Dy. Commissioner of Income Tax (International Taxation)-1, Ahmedabad V. Adani Port & Special Economic Zone Ltd., Ahmedabad

ITA 2641/AHD/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 8555 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-04-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I
• Assessment Year: 2016-2017
• Appeal Filed On: 30-11-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Recovery proceedings; Double taxation relief; TDS
• Section: 90; 206AA; 195; 20

Judgement Text

ITA NO. 2641/AHD/2017 DCIT VS. ADANI PORT & SPECIAL ECONOMIC ZONE LTD ASSESSMENT YEAR: 2016-17 PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH, AHMEDABAD [CORAM: PRAMOD KUMAR AM AND RAJPAL YADAV JM] ITA NO. 2641/AHD/2017 ASSESSMENT YEAR: 2016-17 DY. COMMISSIONER OF INCOME-TAX ........... .......APPELLANT (INTERNATIONAL TAXATION), AHMEDABAD VS. ADANI PORT & SPECIAL ECONOMIC ZONE LTD ...........................RESPONDENT GROUND FLOOR, ADANI HOUSE, NR. MITHAKHALI CIRCLE, NAVRANGPURA, AHMEDABAD [PAN : AAACG 7917 K] APPEARANCES BY: SAURABH SINGH FOR THE APPELLANT PM MEHTA FOR THE RESPONDENT DATE OF CONCLUDING THE HEARING : 15.03.2018 DATE OF PRONOUNCING THE ORDER : 05.04.2018 O R D E R PER BENCH : 1. THE SHORT ISSUE THAT REQUIRES OUR ADJUDICATION I N THIS APPEAL IS WHETHER THE LEARNED CIT(A) WAS JUSTIFIED IN HOLDING THAT SECTIO N 206AA OF THE INCOME TAX ACT, 1961 DO NOT OVERRIDE THE PROVISIONS OF DOUBLE TAXAT ION AVOIDANCE AGREEMENT ENTERED INTO BY THE GOVERNMENT OF INDIA UNDER SECTI ON 90 OF THE ACT. THE GRIEVANCES RAISED IN THIS APPEAL ARE AS FOLLOWS: 1. WHETHER THE LD.CIT(A) IS CORRECT IN LAW AND ON FACTS IN HOLDING THAT THE RECIPIENTS ARE ENTITLED TO THE BENEFIT OF TREATY WI THOUT DECIDING FIRST WHETHER THE RECIPIENTS SATISFIED CONDITIONS OF THE TREATY AND C AN BE TREATED AS RESIDENT OF RESPECTIVE COUNTRIES AS PER THE DTAA. 2. WITHOUT PREJUDICE TO THE ABOVE, (I) WHETHER THE LD. CIT(A) WAS RIGHT IN LAW AND ON FACTS IN COMING TO THE CONCLUSION THAT SECTION 206AA OF THE ACT, DOES NOT OVERRIDE THE PROVISION OF SECTION OF SECTION 90(2) OF THE ACT, DESPITE THE FACT THAT SEC.206AA STARTS WITH A NON- OBSTANTE CLAUSE. (II) WHETHER THE LD. CLT(A) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN IGNORING THE MEMORANDUM EXPLAINING THE PROVISION OF THE FINA NCE (NO.2) BILL, 2009 WHICH CLEARLY STATES THAT THE SEC.206AA OF INCOME T AX ACT APPLIES TO NON- RESIDENTS AND ALSO IGNORING THE PRESS RELEASE OF CB DT NO.402/92/2006- ITA NO. 2641/AHD/2017 DCIT VS. ADANI PORT & SPECIAL ECONOMIC ZONE LTD ASSESSMENT YEAR: 2016-17 PAGE 2 OF 4 MC (04 OF 2010) DATED 20/1/2010 WHICH REITERATES TH AT SEC.206AA OF INCOME TAX ACT WILL ALSO APPLY TO ALL NON-RESIDENTS IN RESPECT OF PAYMENTS/REMITTANCE LIABLE TO TDS WHERE PAN IS NOT PROVIDE TO THE DEDUCTOR? (III) WHETHER THE LD. CLT(A) HAS ERRED IN LAW AND O N FACTS OF THE CASE IN RELYING UPON THE DECISION WHICH WERE RENDERED BEFORE THE IN TRODUCTION OF SEC.206AA OF THE I.T. ACT? 3. ANY OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING. 2. AT THE TIME OF HEARING BEFORE US, LEARNED REPRES ENTATIVES FAIRLY AGREE THAT THE ISSUE IN APPEAL IS NOW COVERED, IN FAVOUR OF THE AS SESSEE, BY A LARGE NUMBER OF JUDICIAL PRECEDENTS IN FAVOUR OF THE ASSESSEE, EVEN THOUGH LEARNED DEPARTMENTAL REPRESENTATIVE HAS, NEVERTHELESS, RELIED UPON THE S TAND TAKEN IN THE GROUNDS OF APPEAL. LEARNED COUNSEL FOR THE ASSESSEE ALSO INVIT ES OUR ATTENTION TO A RATHER RECENT JUDGMENT OF HONBLE DELHI HIGH COURT IN THE CASE OF DANSICO INDIA PVT. LTD. VS. UNION OF INDIA & ORS [JUDGMENT DATED 5TH FEBRUARY 2 018 IN WP(C) 5908 OF 2015], AND SUBMITS THAT, AS IS ELEMENTARY, THE PROVISIONS OF A DTAA OVERRIDE THE PROVISIONS OF THE INCOME TAX ACT - EXCEPT TO THE EXTENT SUCH S TATUTORY PROVISIONS ARE MORE BENEFICIAL TO THE ASSESSEE. IN EFFECT, THUS, IN A S ITUATION COVERED BY THE PROVISIONS OF THE DTAA, THE STATUTORY PROVISIONS OF THE INCOME TA X ACT CAN NEVER BE PUT AGAINST THE ASSESSEE. 3. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE AP PLICABLE LEGAL POSITION. 4. WE FIND THAT, IN THE CASE OF DDIT VS SERUM INST ITUTE OF INDIA PVT. LTD. [(2015) 40 ITR TRIB 684 (PUNE)], A COORDINATE BENCH OF THE TRIBUNAL HAS, INTER ALIA, OBSERVED AS FOLLOWS: 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS. SECTION 206AA OF THE ACT HAS BEEN INCLUDED IN PART B OF CHAPTER XVII DEA LING WITH COLLECTION AND RECOVERY OF TAX DEDUCTION AT SOURCE. SECTION 206A A OF THE ACT DEALS WITH REQUIREMENTS OF FURNISHING PAN BY ANY PERSON, ENTIT LED TO RECEIVE ANY SUM OR INCOME ON WHICH TAX IS DEDUCTIBLE UNDER CHAPTER XVI I-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 FURNISH ED TO THE PERSON RESPONSIBLE FOR DEDUCTING TAX AT SOURCE THEN THE TA X DEDUCTOR WOULD BE REQUIRED TO DEDUCT TAX AT THE HIGHER OF THE FOLLOWI NG 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 PRESENT CASE, ASSESSEE W AS RESPONSIBLE FOR DEDUCTING TAX ON PAYMENTS MADE TO NON-RESIDENTS ON ACCOUNT OF ROYALTY AND/OR FEE FOR TECHNICAL SERVICES. THE DISPUTE BEFO RE 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 OBLIGAT ION TO DEDUCT TAX @ 20% FOLLOWING THE PROVISIONS OF SECTION 206AA OF THE AC T. 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-R ESIDENTS; AND, SUCH RATE OF TAX BEING LOWER THAN THE RATE OF 20% MANDATED BY SE CTION 206AA OF THE ACT. THE CIT(A) HAS FOUND THAT THE PROVISIONS OF SECTION 90(2) COME TO THE RESCUE ITA NO. 2641/AHD/2017 DCIT VS. ADANI PORT & SPECIAL ECONOMIC ZONE LTD ASSESSMENT YEAR: 2016-17 PAGE 3 OF 4 OF THE ASSESSEE. SECTION 90(2) PROVIDES THAT THE PR OVISIONS OF THE DTAAS WOULD OVERRIDE THE PROVISIONS OF THE DOMESTIC ACT I N CASES WHERE THE PROVISIONS OF DTAAS ARE MORE BENEFICIAL TO THE ASSE SSEE. THERE CANNOT BE ANY DOUBT TO THE PROPOSITION THAT IN CASE OF NON-RE SIDENTS, TAX LIABILITY IN INDIA IS LIABLE TO BE DETERMINED IN ACCORDANCE WITH THE P ROVISIONS OF THE ACT OR THE DTAA BETWEEN INDIA AND THE RELEVANT COUNTRY, WHICHE VER IS MORE BENEFICIAL TO THE ASSESSEE, HAVING REGARD TO THE PROVISIONS OF SE CTION 90(2) OF THE ACT. IN THIS CONTEXT, THE CIT(A) HAS CORRECTLY OBSERVED THA T THE HONBLE SUPREME COURT IN THE CASE OF AZADI BACHAO ANDOLAN AND OTHER S VS. UOI, (2003) 263 ITR 706 (SC) HAS UPHELD THE PROPOSITION THAT THE PR OVISIONS MADE IN THE DTAAS WILL PREVAIL OVER THE GENERAL PROVISIONS CONT AINED 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 B ETWEEN INDIA AND THE OTHER RELEVANT COUNTRIES IN THE PRESENT CONTEXT PRO VIDE 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 DEDUCT ED THE TAX AT SOURCE HAVING REGARD TO THE PROVISIONS OF THE RESPECTIVE D TAAS WHICH PROVIDED FOR A BENEFICIAL RATE OF TAXATION. IT WOULD ALSO BE RELEV ANT 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 TH E 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 OTHER S (SUPRA). THUS, IN SO FAR AS THE APPLICABILITY OF THE SCOPE/RATE OF TAXAT ION WITH RESPECT TO THE IMPUGNED PAYMENTS MAKE TO THE NON-RESIDENTS IS CONC ERNED, NO FAULT CAN BE FOUND WITH THE RATE OF TAXATION INVOKED BY THE ASSE SSEE 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 REQ UIRED TO BE MADE AT 20% IN THE ABSENCE OF FURNISHING OF PAN BY THE RECIPIEN T NON-RESIDENTS, HAVING REGARD TO SECTION 206AA OF THE ACT. IN OUR CONSIDER ED OPINION, IT WOULD BE QUITE INCORRECT TO SAY THAT THOUGH THE CHARGING SEC TION 4 OF THE ACT AND SECTION 5 OF THE ACT DEALING WITH ASCERTAINMENT OF TOTAL IN COME 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 NOT SU BORDINATE 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 SE CTION 195 OF THE ACT ALSO, THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. ELI LI LY & CO., (2009) 312 ITR 225 (SC) OBSERVED THAT THE PROVISIONS OF TAX WITHHO LDING I.E. SECTION 195 OF THE ACT WOULD APPLY ONLY TO SUMS WHICH ARE OTHERWISE CH ARGEABLE TO TAX UNDER THE ACT. THE HONBLE SUPREME COURT IN THE CASE OF GE IN DIA TECHNOLOGY CENTRE PVT. LTD. VS. CIT, (2010) 327 ITR 456 (SC) HELD THA T 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. THEREFOR E, 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 OVERRI DE DOMESTIC LAW IN CASES WHERE THE PROVISIONS OF DTAAS ARE MORE BENEFICIAL T O THE ASSESSEE AND THE SAME ALSO OVERRIDES THE CHARGING SECTIONS 4 AND 5 O F THE ACT WHICH, IN TURN, OVERRIDE THE DTAAS PROVISIONS ESPECIALLY SECTION 20 6AA OF THE ACT WHICH IS ITA NO. 2641/AHD/2017 DCIT VS. ADANI PORT & SPECIAL ECONOMIC ZONE LTD ASSESSMENT YEAR: 2016-17 PAGE 4 OF 4 THE CONTROVERSY BEFORE US. THEREFORE, IN OUR VIEW, WHERE THE TAX HAS BEEN DEDUCTED ON THE STRENGTH OF THE BENEFICIAL PROVISIO NS OF SECTION DTAAS, THE PROVISIONS OF SECTION 206AA OF THE ACT CANNOT BE IN VOKED BY THE ASSESSING OFFICER TO INSIST ON THE TAX DEDUCTION @ 20%, HAVIN G REGARD TO THE OVERRIDING NATURE OF THE PROVISIONS OF SECTION 90(2) OF THE AC T. THE CIT(A), IN OUR VIEW, CORRECTLY INFERRED THAT SECTION 206AA OF THE ACT DO ES 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 2 06AA OF THE ACT BECAUSE THE PROVISIONS OF THE DTAAS WAS MORE BENEFICIAL. TH US, WE HEREBY AFFIRM THE ULTIMATE CONCLUSION OF THE CIT(A) IN DELETING THE T AX DEMAND RELATABLE TO DIFFERENCE BETWEEN 20% AND THE ACTUAL TAX RATE ON W HICH TAX WAS DEDUCTED BY THE ASSESSEE IN TERMS OF THE RELEVANT DTAAS. AS A C ONSEQUENCE, REVENUE FAILS IN ITS APPEALS. 5. THE VIEWS SO EXPRESSED BY THE COORDINATE BENCH N OW STAND APPROVED BY HONBLE DELHI HIGH COURTS JUDGMENT IN THE CASE OF DANSICO INDIA PVT. LTD. (SUPRA). NO JUDICIAL PRECEDENT TO THE CONTRARY HAS BEEN BROU GHT TO OUR NOTICE. IN THIS VIEW OF THE MATTER, AND RESPECTFULLY FOLLOWING THE BINDING JUDICIAL PRECEDENTS, WE APPROVE THE CONCLUSIONS ARRIVED AT BY THE CIT(A) AND DECLINE TO INTERFERE IN THE MATTER. 6. IN THE RESULT, THE APPEAL IS DISMISSED. PRONOUNC ED IN THE OPEN COURT TODAY ON THE 5 TH APRIL, 2018 SD/- SD/- RAJPAL YADAV PRAMOD KUMAR (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) AHMEDABAD, THE 5 TH DAY OF APRIL, 2018 **BT COPIES TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER TRUE COPY ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD 1. DATE OF DICTATION: ................COVERED MATT ER...04.04.2018... 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: ....... 04.04.2018.......... 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR . P.S./P.S.: ..04.04.2018..... . 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: .... 05.04.2018... 5. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK : .. 05.04.2018.... 6. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK : . 7. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER : 8. DATE OF DESPATCH OF THE ORDER: ......