BY C.B.D.T. 3. THAT THE AFORESAID PROVISION OF SECTION 139A(8)( D ) READ WITH RULE 114C(1)(B) OF THE INCOME TAX RULES HAVING BEEN SPECIFICALLY NOTIFIED BY C.B.D.T., EXEMP TING THE NON-RESIDENT FROM THE REQUIREMENT OF PAN IN INDIA, THE DEMAND RAISED BY THE LEARNED ASSESSING OFFICER AGAINST THE APPELLANT IS WHOLLY ARBITRARY, UNJUSTIFIE D AND UNCALLED FOR. 4. THAT THE AFORESAID SPECIAL PROVISION OF SECTION 139(A)(8)(D) READ WITH RULE 114C(1)(B) OF THE INCOME TAX RULES OVERRIDE THE GENERAL PROVISION OF SECTION 206AA OF THE ACT WITH REGARD TO OBTAINING PAN IN INDIA BY T HE NON-RESIDENT, THE DEMAND RAISED BY THE LEARNED ASSESSING OFFICER AGAINST THE APPELLANT IS TOTALLY IN NEGATION OF THE PROVISION OF THE INCOME TAX ACT AS S UCH DEMAND DESERVE TO BE CANCELLED. 5. THAT IN VIEW OF DOUBLE TAX AVOIDANCE TREATY HAVIN G BEEN ENTERED INTO BY THE GOVT. OF INDIA WITH THE GOVT. O F ITALY, THE NON-RESIDENT HAVING NO PERMANENT ESTABLISHMENT IN INDIA, IS UNDER NO OBLIGATION TO APP LY PAN IN INDIA UNLESS THE SAID DTA TREATY IS AMENDED TO INCLUDE THE REQUIREMENT OF SECTION 206AA OF THE ACT I N ITA NO.2490/DEL/2015 3 THE TREATY, THE DEMAND RAISED AGAINST THE APPELLANT IS AGAINST THE PROVISION OF THE ACT. 6. WHETHER ON FACTS AND CIRCUMSTANCES OF THE CASE AND ON TRUE INTERPRETATION OF LAW, CAN BILATERAL DOUBLE T AX AVOIDANCE TREATY ENTERED INTO WITH THE OTHER NATION BE OVERRIDDEN SO AS TO INCLUDE NON-RESIDENTS HAVING NO PERMANENT ESTABLISHMENT IN INDIA TO COMPLY WITH THE PROVISION OF INDIAN INCOME TAX ACT VIZ., SECTION 206 M OF THE ACT. 7. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, WHETHER THE PROVISION OF SECTION 206M OF THE IN COME TAX ACT IS APPLICABLE TO A NON-RESIDENT ON INCOME CHARGEABLE TO TAX IN PURSUANCE TO PROVISION OF SECTIO N 115A(B)(BB) (CHAPTER XII) OF THE ACT AS THE SAID PROVISION 206M IS APPLICABLE ON TAX DEDUCTABLE UNDER CHAPTER XVII B OF THE ACT. 8. THAT EVEN OTHERWISE, IN VIEW OF CLEAR CONFLICT AND AMBIGUITY IN INTERPRETATION OF THE PROVISION OF SECTIO N 206M AND SECTION 139A(8)(D) READ WITH RULE 114C(1)(B) OF THE INCOME TAX RULES, THE BENEFIT OF DOUBT AS TO TH E INTERPRETATION OF LAW BE RESOLVED IN FAVOUR OF THE APPELLANT AS HELD BY THE HON'BLE SUPREME COURT AND AS SUCH DEMAND RAISED BY THE ASSESSING OFFICER BE DELETE D. 9. THAT THE APPELLANT CRAVE LEAVE TO ADD, AMEND OR VARY ANY GROUND OF APPEAL BEFORE OR AT THE TIME OF HEARING, IF SO REQUIRED. ITA NO.2490/DEL/2015 4 2. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IS A COMPANY, FILED STATEMENT OF DEDUCTION OF TAX AT SOURCE IN FORM 27Q FOR 4 TH QUARTER OF THE ASSESSMENT YEAR 2012-13. THE ITO(TDS ) (INT. TAXATION), WARD 2(1), NEW DELHI AFTER EXAMINING THE F ORM 27Q ISSUED INTIMATION U/S. 200A OF THE INCOME TAX ACT, 19 61 (HEREINAFTER REFERRED AS THE ACT) WHEREIN, IT WAS POIN TED OUT THAT THERE WAS A SHORT DEDUCTION OF TAX AT SOURCE AND ACCOR DINGLY DEMAND OF RS. 5,12,510/- WAS RAISED WITH INTEREST CH ARGEABLE ON SUCH SHORT DEDUCTION. 3. AGAINST THE ORDER OF THE LD. AO, ASSESSEE APPEAL ED BEFORE THE LD. CIT(A)-43, NEW DELHI, WHO VIDE HIS IMPUGNED ORD ER DATED 31.3.2015 HAS DISMISSED THE APPEAL OF THE ASSESSE E 4. AGGRIEVED WITH THE ORDER OF THE LD. CIT(A), AS SESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 5. AT THE TIME OF HEARING, LD. COUNSEL OF THE ASSESSEE STATED THAT ISSUE IN DISPUTE HAS ALREADY BEEN ADJUDICATED AND DEC IDED IN FAVOUR OF THE ASSESSEE BY THE VARIOUS DECISIONS RENDERED BY THE ITAT BENCHES WHICH INCLUDES THE ORDER OF THE ITAT, PUNE BENCH B REPORTED (2015) 54 TAXMAN.COM1 (PUNE-TRIB) IN THE CA SE OF DDIT(IT-II) PUNE VS. SERUM INSTITUTE OF INDIA LTD. AND ITAT, D BENCH CHENNAI IN THE CASE OF DCIT VS. M/S PRICOL LTD . IN ITA NOS. ITA NO.2490/DEL/2015 5 880 & 1141/MDS./2014 (AYRS 2011-12 & 2011-12) AND C O NOS. 56 & 57/MDS./2014 (IN ITA NOS. 880 & 1141/MDS./2014). HE ALSO FILED THE COPY OF THE CBDTS NOTIFICATION NO. SO 2196(E) [F. NO. 370142/16/2016-TPL)] DATED 24.6.2016 AND STATED THAT T HESE INSTRUCTIONS ARE ALSO APPLICABLE IN THE CASE OF THE A SSESSEE. 6. ON THE CONTRARY, LD. DR RELIED UPON THE IMPUGNED ORDER OF THE LD. CIT(A). 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECORDS AVAILABLE WITH US, ESPECIALLY THE ORDERS PASSED BY THE REVENUE AUTHORITIES AND THE ORDERS OF THE ITAT, PUNE BENCH B REPORTED (2015) 54 TAXMAN.COM1 (PUNE-TRIB) IN THE CASE OF DDI T(IT-II) PUNE VS. SERUM INSTITUTE OF INDIA LTD. AND ITAT, D BEN CH CHENNAI IN THE CASE OF DCIT VS. M/S PRICOL LTD. IN ITA NOS. 880 & 1 141/MDS./2014 (AYRS 2011-12 & 2011-12) AND CO NOS. 56 & 57/MDS./2 014 (IN ITA NOS. 880 & 1141/MDS./2014) AND THE CBDTS NOTIFICAT ION NO. SO 2196(E) [F.NO. 370142/16/2016-TPL)] DATED 24.6.2016 . FOR THE SAKE OF CONVENIENCE, WE ARE REPRODUCING THE RELEVAN T PARAS OF THE ITAT PUNE BENCH AND ITAT, CHENNAI BENCH AND THE CBD T NOTIFICATION DATED 24.6.2016 HEREUNDER:- PARA NO. 7 OF THE ITAT, PUNE BENCH ITA NO.2490/DEL/2015 6 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. SECTION 206AA OF THE ACT HAS BEEN INCLUDED IN PART B O F CHAPTER XVII DEALING WITH COLLECTION AND RECOVERY OF TAX DEDUCTION AT SOURCE. SECTION 206AA OF THE ACT DEALS WITH REQUIREMENTS OF FURNISHING PAN BY ANY PERSON, ENTITLED TO RECEIVE ANY SUM OR INCOME ON WHICH TAX IS DEDUCTIBLE UNDER CHAPTER XVII-B, TO THE PERSON RESPONSIBLE FOR DEDUCTING SUCH TAX. SHORN OF OTHER DETAILS, IN SO FAR AS THE PRESENT CONTROVERSY IS CONC ERNED, IT WOULD SUFFICE TO NOTE THAT SECTION 206AA OF THE ACT PRESCRIBES THAT WHERE PAN IS NOT FURNISHED T O THE PERSON RESPONSIBLE FOR DEDUCTING TAX AT SOURCE TH EN THE TAX DEDUCTOR WOULD BE REQUIRED TO DEDUCT TAX AT THE HIGHER OF THE FOLLOWING RATES, NAMELY, AT THE RATE PRESCRIBED IN THE RELEVANT PROVISIONS OF THIS ACT; OR AT THE RATE/RATES IN FORCE; OR AT THE RATE OF 20%. IN THE PRES ENT CASE, ASSESSEE WAS RESPONSIBLE FOR DEDUCTING TAX ON PAYMENTS MADE TO NON-RESIDENTS ON ACCOUNT OF ROYALTY AND/OR FEE FOR TECHNICAL SERVICES. THE DISPUTE BEFOR E US RELATES TO THE PAYMENTS MADE BY THE ASSESSEE TO SUCH NON-RESIDENTS WHO HAD NOT FURNISHED THEIR PANS TO THE ASSESSEE. THE CASE OF THE REVENUE IS THAT IN THE ABSE NCE ITA NO.2490/DEL/2015 7 OF FURNISHING OF PAN, ASSESSEE WAS UNDER AN OBLIGATI ON TO DEDUCT TAX @ 20% FOLLOWING THE PROVISIONS OF SECTION 206AA OF THE ACT. HOWEVER, ASSESSEE HAD DEDUCTED THE TAX AT SOURCE AT THE RATES PRESCRIBED IN THE RESPECTIVE DTAAS BETWEEN INDIA AND THE RELEVANT COUNTRY OF THE NON-RESIDENTS; AND, SUCH RATE OF TAX BEING LOWER THAN T HE RATE OF 20% MANDATED BY SECTION 206AA OF THE ACT. THE CIT(A) HAS FOUND THAT THE PROVISIONS OF SECTION 90(2 ) COME TO THE RESCUE OF THE ASSESSEE. SECTION 90(2) PROVIDES THAT THE PROVISIONS OF THE DTAAS WOULD OVERRI DE THE PROVISIONS OF THE DOMESTIC ACT IN CASES WHERE THE PROVISIONS OF DTAAS ARE MORE BENEFICIAL TO THE ASSESS EE. THERE CANNOT BE ANY DOUBT TO THE PROPOSITION THAT IN CA SE OF NON-RESIDENTS, TAX LIABILITY IN INDIA IS LIABLE TO BE DETERMINED IN ACCORDANCE WITH THE PROVISIONS OF THE A CT OR THE DTAA BETWEEN INDIA AND THE RELEVANT COUNTRY, WHICHEVER IS MORE BENEFICIAL TO THE ASSESSEE, HAVIN G REGARD TO THE PROVISIONS OF SECTION 90(2) OF THE ACT. IN THIS CONTEXT, THE CIT(A) HAS CORRECTLY OBSERVED THAT TH E HONBLE SUPREME COURT IN THE CASE OF AZADI BACHAO ANDOLAN AND OTHERS VS. UOI, (2003) 263 ITR 706 (SC) HAS UPHELD THE PROPOSITION THAT THE PROVISIONS MADE IN ITA NO.2490/DEL/2015 8 THE DTAAS WILL PREVAIL OVER THE GENERAL PROVISIONS CONTAINED IN THE ACT TO THE EXTENT THEY ARE BENEFICIAL TO THE ASSESSEE. IN THIS CONTEXT, IT WOULD BE WORTHWHILE TO OBSERVE THAT THE DTAAS ENTERED INTO BETWEEN INDIA AND THE OTHER RELEVANT COUNTRIES IN THE PRESENT CONTEXT PROVIDE FOR SCOPE OF TAXATION AND/OR A RATE OF TAXATIO N WHICH WAS DIFFERENT FROM THE SCOPE/RATE PRESCRIBED UND ER THE ACT. FOR THE SAID REASON, ASSESSEE DEDUCTED THE TAX AT SOURCE HAVING REGARD TO THE PROVISIONS OF THE RESPECTIVE DTAAS WHICH PROVIDED FOR A BENEFICIAL RAT E OF TAXATION. IT WOULD ALSO BE RELEVANT TO OBSERVE THAT EVEN THE CHARGING SECTION 4 AS WELL AS SECTION 5 OF THE AC T WHICH DEALS WITH THE PRINCIPLE OF ASCERTAINMENT OF TO TAL INCOME UNDER THE ACT ARE ALSO SUBORDINATE TO THE PRINCIPLE ENSHRINED IN SECTION 90(2) AS HELD BY THE HONBLE SUPREME COURT IN THE CASE OF AZADI BACHAO ANDOLAN AND OTHERS (SUPRA). THUS, IN SO FAR AS THE APPLICABILITY OF THE SCOPE/RATE OF TAXATION WITH RESP ECT TO THE IMPUGNED PAYMENTS MAKE TO THE NON-RESIDENTS IS CONCERNED, NO FAULT CAN BE FOUND WITH THE RATE OF TAXATIO N INVOKED BY THE ASSESSEE BASED ON THE DTAAS, WHICH PRESCRIBED FOR A BENEFICIAL RATE OF TAXATION. HOWEVER , THE ITA NO.2490/DEL/2015 9 CASE OF THE REVENUE IS THAT THE TAX DEDUCTION AT SOU RCE WAS REQUIRED TO BE MADE AT 20% IN THE ABSENCE OF FURNISHING OF PAN BY THE RECIPIENT NON-RESIDENTS, HA VING REGARD TO SECTION 206AA OF THE ACT. IN OUR CONSIDERE D OPINION, IT WOULD BE QUITE INCORRECT TO SAY THAT THOUGH THE CHARGING SECTION 4 OF THE ACT AND SECTION 5 OF THE AC T DEALING WITH ASCERTAINMENT OF TOTAL INCOME ARE SUBORDINATE TO THE PRINCIPLE ENSHRINED IN SECTION 90( 2) OF THE ACT BUT THE PROVISIONS OF CHAPTER XVII-B GOVERNIN G TAX DEDUCTION AT SOURCE ARE NOT SUBORDINATE TO SECTION 90(2) OF THE ACT. NOTABLY, SECTION 206AA OF THE ACT WH ICH IS THE CENTRE OF CONTROVERSY BEFORE US IS NOT A CHARG ING SECTION BUT IS A PART OF A PROCEDURAL PROVISIONS DEA LING WITH COLLECTION AND DEDUCTION OF TAX AT SOURCE. THE PROVISIONS OF SECTION 195 OF THE ACT WHICH CASTS A DU TY ON THE ASSESSEE TO DEDUCT TAX AT SOURCE ON PAYMENTS TO A NON-RESIDENT CANNOT BE LOOKED UPON AS A CHARGING PROVISION. IN-FACT, IN THE CONTEXT OF SECTION 195 OF THE ACT ALSO, THE HONBLE SUPREME COURT IN THE CASE OF CIT VS . ELI LILY & CO., (2009) 312 ITR 225 (SC) OBSERVED THAT T HE PROVISIONS OF TAX WITHHOLDING I.E. SECTION 195 OF THE ACT WOULD APPLY ONLY TO SUMS WHICH ARE OTHERWISE CHARGEAB LE ITA NO.2490/DEL/2015 10 TO TAX UNDER THE ACT. THE HONBLE SUPREME COURT IN THE CASE OF GE INDIA TECHNOLOGY CENTRE PVT. LTD. VS. CIT , (2010) 327 ITR 456 (SC) HELD THAT THE PROVISIONS OF DTAAS ALONG WITH THE SECTIONS 4, 5, 9, 90 & 91 OF THE ACT ARE RELEVANT WHILE APPLYING THE PROVISIONS OF TAX DEDUCTION AT SOURCE. THEREFORE, IN VIEW OF THE AFORESA ID SCHEMATIC INTERPRETATION OF THE ACT, SECTION 206AA OF THE ACT CANNOT BE UNDERSTOOD TO OVERRIDE THE CHARGING SECTIONS 4 AND 5 OF THE ACT. THUS, WHERE SECTION 90(2 ) OF THE ACT PROVIDES THAT DTAAS OVERRIDE DOMESTIC LAW IN CASES WHERE THE PROVISIONS OF DTAAS ARE MORE BENEFI CIAL TO THE ASSESSEE AND THE SAME ALSO OVERRIDES THE CHARGIN G SECTIONS 4 AND 5 OF THE ACT WHICH, IN TURN, OVERRID E THE DTAAS PROVISIONS ESPECIALLY SECTION 206AA OF THE ACT WHICH IS THE CONTROVERSY BEFORE US. THEREFORE, IN OUR VIEW, WHERE THE TAX HAS BEEN DEDUCTED ON THE STRENGTH OF THE BENEFICIAL PROVISIONS OF SECTION DTAAS, THE PROVISIONS OF SECTION 206AA OF THE ACT CANNOT BE INV OKED BY THE ASSESSING OFFICER TO INSIST ON THE TAX DEDUCTI ON @ 20%, HAVING REGARD TO THE OVERRIDING NATURE OF THE PROVISIONS OF SECTION 90(2) OF THE ACT. THE CIT(A), I N OUR VIEW, CORRECTLY INFERRED THAT SECTION 206AA OF THE ACT ITA NO.2490/DEL/2015 11 DOES NOT OVERRIDE THE PROVISIONS OF SECTION 90(2) OF T HE ACT AND THAT IN THE IMPUGNED CASES OF PAYMENTS MADE TO NON-RESIDENTS, ASSESSEE CORRECTLY APPLIED THE RATE OF TAX PRESCRIBED UNDER THE DTAAS AND NOT AS PER SECTION 206AA OF THE ACT BECAUSE THE PROVISIONS OF THE DTAAS WAS MORE BENEFICIAL. THUS, WE HEREBY AFFIRM THE ULTI MATE CONCLUSION OF THE CIT(A) IN DELETING THE TAX DEMAND RELATABLE TO DIFFERENCE BETWEEN 20% AND THE ACTUAL TAX RATE ON WHICH TAX WAS DEDUCTED BY THE ASSESSEE IN TERMS OF THE RELEVANT DTAAS. AS A CONSEQUENCE, REVENUE FAI LS IN ITS APPEALS. PARA NO. 5 OF THE ITAT, CHENNAI BENCH 5. WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY PERUSED THE MATERIALS AVAILABLE ON RECORD. AS POINTE D OUT BY THE LD. AR THE PUNE BENCH OF THE TRIBUNAL IN THE C ASE CITED SUPRA (DCIT VS. SERIUM INSTITUTE OF INDIA LTD.), IT HAS BEEN CATEGORICALLY HELD THAT SECTION 206AA OF THE ACT DOES NOT OVERRIDE THE PROVISIONS OF SECTION 90(2) OF THE ACT AND ACCORDINGLY THE RATE OF TAX DEDUCTED AT SOURC E PRESCRIBED IN THE DTA AGREEMENT SHALL PREVAIL. THE ITA NO.2490/DEL/2015 12 RELEVANT PARA OF THE ORDER IS REPRODUCED HEREINABELO W FOR REFERENCE:- 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS. SECTION 206AA OF THE ACT HAS BEEN INCLUDED IN PART B OF CHAPTER XVII DEALING WITH COLLECTION AND RECOVERY OF TAX DEDUCTION AT SOURCE. SECTION 206AA OF THE ACT DEALS WITH REQUIREMENTS OF FURNISHING PAN BY ANY PERSON, ENTITLED TO RECEIVE ANY SUM OR INCOME ON WHICH TAX IS DEDUCTIBLE UNDER CHAPTER XVII-B, TO THE PERSON RESPONSIBLE FOR DEDUCTING SUCH TAX. SHORN OF OTHER DETAILS, IN SO FAR AS THE PRESENT CONTROVERSY IS CONCERNED, IT WOULD SUFFICE TO NOTE THAT SECTION 206AA OF THE ACT PRESCRIBES THAT WHERE PAN IS NOT FURNISHED TO THE PERSON RESPONSIBLE FOR DEDUCTING TAX AT SOURCE THEN THE TAX DEDUCTOR WOULD BE REQUIRED TO DEDUCT TAX AT THE HIGHER OF THE FOLLOWING RATES, ITA NO.2490/DEL/2015 13 NAMELY, AT THE RATE PRESCRIBED IN THE RELEVANT PROVISIONS OF THIS ACT; OR AT THE RATE/RATES IN FORCE; OR AT THE RATE OF 20%. IN THE PRESENT CASE, ASSESSEE WAS RESPONSIBLE FOR DEDUCTING TAX ON PAYMENTS MADE TO NON-RESIDENTS ON ACCOUNT OF ROYALTY AND/OR FEE FOR TECHNICAL SERVICES. THE DISPUTE BEFORE US RELATES TO THE PAYMENTS MADE BY THE ASSESSEE TO SUCH NON-RESIDENTS WHO HAD NOT FURNISHED THEIR PANS TO THE ASSESSEE. THE CASE OF THE REVENUE IS THAT IN THE ABSENCE OF FURNISHING OF PAN, ASSESSEE WAS UNDER AN OBLIGATION TO DEDUCT TAX @ 20% FOLLOWING THE PROVISIONS OF SECTION 206AA OF THE ACT. HOWEVER, ASSESSEE HAD DEDUCTED THE TAX AT SOURCE AT THE RATES PRESCRIBED IN THE RESPECTIVE DTAAS BETWEEN INDIA AND THE RELEVANT COUNTRY OF THE NON-RESIDENTS; AND, SUCH RATE OF TAX BEING LOWER THAN THE RATE OF 20% MANDATED BY SECTION 206AA OF THE ACT. ITA NO.2490/DEL/2015 14 THE CIT(A) HAS FOUND THAT THE PROVISIONS OF SECTION 90(2) COME TO THE RESCUE OF THE ASSESSEE. SECTION 90(2) PROVIDES THAT THE PROVISIONS OF THE DTAAS WOULD OVERRIDE THE PROVISIONS OF THE DOMESTIC ACT IN CASES WHERE THE PROVISIONS OF DTAAS ARE MORE BENEFICIAL TO THE ASSESSEE. THERE CANNOT BE ANY DOUBT TO THE PROPOSITION THAT IN CASE OF NON- RESIDENTS, TAX LIABILITY IN INDIA IS LIABLE TO BE DETERMINED IN ACCORDANCE WITH THE PROVISIONS OF THE ACT OR THE DTAA BETWEEN INDIA AND THE RELEVANT COUNTRY, WHICHEVER IS MORE BENEFICIAL TO THE ASSESSEE, HAVING REGARD TO THE PROVISIONS OF SECTION 90(2) OF THE ACT. IN THIS CONTEXT, THE CIT(A) HAS CORRECTLY OBSERVED THAT THE HONBLE SUPREME COURT IN THE CASE OF AZADI BACHAO ANDOLAN AND OTHERS VS. UOI, (2003) 263 ITR 706 (SC) HAS UPHELD THE PROPOSITION THAT THE PROVISIONS MADE IN THE DTAAS ITA NO.2490/DEL/2015 15 WILL PREVAIL OVER THE GENERAL PROVISIONS CONTAINED IN THE ACT TO THE EXTENT THEY ARE BENEFICIAL TO THE ASSESSEE. IN THIS CONTEXT, IT WOULD BE WORTHWHILE TO OBSERVE THAT THE DTAAS ENTERED INTO BETWEEN INDIA AND THE OTHER RELEVANT COUNTRIES IN THE PRESENT CONTEXT PROVIDE FOR SCOPE OF TAXATION AND/OR A RATE OF TAXATION WHICH WAS DIFFERENT FROM THE SCOPE/RATE PRESCRIBED UNDER THE ACT. FOR THE SAID REASON, ASSESSEE DEDUCTED THE TAX AT SOURCE HAVING REGARD TO THE PROVISIONS OF THE RESPECTIVE DTAAS WHICH PROVIDED FOR A BENEFICIAL RATE OF TAXATION. IT WOULD ALSO BE RELEVANT TO OBSERVE THAT EVEN THE CHARGING SECTION 4 AS WELL AS SECTION 5 OF THE ACT WHICH DEALS WITH THE PRINCIPLE OF ASCERTAINMENT OF TOTAL INCOME UNDER THE ACT ARE ALSO SUBORDINATE TO THE PRINCIPLE ENSHRINED IN SECTION 90(2) AS HELD BY THE HONBLE SUPREME COURT IN THE CASE OF AZADI ITA NO.2490/DEL/2015 16 BACHAO ANDOLAN AND OTHERS (SUPRA). THUS, IN SO FAR AS THE APPLICABILITY OF THE SCOPE/RATE OF TAXATION WITH RESPECT TO THE IMPUGNED PAYMENTS MAKE 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. HOWEVER, THE CASE OF THE REVENUE IS THAT THE TAX DEDUCTION AT SOURCE WAS REQUIRED TO BE MADE AT 20% IN THE ABSENCE OF FURNISHING OF PAN BY THE RECIPIENT NON-RESIDENTS, HAVING REGARD TO SECTION 206AA OF THE ACT. IN OUR CONSIDERED OPINION, IT WOULD BE QUITE INCORRECT TO SAY THAT THOUGH THE CHARGING SECTION 4 OF THE ACT AND SECTION 5 OF THE ACT DEALING WITH ASCERTAINMENT OF TOTAL INCOME ARE SUBORDINATE TO THE PRINCIPLE ENSHRINED IN SECTION 90(2) OF THE ACT BUT THE PROVISIONS OF CHAPTER XVII-B GOVERNING TAX DEDUCTION AT SOURCE ARE ITA NO.2490/DEL/2015 17 NOT SUBORDINATE TO SECTION 90(2) OF THE ACT. NOTABLY, SECTION 206AA OF THE ACT WHICH IS THE CENTRE OF CONTROVERSY BEFORE US IS NOT A CHARGING SECTION BUT IS A PART OF A PROCEDURAL PROVISIONS DEALING WITH COLLECTION AND DEDUCTION OF TAX AT SOURCE. THE PROVISIONS OF SECTION 195 OF THE ACT WHICH CASTS A DUTY ON THE ASSESSEE TO DEDUCT TAX AT SOURCE ON PAYMENTS TO A NON-RESIDENT CANNOT BE LOOKED UPON AS A CHARGING PROVISION. IN-FACT, IN THE CONTEXT OF SECTION 195 OF THE ACT ALSO, THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. ELI LILY & CO., (2009) 312 ITR 225 (SC) OBSERVED THAT THE PROVISIONS OF TAX WITHHOLDING I.E. SECTION 195 OF THE ACT WOULD APPLY ONLY TO SUMS WHICH ARE OTHERWISE CHARGEABLE TO TAX UNDER THE ACT. THE HONBLE SUPREME COURT IN THE CASE OF GE INDIA TECHNOLOGY CENTRE PVT. LTD. VS. CIT, (2010) 327 ITR 456 (SC) HELD THAT THE PROVISIONS OF DTAAS ALONG ITA NO.2490/DEL/2015 18 WITH THE SECTIONS 4, 5, 9, 90 & 91 OF THE ACT ARE RELEVANT WHILE APPLYING THE PROVISIONS OF TAX DEDUCTION AT SOURCE. THEREFORE, IN VIEW OF THE AFORESAID SCHEMATIC INTERPRETATION OF THE ACT, SECTION 206AA OF THE ACT CANNOT BE UNDERSTOOD TO OVERRIDE THE CHARGING SECTIONS 4 AND 5 OF THE ACT. THUS, WHERE SECTION 90(2) OF THE ACT PROVIDES THAT DTAAS OVERRIDE DOMESTIC LAW IN CASES WHERE THE PROVISIONS OF DTAAS ARE MORE BENEFICIAL TO THE ASSESSEE AND THE SAME ALSO OVERRIDES THE CHARGING SECTIONS 4 AND 5 OF THE ACT WHICH, IN TURN, OVERRIDE THE DTAAS PROVISIONS ESPECIALLY SECTION 206AA OF THE ACT WHICH IS THE CONTROVERSY BEFORE US. THEREFORE, IN OUR VIEW, WHERE THE TAX HAS BEEN DEDUCTED ON THE STRENGTH OF THE BENEFICIAL PROVISIONS OF SECTION DTAAS, THE PROVISIONS OF SECTION 206AA OF THE ACT CANNOT BE INVOKED BY THE ASSESSING ITA NO.2490/DEL/2015 19 OFFICER TO INSIST ON THE TAX DEDUCTION @ 20%, HAVING REGARD TO THE OVERRIDING NATURE OF THE PROVISIONS OF SECTION 90(2) OF THE ACT. THE CIT(A), IN OUR VIEW, CORRECTLY INFERRED THAT SECTION 206AA OF THE ACT DOES NOT OVERRIDE THE PROVISIONS OF SECTION 90(2) OF THE ACT AND THAT IN THE IMPUGNED CASES OF PAYMENTS MADE TO NON-RESIDENTS, ASSESSEE CORRECTLY APPLIED THE RATE OF TAX PRESCRIBED UNDER THE DTAAS AND NOT AS PER SECTION 206AA OF THE ACT BECAUSE THE PROVISIONS OF THE DTAAS WAS MORE BENEFICIAL. THUS, WE HEREBY AFFIRM THE ULTIMATE CONCLUSION OF THE CIT(A) IN DELETING THE TAX DEMAND RELATABLE TO DIFFERENCE BETWEEN 20% AND THE ACTUAL TAX RATE ON WHICH TAX WAS DEDUCTED BY THE ASSESSEE IN TERMS OF THE RELEVANT DTAAS. AS A CONSEQUENCE, REVENUE FAILS IN ITS APPEALS. FOLLOWING THE ABOVE DECISION, WE HAVE NO HESITATION TO UPHOLD THE ORDER OF THE LD. CIT(A), WHO HAS ONLY ITA NO.2490/DEL/2015 20 DIRECTED THE ACIT(TDS) TO COMPUTE TAX @10% AS PRESCRIBED BY THE DTAA, HENCE INVOKING SECTION 200A OF THE ACT IS NOT WARRANTED IN THE CASE OF THE ASSESSEE. CBDT NOTIFICATION NO. SO 2196(E) DATED 24.6.2016 S.O. 2196 (E). IN EXERCISE OF THE POWERS CONFERRED BY CLAUSE (II) OF SUB-SECTION (7)OF SECTIO N 206AA, READ WITH SECTION 295 OF THE INCOME-TAX ACT, 1961 (43 OF 1961), THE CENTRAL BOARD OF DIRECT TAXES HEREBY MAKES THE FOLLOWING RULES FURTHER TO AMEND THE INCOME-TAX RULES, 1962, NAMELY:- 1. (1) THESE RULES MAY BE CALLED THE INCOME-TAX (17TH AMENDMENT) RULES, 2016. (2) THEY SHALL COME INTO FORCE ON THE DATE OF THEIR PUBLICATION IN THE OFFICIAL GAZETTE. 2. IN THE INCOME-TAX RULES, 1962 (HEREAFTER REFERRE D TO AS THE SAID RULES), AFTER RULE 37BB, THE FOLLOWING RU LE SHALL BE INSERTED, NAMELY :- ITA NO.2490/DEL/2015 21 37BC. RELAXATION FROM DEDUCTION OF TAX AT HIGHER RATE UNDER SECTION 206AA.- (1) IN THE CASE OF A NON-RESID ENT, NOT BEING A COMPANY, OR A FOREIGN COMPANY ( HEREAFTE R REFERRED TO AS THE DEDUCTEE) AND NOT HAVING PERMANEN T ACCOUNT NUMBER THE PROVISIONS OF SECTION 206AA SHALL NOT APPLY IN RESPECT OF PAYMENTS IN THE NATURE OF INTEREST, ROYALTY, FEES FOR TECHNICAL SERVICES AND PAYMENTS ON TRANSFER OF ANY CAPITAL ASSET, IF THE DEDUCTEE FURNISHE S THE DETAILS AND THE DOCUMENTS SPECIFIED IN SUB-RULE ( 2) TO THE DEDUCTOR. (2) THE DEDUCTEE REFERRED TO IN SUB-RULE (1), SHALL I N RESPECT OF PAYMENTS SPECIFIED THEREIN, FURNISH THE FOLLOWING DETAILS AND DOCUMENTS TO THE DEDUCTOR, NAMEL Y :- (I) NAME, E-MAIL ID, CONTACT NUMBER; (II) ADDRESS IN THE COUNTRY OR SPECIFIED TERRITORY OUT SIDE INDIA OF WHICH THE DEDUCTEE IS A RESIDENT; (III) A CERTIFICATE OF HIS BEING RESIDENT IN ANY COU NTRY OR SPECIFIED TERRITORY OUTSIDE INDIA FROM THE GOVERNMENT O F THAT COUNTRY OR SPECIFIED TERRITORY IF THE LAW OF THAT ITA NO.2490/DEL/2015 22 COUNTRY OR SPECIFIED TERRITORY PROVIDES FOR ISSUANCE OF SUCH CERTIFICATE; (IV) TAX IDENTIFICATION NUMBER OF THE DEDUCTEE IN THE COUNTRY OR SPECIFIED TERRITORY OF HIS RESIDENCE AND IN CASE NO SUCH NUMBER IS AVAILABLE, THEN A UNIQUE NUMBER O N THE BASIS OF WHICH THE DEDUCTEE IS IDENTIFIED BY THE GOVERNMENT OF THAT COUNTRY OR THE SPECIFIED TERRITORY OF WHICH HE CLAIMS TO BE A RESIDENT. 3. IN THE SAID RULES, IN APPENDIX II, IN FORM NO. 2 7Q,- (A) IN THE SECOND LINE, AFTER THE FIGURES AND LETTERS 194LB, THE FIGURES AND LETTERS 194LBA, 194LBB,194 LBC SHALL BE INSERTED; (B) IN THE ANNEXURE,- (I) IN THE TABLE,- (I) IN THE COLUMN 717, IN THE COLUMN HEADING, AFTER TH E LETTERS AND WORDS PAN OF THE DEDUCTEE, THE BRACKETS, WORDS AND FIGURE [ SEE NOTE 5] SHALL BE INSERTED; (II) AFTER COLUMN 734, THE FOLLOWING SHALL BE INSERTE D, NAMELY : EMAIL ID OF CONTRACT ADDRESS OF TAX ITA NO.2490/DEL/2015 23 DEDUCTEE NUMBER OF DEDUCTEE DEDUCTEE IN COUNTRY OF RESIDENCE IDENTIFICATION NUMBER / UNIQUE IDENTIFICATION NUMBER OF DEDUCTEE 735 736 737 738 (II) IN THE NOTES BELOW THE TABLE,- (A)IN POINT 4, IN THE TABLE, AFTER ENTRY 194LB, THE FOLLOWING SHALL BE INSERTED, NAMELY: 194LBA CERTAIN INCOME FROM UNITS OF A BUSINESS TRUST LBA 194LBB INCOME IN RESPECT OF UNITS OF INVESTMENT FUND LBB 194LBC INCOME IN RESPECT OF INVESTMENT IN SECURITIZA TION TRUST LBC; (B) AFTER POINT 4 AND BELOW THE TABLE, THE FOLLOWING P OINT SHALL BE INSERTED NAMELY: 5. IN CASE OF DEDUCTEES COVERED UNDER RULE 37BC, P AN NOT AVAILABLE SHOULD BE MENTIONED.. 8. AFTER GOING THROUGH THE ORDERS OF THE ITAT, PUNE B ENCH AND CHENNAI BENCH (SUPRA) AND THE CBDTS NOTIFICATION DA TED ITA NO.2490/DEL/2015 24 24.6.2016, AS AFORESAID, WE ARE OF THE CONSIDERED VI EW THAT THE ISSUE INVOLVED IN THE PRESENT APPEAL IS SQUARELY COV ERED BY THE AFORESAID ORDERS OF THE COORDINATE BENCHES OF THE TRI BUNAL AND THE INSTRUCTIONS CONTAINED IN THE AFORESAID CBDTS NOTIFICA TION IS CLEARLY APPLICABLE IN THE PRESENT CASE. THEREFORE, RESPECTF ULLY, FOLLOWING THE COORDINATE BENCHES DECISIONS, AS AFORESAID, WE DELE TE THE ADDITION IN DISPUTE AND DECIDE THE APPEAL IN FAVOUR OF THE AS SESSEE AND ACCORDINGLY, CANCEL THE IMPUGNED ORDER PASSED BY THE LD. CIT(A). 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STA NDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 05/08/2016. SD/- SD/- [O.P. KANT] [H.S. SIDHU] ACCOUNTANT MEMBER JUDICIAL MEMBER DATE 08/8/2016 SRBHATNAGAR COPY FORWARDED TO: - 1. APPELLANT - 2. RESPONDENT - 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES